Death and Shared Responsibility Payments


This happened while I was getting sunburned and avoiding chiggers at a state park near Dallas, so I missed it, and I don't think it's been noted here yet: Last week the Justice Department asked a federal judge to dismiss a constitutional challenge to the Patient Protection and Affordable Care Act. Responding to a lawsuit by 20 states, the Obama administration argues that "requiring individuals to buy health insurance is an exercise of Congress' taxing authority." This position is consistent with the Internal Revenue Service's role in collecting what the final version of the law (PDF) calls a "shared responsibility payment" and a "penalty" (earlier versions called it an "excise tax"). But as the National Federation of Independent Business notes, the Justice Department's argument does not quite jibe with President Obama's insistence that the individual insurance mandate "is absolutely not a tax increase." That position, in turn, was necessary as part of Obama's refusal to admit that he has broken his campaign pledge to avoid raising taxes on households earning less than $250,000 a year.

The NFIB argues that the Obama administration is trying to avoid justifying the mandate as a regulation of interstate commerce, which does indeed pose some serious logical problems, since not buying health insurance is neither interstate nor commerce and neither economic nor an activity. But the law itself cites the Commerce Clause as the rationale for the mandate, claiming "the individual responsibility requirement…is commercial and economic in nature" and "substantially affects interstate commerce."

The Justice Department may also be worried about due process issues. If the penalty isn't a tax, it would seem to be a fine, in which case the streamlined IRS collection procedure envisioned in the law may not be feasible.

The law, by the way, includes several other taxes that are explicitly identified as such but are not limited to the wealthy, including an "excise tax on high cost employer-sponsored health coverage" and an "excise tax on indoor tanning services" (which Greg Beato discussed last week). Obama presumably would explain away these levies by noting that you don't have to pay them unless you engage in the taxed activities (the reason his press secretary gave for claiming that the cigarette tax hike Obama signed should not count as a tax hike). But as I noted in a column last fall:

The fact that you can avoid a tax by changing your behavior does not mean it isn't a tax. You don't pay gasoline taxes if you don't drive, you don't pay property taxes if you don't own real estate, and you don't pay income taxes if you don't earn income.

As far as I can tell, by Obama's reasoning, there's no such thing as a tax. So perhaps we should be grateful to him for ushering in a tax-free society.

[via David Hogberg at Investor's Business Daily]