While the health care overhaul was being debated, President Obama argued that the individual mandate, which requires all Americans to purchase health insurance or pay a penalty, was not a tax. But now that the provision has hit the courts, the administration’s lawyers are arguing that it is constitutional because Congress has the power to impose the penalty under the Constitution's taxing power.
So which is it? According to Roger Vinson, the federal judge who ruled yesterday that parts of the multi-state constitutional challenge against the law could go forward, the mandate isn’t a tax. Not for legal purposes anyway. He notes that although previous drafts of the law had explicitly referred to the provision as a tax, the final version calls it a penalty. And he quotes from a 1987 decision saying that “[w]here Congress includes [certain] language in an earlier version of a bill but deletes it prior to enactment, it may be presumed that the [omitted text] was not intended.” He also writes that "Congress’s failure to call the penalty a 'tax' is especially significant in light of the fact that the Act itself imposes a number of taxes in several other sections.” Those provisions, he argues, show “beyond question that Congress knew how to impose a tax when it meant to do so.”
Now, in arguing for the constitutionality of the mandate, the government had maintained that it’s irrelevant whether the law actually uses the word “tax.” If a provision counts as a tax, it counts regardless of the specific language employed by Congress. The judge agrees, but notes an exception: “This rule must be set aside when it is clear and manifest that Congress intended the exaction to be regarded as one and not the other.” And in this case, Vinson says it’s clear enough that because the law's authors changed the legislative text to call the mandate a penalty and not a tax, but allowed other provisions to continue being labeled as taxes, Congress intended the provision not to be a tax. He illustrates this in a footnote:
Suppose that after the Act imposed the penalty it went on to expressly state: “This penalty is not a tax.” According to the logic of the defendants’ argument, if the intrinsic nature of the penalty was a tax, it could still be regarded as one despite what it was called and despite the clear and unmistakable Congressional intent to the contrary. Such an outcome would be absurd. In my view, changing the word from tax to penalty, but at the same time including various other true (and accurately characterized) taxes in the Act, is the equivalent of Congress saying “This penalty is not a tax.”
Moreover, Vinson says, Congress showed essentially no sign that it thought of the power as a tax. In addition to changing the language from tax to penalty in the final draft of the law, Congress relied solely on its power to regulate interstate commerce:
Congress did not state in the Act that it was exercising its taxing authority to impose the individual mandate and penalty; instead, it relied exclusively on its power under the Commerce Clause. The Act recites numerous (and detailed) factual findings to show that the individual mandate regulates commercial activity important to the economy....It further states that health insurance “is in interstate commerce,” and the individual mandate is “essential to creating effective health insurance markets.” The Act contains no indication that Congress was exercising its taxing authority or that it meant for the penalty to be regarded as a tax.
Vinson’s decision starts by casting the debate in politically neutral terms, suggesting that reasonable people can disagree about the merits of the new law. But on the tax-or-not-a-tax point, he’s not just clear, but rather scolding about the administration’s rhetorical sleight of hand:
Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice-in-Wonderland” tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check.
The upshot of all this, of course, is that Vinson believes the mandate will have to be justifiable under the Commerce Clause. And that will have to wait. As Ilya Somin notes, Vinson cautioned that the question of the mandate’s ultimate constitutionality “cannot be fully considered at this stage of the process.” Does judging the mandate’s constitutionality under the Commerce Clause make it more likely to be struck down? Perhaps: Much like the Virginia judge who ruled, in a separate constitutional challenge to the mandate, that “Never before has the Commerce Clause...been extended this far,” Vinson also noted the unprecedented nature of the federal mandate. At the very least, that suggests that he views the provision as new and unusual. But as we saw last week in Michigan, a ruling based on the Commerce Clause is not a certain defense against the mandate.
Still, however Judge Vinson’s eventual ruling turns out, it will likely not be final; the ruling will almost certainly be appealed, probably all the way up to the Supreme Court. And once there, those who hope to overturn the mandate will, at best, face long odds.
Jacob Sullum wrote about the crazy constitutional logic of the individual mandate here. Damon Root noted one legislator's lack of concern for the constitutionality of the mandate here and looked at how the mandate has revived debates about the Commerce Clause here.