So the individual mandate is Constitutional because it’s a tax.
I wonder if the Chief Justice forgot that all tax legislation must originate in the House of Representatives. There’s that pesky Constitution again.
Hat tip to Jim Kahn for this.
Edited to add: The really striking thing about this ruling is that someone could use the exact same reasoning to decide that Social Security is constitutional. This is what’s known as a reductio ad absurdum.
Apparently the way the Senate handled the bill was taking some random one passed from the House and amending it to remove everything substantive. That way they were able to technically avoid the constitutional requirement.
Pages 24-25 of the Scalia et al dissent also discuss the point you made about the House of Representatives originating the bill.
How is making people buy health insurance different than making them pay taxes to fund retirement insurance (social security), or unemployment insurance? Regardless of the merits of the healthcare law, I never why it should be unconstitutional when taxes to finance social programs are constitutional. Maybe they should both be unconstitutional, and maybe they’re both bad policies, but that’s not the point I’m making. I’m asking why the health care mandate should have a DIFFERENT constitutional status than, say, a law making people pay taxes for Medicare. Can anyone think of a difference?
To breathe or not to breathe, that is the question that now has been answered.
But, the really interesting thing is that John Roberts seems to have switched his vote, late, because the dissent reads like a majority decision. For instance;
‘Finally, we must observe that rewriting §5000A as a tax
in order to sustain its constitutionality would force us to
confront a difficult constitutional question: whether this is
a direct tax that must be apportioned among the States
according to their population. Art. I, §9, cl. 4. Perhaps it
is not (we have no need to address the point); but the
meaning of the Direct Tax Clause is famously unclear, and
its application here is a question of first impression that
deserves more thoughtful consideration than the lick-anda-promise accorded by the Government and its supporters.’
‘Would force us to’? ‘we have no need to address the point’?
So the individual mandate is Constitutional because it’s a tax.
Sam: How is making people buy health insurance different than making them pay taxes to fund retirement insurance (social security), or unemployment insurance?
Exactly.
Logically, think of social security as mandated retirement insurance (it’s single-payer, but that doesn’t matter.) The court operates heavily on stare decisis, so why object to mandated health insurance if you already have mandated retirement insurance as constitutional? After all, I’m still forced to buy retirement insurance even if I don’t want it.
There are other ways to justify the individual mandate, constitutionally as well. The power to tax is just one of them.
Also to note, someone in the other blog entry posted something to the extent of if it’s illegal to turn away patients in the ER then why not have an individual mandate? This fixes the free-rider problem and is economically sound. Unless you’re for turning sick men, women, and children away from care, then you have no basis for using the argument that individual mandate is unconstitutional because it forces you to buy something you don’t want.
The competing legal theories are interesting, but beside the point; the point is, of course, that the allocation of scarce resources to fund this new entitlement will produce a less efficient and therefore less robust private sector.
The Obamacare tax is more like Medicare than Social Security. First of all, Social Security has disability and survivor’s benefits that are extended to folks who have not paid into the system.
Medicare covers only the contributor. Social Security is available to the Amerikan traveling or living overseas. Medicare and Obamacare are not. I have no idea what FICA taxes are levied on Amerikans living abroad with income, but Obamacare, like Medicare, will deliver no benefit whatsoever, in spite of how many years they have paid into the system, whether they’re in France, Costa Rica or Brazil.
The problem is granting the right to levy taxes – once they can take all your money, and then give it back *if you do as you are told* then there is no limit to what they may order you to do.
https://supreme.justia.com/cases/federal/us/259/20/case.html
The difference between SS and Medicare is that they are both tax and spend programs. Obamacare is not. Congress could have easily passed a law that made it so–eliminate the age limit for Medicare–but, they didn’t do that. Kennedy was right to say that the Court saved a law that wasn’t written.
Back to the odd language from the dissenters;
‘Whatever may be the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the Federal Government to regulate all private conduct and to compel the States to function as administrators of federal programs.
‘That clear principle carries the day here.’
