The 'Tax' That Was Not a Tax Is Now a 'Penalty' That Is a Tax

In addition to rejecting the Obama administration's Commerce Clause rationale for compelling Americans to buy government-approved health insurance, yesterday's ruling by U.S. District Judge Henry Hudson knocked down an emergency backup argument: that the assessment for failing to comply with the mandate is a revenue measure authorized by Congress' power to "lay and collect taxes...to provide for the common defence and general welfare of the United States." What's hilarious about that argument, of course, is that before Congress approved the Patient Protection and Affordable Care Act, President Obama and his underlings indignantly insisted this assessment, though collected by the IRS via income tax returns, was in no way, shape, or form a tax, since that would have violated Obama's campaign pledge not to raise taxes on households earning less than $250,000 a year. Here, for example, is an exchange that Obama had with ABC's George Stephanopoulos in September 2009:

Obama: For us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase. What it's saying is, is that we're not going to have other people carrying your burdens for you anymore...

Stephanopoulos: But it may be fair, it may be good public policy—

Obama: No, but—but, George, you—you can't just make up that language and decide that that's called a tax increase.

Stephanopoulos: I don't think I'm making it up. [Cites Merriam-Webster's definition of a tax as "a charge, usually of money, imposed by authority on persons or property for public purposes."]

Obama: George, the fact that you looked up Merriam's Dictionary, the definition of tax increase, indicates to me that you're stretching a little bit right now...

Stephanopoulos: I wanted to check for myself. But your critics say it is a tax increase.

Obama: My critics say everything is a tax increase. My critics say that I'm taking over every sector of the economy. You know that. Look, we can have a legitimate debate about whether or not we're going to have an individual mandate or not, but...

Stephanopoulos: But you reject that it's a tax increase?

Obama: I absolutely reject that notion.

To shore up this position, members of Congress changed the language used in the health care bill, replacing tax with penalty in Section 1501, which describes what happens to people who fail to obtain "minimum essential coverage." But that was then. As soon as the Obama administration switched from getting the bill passed to defending it in court, the "penalty" became a "tax" again, on the assumption that a revenue measure would more easily survive judicial review. In his decision, Hudson insists that Obama can't have it both ways:

In concluding that Congress did not intend to exercise its powers of taxation under the General Welfare Clause, this Court's analysis begins with the unequivocal denials by the Executive and Legislative branches that the [assessment] was a tax. In drafting this provision, Congress specifically referred to the exaction as a penalty….Earlier versions of the bill in both the House of Representatives and the Senate used the more politically toxic term "tax" when referring to the assessment for noncompliance with the insurance mandate….In the final version of the [health care law] the term "penalty" was substituted for "tax"…A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress....

The text of Section 1501 unequivocally states that it is a product of the Commerce Clause, not the General Welfare Clause. Moreover, any revenue generated is merely incidental to a violation of a regulatory provision....

The notion that the generation of revenue was a significant legislative objective is a transparent afterthought. The legislative purpose underlying this provision was purely regulation of what Congress misperceived to be economic activity. The only revenue generated under the provision is incidental to a citizen's failure to obey the law….The use of the term "tax" appears to be a tactic to achieve enlarged regulatory license....

This Court is therefore unpersuaded that Section 1501(b)(1) is a bona fide revenue raising measure enacted under the taxing power of Congress.

In October, Peter Suderman noted that Roger Vinson, the federal judge in Florida who is hearing an ObamaCare challenge backed by 20 states, expressed similar dismay at Obama's tax/penalty switcheroo.

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  • Tim||

    Just reading that is taxing.

  • Kristian||

    Re: Pnalty as a Tax. If it is a tax, then isn't the whole thing invalid as the PPACA as passed, started in the Senate, and all bills raising revenue must start in the House?

  • ||

    Nah. Technically, ObamaCare (I'll thank you not to use the term PPACA) was substitute amendment for a tax bill started in the House.

  • ||

    Obama: It's a penalty.

    [Stephanopoulos slaps Obama]

    Stephanopoulos: I said I want the truth!

    Obama: It's a tax.

    [slap]

    Obama: It's a penalty.

    [slap]

    Obama: A tax, a penalty.

    [More slaps]

    Stephanopoulos: I said I want the truth!

    Obama: It's a tax AND a penalty!

  • ||

    Please stop quoting The Breakfast Club. Give it a rest, dude.

  • ||

    Okay, that was funny. On the other hand, how many people here know you're joking?

  • ||

    I thought it was Chinatown
    She's my daughter, she's my sister.

  • ||

    SF knows that; he's just having fun.

  • ||

    His soul is mine now. MINE!

  • ||

    O-OH!

  • Tman||

    My favorite stupid analogy that Dems are using to support the mandate is Auto insurance.

    Here's Eric H. Holder Jr. and Kathleen Sebelius writing in todays Washington Post-

    Everyone wants health care to be affordable and available when they need it. But we have to stop imposing extra costs on people who carry insurance, and that means everyone who can afford coverage needs to carry minimum health coverage starting in 2014.
    If we want to prevent insurers from denying coverage to people with preexisting conditions, it’s essential that everyone have coverage. Imagine what would happen if everyone waited to buy car insurance until after they got in an accident. Premiums would skyrocket, coverage would be unaffordable, and responsible drivers would be priced out of the market.
    The same is true for health insurance. Without an individual responsibility provision, controlling costs and ending discrimination against people with preexisting conditions doesn’t work.