But, it didn’t carry the day. Then there is the lengthy section on severability;
‘The two pillars of the Act are the Individual Mandate and the expansion of coverage under Medicaid. In our view, both these central provisions of the Act—the Individual Mandate and Medicaid Expansion—are invalid.
‘It follows, as some of the parties urge, that all other provisions of the Act must fall as well. The following section explains the severability principles that require this conclusion.’
If the Individual Mandate didn’t fall, why talk about why, ‘all other provisions’ related to it must also fall?
Why the specificity here;
‘The Act was passed to enable affordable, “near-universal”health insurance coverage. ….
‘The resulting, complex statute consists of mandates and other requirements; comprehensive regulation and penalties; some undoubted taxes; and increases in some governmental expenditures, decreases in others. Under the severability test set out above, it must be determined if those provisions function in a coherent way and as Congress would have intended, even when the major provisions establishing the Individual Mandate and Medicaid Expansion are themselves invalid.’
‘Themselves’? That sounds like something the majority would say, not dissenters.
But Steve, HR 3590 did, in fact, originate in the House. It was introduced as the “Service Members Home Ownership Tax Act of 2009,” and passed the House by a vote of 416-0 on October 8, 2009. The Senate *amended* the bill to make it the PPACA, and the *amended* bill passed the House 219-212. It’s all cool.
The “all tax legislation must originate in the House of Representatives” argument is weak sauce. If you don’t like the mandate, then that’s fine. The better argument would have been that we as a society must allow people who are irresponsible and don’t buy health insurance to pay the consequences for their actions. However, we as a society have decided otherwise. That’s why the mandate is needed in our situation. Otherwise we’ll continue to have free-riders galore.
ThomasBayes,
isn’t there the little pesky detail that the Senate Bill version passed via reconciliation, avoiding the 60 votes necessary, and just majority vote (51)? Vive la democratie!
@ Ben —
“The problem is granting the right to levy taxes – once they can take all your money, and then give it back *if you do as you are told* then there is no limit to what they may order you to do.”
Well there is a limit: the democratic nature of our government.
It’s not unconstitutional for Congress to pass a 100% income tax. However, would it ever happen? No.
Manfred: I’m not sure what you’re referring to. HR 3590 passed the Senate by a vote of 60 to 39 with 1 non voting . . .
http://www.govtrack.us/congress/votes/111-2009/s396
J: I’m not sure I understand why the “all tax legislation must originate in the House of Representatives” argument is weak sauce. Unless you consider the first sentence of Section 7 of the Constitution to be some sort of weak sauce:
—
All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.
—
The goofed-up thing about this is that the Senate took a bill on home ownership for service members — that had passed the House with a unanimous vote — and “amended” it (changed it completely, evidently) to become one of the most controversial and partisan bills of our time. Seems to me that a revenue-raising bill as important as this should have clearly and unambiguously originated in the House if our lawmakers and executives care (or want to appear to care) about the Constitution.
The Roberts opinion explains at some length that the government lacks the power to make people buy health insurance. It then adds that, if the penalty for not buying that insurance is called a tax, the government has that power after all. It’s a magic words thing. Put the penalty in a health section of the U.S. Code and the whole scheme is unconstitutional. Put it in the Internal Revenue Code and it’s fine. We have a Federal government of limited powers unless it wants to exercise unlimited powers, in which case calling the penalty for not doing what they want you to do a tax solves all the problems.
Maybe we should add “unless they call the penalty a tax” to that “land of the free” nonsense in the national anthem.
Great minds…
http://delong.typepad.com/sdj/2012/06/paul-campos-says-that-john-roberts-switched-his-vote-at-the-last-minute.html
PAUL CAMPOS SAYS THAT JOHN ROBERTS SWITCHED HIS VOTE AT THE LAST MINUTE
The government has taxed, or penalized, me for NOT doing something for years–viz., for not devoting all my time to leisure. What does it matter what we call something?
???
The really striking thing about this ruling is that rejecting the argument would have required rejecting the opportunity to privitize Social Security. After all, if government couldn’t provide incentives for people to buy insurance, government couldn’t provide incentives for people to buy stocks & bonds either. The Roberts Court has rescued the opportunity to privitize Social Security — in spite of the Republican’s efforts to kill that option.
The thing about the ‘wink-wink it’s not a tax’ outcome is, how can we know whether this would have *passed* in the first place if structured as a tax? The admin should’ve had to go back and sell this thing honestly.
Bearce – ? If there are lots of ways, the admin didn’t identify any of them.
I’m just lurking here, wondering if conversation will turn towards the merits or otherwise of the law, rather than all this exciting stuff about legal technicalities and politics.
The market for lemons and the individual mandate : http://economistsview.typepad.com/economistsview/2012/06/the-economics-of-the-scotus-health-care-decision.html
If there are lots of ways, the admin didn’t identify any of them.
Your point being?
What nobody is talking about – yet – is that the Supreme Court limited the PPACA in a critical way. It enabled the states to opt out of expanding Medicaid without losing access to Federal Medicaid fund. This is part of the decision may deprive far more people of medical care than the abolishment of the individual mandate might eventually have.
Suppose Congress enacted a tax on all Catholics (say $10,000 for attending mass once during the year). Would that be constitutional? According to Roberts’s opinion, that would not be constitutional under the 1st amendment, but it *would* be constitutional under Congress’s power to tax. The second trumps the first, so taxing Catholics is OK.
John E. I suspect that is one way such a tax could be interpeted. I am sure there are also many others, and almost certainly the Catholic Tax would be declared unconstitutional using some other argument.
I’m not acquainted with this legal doctrine.
The US Constitution grants Congress various (“enumerated”) powers. The recent Court decision analyzed whether any of those powers were sufficient to empower Congress to adopt ObamaCare. The Court only needed to find one power to support a finding that Congress was within its authority to act. In that sense, a finding that the taxing power supports ObamaCare “trumps” (renders irrelevant) a finding that the Commerce Clause does not.
(Query: Because the Court’s finding regarding the Commerce Clause proves to be irrelevant to the ultimate outcome of the case, does that render this finding mere dicta, rather than binding precedent?)
But the Constitution contains more than just a list of enumerated powers. In particular, the amendments contain a number of limitations on how those powers may be exercised.
Thus, I’m not persuaded by the argument that the taxing power “trumps” the rest of the Constitution.
ThomasBayes:
Here is how James Capretta describes the passage of ObamaCare in Congress in 2009/2010:
http://www.nationalreview.com/articles/280274/reconciliation-option-james-c-capretta?pg=1
“… Reconciliation didn’t play a small role in Obamacare’s passage, as has been suggested. Without reconciliation, Obamacare would not have become law at all. It’s true that the main Obamacare structure was passed by the Senate in December 2009 under normal rules for legislative consideration. That’s because Democrats at that time had 60 votes (including two independent senators who caucus with them). They didn’t need to resort to reconciliation to pass the bill as long as all 60 of their senators stuck together and supported passage, which they did.
But then Scott Brown won the Massachusetts Senate race in January 2010; the Democrats lost their 60-vote supermajority and could no longer close off debate on legislation without the help of at least one Republican senator.
At that point, the president and his allies had two choices. They could compromise with Republicans and bring back a bill to the Senate that could garner a large bipartisan majority. Or they could ignore the election results in Massachusetts and pull an unprecedented legislative maneuver, essentially switching from regular order to reconciliation at the eleventh hour, thereby bypassing any need for Republican support. As they had done at every other step in the process, the Democrats chose the partisan route. They created a separate bill [this bill was, I think, HR 4872], with scores and scores of legislative changes that essentially became the vehicle for a House-Senate conference on the legislation. That bill was designated a reconciliation bill. Then they passed the original Senate bill through the House on the explicit promise that it would be immediately amended by this highly unusual reconciliation bill, which then passed both the House and Senate a few days later, on an entirely party-line vote.”
This is what I meant with my comment. The process of passing ObamaCare was much dirtier than you describe (which is dirty enough).
I think it is quite plausable that Roberts changed his vote. I had been operating under the assumption that PPACA would be overturned. The fact that the decision was passed down at the last possible moment led me to believe that there was still internal discussion occurring, and thus that there was a real possibility of it being upheld.