    Aside from the obvious things that are so completely wrong about this analogy (driving is voluntary-living and breathing is not, most auto-insurance mandates are for liability for other peoples cars that you damage, etc.) what is interesting is that Seblius and Holder ignore something that Auto Insurance companies do - THEY DISCRIMINATE AGAINST PRE-EXISTING CONDITIONS. Have you received ten speeding tickets in the last year? I bet your premiums are outrageous. Three DUI's in ten years? You probably have a hard time getting insurance period.

    So not only is their analogy wrong, but the reason they use for it -to stop insurance companies from "discriminating" against those with pre-existing conditions- is also completely ridiculous considering this is what Auto insurers do already, and they have a mandate.

    I really really despite the stupidity eminating from our supposed leaders during these debates.

  • robc||

    Aside from the obvious things that are so completely wrong about this analogy

    That isnt the obvious wrong thing - the obvious wrong thing is that the Health Care Mandate is being done by the Feds and the Auto Insurance "Mandate" is being done by the states. The states dont have to worry about the ICC.

  • Tman||

    the obvious wrong thing is that the Health Care Mandate is being done by the Feds and the Auto Insurance "Mandate" is being done by the states.

    True, this is yet another part of Obamacare that makes using the auto insurance analogy even more stupid than it already is, but the article is quoted was referring to the pre-existing issues problem that Holder and Seblius are trying to eliminate.

    I understand that Auto insurance mandates are state enforced, thus not under the ICC, but the point I was making is that even with mandates AND states not federal government enforcing them, they STILL discriminate against pre-existing issues.

  • Anonymous Coward||

    Like driving, merely living has become a privilege to which certain responsibilities can be attached according to the government's whims.

    Or something like that.

  • Jeffersonian||

    Add to that the fact that federal law doesn't require a body shop to fix someone's car regardless of his ability to pay for the work.

  • Jeffersonian||

    They know it's utter, complete and total bullshit. The important thing is to get it out there to take in the gullible and dull-witted. By making such specious arguments, these cretins show their boundless contempt for America's citizenry.

  • Wesley||

    When the law was passed, I predicted this. If you have to pay criminal fines for not having health insurance, it's blatantly unconstitutional, beyond anything that has been done since New Deal farm programs. But if it's called a tax increase for everyone, with tax credits if you do have approved health insurance, then it's allowed by Congress's enumerated power to levy taxes, expanded by the 16th amendment.
    Political gamemanship at its finest.

  • cynical||

    That's the hallmark of an excellent bullshitter -- say something that is completely contrary to basic common sense, and make it sound like you have a point.

    "The fact that this seems to exactly correspond to the dictionary definition of tax should be evidence enough that it isn't really a tax."

    What is this I don't even

  • ||

    I'm still waiting for the other shoe to drop on the "penalty" - the lack of due process.

    If I have to pay a penalty, I am entitled to some due process before the penalty is assessed. I don't think there is any such due process in ObamaCare.

  • ||

    That's what the Death Panels are for, dude.

  • Mike M.||

    Not only is there no due process involved, the fact that various and sundry groups like the Amish are specifically exempt from this "penalty" violates both our 1st Amendment freedom of religion and our equal protection rights.

  • ||

    Intersting angle.

    You can't apply an exemption to only one religion.

  • ||

    If this fails in the courts, congress will need to change the term back to tax. Of course that will happen after 2012 and Obama will not be in office. Therefore he didn't raise taxes for it. Pass it off on the next guy is par for political gamemanship.

  • hmm||

    I'm not fucking you in the ass. I'm performing a prostate exam with hands on your shoulders for leverage.

    There's clearly a difference.

  • Barney Frank||

    Tell us more!!

  • ||

    Disappointed woman: you said you "had" a big p*nis.
    fresno dan: NO, I said I "have" a big p*nis.
    Disappointed woman: Well, you "had" a small p*nis yesterday!
    fresno dan: thats correct.
    Disappointed woman: You lied!
    fresno dan: I did not - when you ask I have a big p*nis.
    Disappointed woman: How can that be?
    fresno dan: free beer tomorrow...and thats the truth

  • ||

    If this fails in the courts, congress will need to change the term back to tax.

    After what just happened in November, I don't think any Congress, Dem or Rep, is going to want bite that one off.

  • ||

    President Romney will move to fix the health care law. Will it be change the term back to tax specifically, maybe not.

    I doubt the same team that thought mandating the purchase of a retirement plan, either private or fed option, will have much of a problem when they are in power. They certainly had little problem mandating seniors to have a prescription drug plan.

  • ||

    Politicians play this exact same game with social security taxes, pretending that, instead of regressive income taxes, they are "premiums" or "contributions" that go into a "surplus" or "lockbox." It's all a bunch of smoke and spin.

    As a matter of law, a tax is a tax, no matter what euphemism or code-word a politician tries to attach to it.

  • Obama||

    I absolutely reject the notion that words have definitions, and when spoken in concert with certain other words, in a certain order, convey meaning in order to foster understanding of the same concept each time those words are combined in the same way.

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