Walter Dellinger predicted on Slate that the decision would be upheld, and that Roberts would support it. His argument was that “you break it, you bought it”. If PPACA was overturned, then health care would be owned by the Court for the foreseeable future.
What I find most interesting, is that the Court ruled that PPACA wasn’t supported under the Commerce Clause. That set’s a precedent that could have repercussions in other areas. For example, under what authority did Congress pass DOMA? That’s certainly not interstate commerce. Where does Article I, Section 8 grant Congress the power to legislate morality?
@ nobody.really
I see. That makes sense. So the first amendment is still in.
However is there any way in which the tenth amendment is still relevant?
Has there ever been?
The 10th Amendment states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” By its own terms, the meaning of the 10th Amendment is entirely derived from – and therefore subordinate to — the meaning of all other parts of the Constitution.
In United States v. Sprague (1931) the Supreme Court found that the amendment “added nothing to the [Constitution] as originally ratified.” And in United States v. Darby, 312 U.S. 100, 124 (1941), the Court concluded —
@nobody.really
So in other words, when Congress violates the Constitution by exercising powers clearly not enumerated therein it also violates the tenth amendment. Repeating something twice helps normal humans understand that the something is important. This technique hasn’t worked so well with the law and Congress.
[Liberty] is the product not of institutions, but of a temper, of an attitude towards life; of that mood that looks before and after and pines for what it is not. It is idle to look to laws or courts, or principalities, or powers to secure it. You may write into your constitutions not ten, but fifty, amendments, and it shall not help a farthing, for casuistry [circumstances/rationalizations] will undermine it as casuistry should, if it have no stay but law. It is secure only in that … sense of fair play, of give and take, and the uncertainty of human hypothesis, of how changeable and passing are our surest convictions, which has so hard a chance to survive in any times, perhaps especially in our own.
Learned Hand, In Commemoration of Fifty Years of Federal Judicial Service, 264 F.2d xxxviii (2d Cir. 1959).
@nobody.really-
“Thus, I’m not persuaded by the argument that the taxing power “trumps” the rest of the Constitution.”
Well, think of it this way.
Current federal law taxes capital gains at less than labor. The idea is to spur investment, which is believed to be a major hallmark of innovation and economic growth.
You can say the federal government provides a tax break to individuals who invest, or you can say the federal government provides a tax hike to individuals who don’t invest. That’s semantical. I don’t find this unconstitutional.
The “mandate” provides a tax to individuals who don’t purchase health insurance. Or, it provides a tax break to individuals who do. The idea is to promote individuals to purchase health insurance. I don’t see how this is different from the example above, and I don’t think Roberts did either.
A “mandate” would be: buy insurance or we put you in jail.
Well it’s like English.
A law certainly could be written that way. The question is, was this particular law written that way? And it seems pretty clear it was not. After all it said so explicitly. And there are a few cases where there is a difference. I could be penalized — sorry, provided a tax — for late payment of this alleged tax for instance. And there are differences in challenging taxes and challenging penalties: taxes have to be paid before they can be challenged.
And of course there is a difference between finding you in violation and just plain taxing you. Some people object to being penalized more than they do to being taxed. It’s part of their utility function.
KS:
You can say the federal government provides a tax break to individuals who invest, or you can say the federal government provides a tax hike to individuals who don’t invest.
It’s tangential to your point, but: Yes, you can say either of these, and you’ll be equally wrong in either case.
What you should have said was: “You can say the federal government provides a tax break to individuals who don’t invest, or you can say the federal government provides a tax hike to individuals who invest”. Then the rest of your argument goes through.
(Notice that the government also taxes gasoline, at a rate lower than the tax on income. It would be very odd to conclude that buyers of gasoline are getting a tax break.)
I wonder about this distinction:
KS: “A “mandate” would be: buy insurance or we put you in jail.”
KS is distinguishing this from money taxes. But absent some limit on taxation we simply rewrite this as
“We fine you $x” where X exceeds the total wealth of the planet. And then we jail you for non-payment.
Now I think the distinction should matter, but I don’t see much enthusiasm amongst the ACA boosters for limits on the power to tax, and after all KS was disputing this: ” I’m not persuaded by the argument that the taxing power “trumps” the rest of the Constitution”.
@ Ken B–
“Well it’s like English.
A law certainly could be written that way. The question is, was this particular law written that way? And it seems pretty clear it was not. After all it said so explicitly.”
The law was written exactly how Roberts interpreted it. In fact, the ‘written’ law mentions the IRS. The law was *pitched* totally differently, but that’s politics.
“Now I think the distinction should matter.”
Sorry, I’m not sure I see the distinction. It’s not unconstitutional for the federal government to levy a 100% income tax on everybody. Would it ever happen? No. The mentioned ‘limit on taxation’ you cite is political, not constitutional.
@ Dr. Landsburg–
“Then the rest of your argument goes through.”
My point is the federal government can and clearly has used taxation to incentivize certain behaviors. Simply disagreeing with what those behaviors are doesn’t make the taxation element unconstitutional. I’m not a fan of ethanol subsidies, for example.
Mankiw actually made the exact same point years ago: http://gregmankiw.blogspot.com/2007/12/on-health-insurance-mandates.html
KS’s point seems pretty solid to me.
I don’t understand this, however…
What you should have said was: “You can say the federal government provides a tax break to individuals who don’t invest, or you can say the federal government provides a tax hike to individuals who invest”. Then the rest of your argument goes through.
(Notice that the government also taxes gasoline, at a rate lower than the tax on income. It would be very odd to conclude that buyers of gasoline are getting a tax break.)
The gasoline and income tax example are two distinct taxes, one is a tax on consumption and the other is a tax on earnings.
Taxes on capital gains and labor are also taxes on earnings. You can earn your income completely from capital gains alone, and that would be a tax break. Even if you mix the two, it’s still a tax break. If I have an annual income of 100,000 completely from labor at a tax of 10%, I take home 90,000. If 50,000 is from labor at 10%, and the other 50,000 is capital gains at 9%, then I walk with 500 more than what I would of had earning it completely through labor.
@ KS
I think you might be misreading nobody.really. He was responding to my mistaken understanding that Roberts argued that Congress’s taxing power trumped the Commerce Clause. nobody.really wasn’t (in this instance) arguing against Roberts’s opinion. Rather he was clarifying it for me.
@ Bearce–
I agree; I thought my original argument was sound, and aren’t fully clear on Dr. Landsburg’s rebuttal. But it sounds like he agrees with the gist of my argument – that the government can certainly use taxes to incentivize certain behaviors, and that it routinely does.
But absent some limit on taxation we simply rewrite this as
“We fine you $x” where X exceeds the total wealth of the planet. And then we jail you for non-payment.
Those legal precedents exist. Did you read Roberts opinion?
@Bearce, Steve has answered this in earlier posts.
You can’t earn your income from capital gains alone. We are born with nothing. For most people, any significant captal they accumulate comes from after-tax earned income, as they choose to reduce their consumption in order to save. The tax on earned income reduces your capital, therefore reduces your potential for capital gains.
So, even if you live solely on “tax-free” capital gains, the tax on your wages has reduced your income as effectively as it reduced the amount of gasoline a wage earner can buy. Taxing ordinary people’s gasoline and capital gains reduces their gasoline purchases and income still further.
This argument doesn’t apply to people who disguise earned income as capital gains, nor to people who receive substantial transfers of wealth as gifts or bequests.
@Al V.
The fact that the court issued this decision on the last day of the term is completely meaningless in regards to whether the Chief Justice changed his vote. This decision was undoubtedly always going to come down on the last day of the term because the legal arguments were complex and required significant energy to put into writing. The length and depth of the Chief Justice’s opinion also seems to imply that it was not written in only a few days this week. While I agree there is some substantial evidence that he may have changed his opinion over the course of the last few months, such a change would most likely have occurred a few weeks ago. Just my opinion. Maybe you can prove me wrong in a few decades when the justice’s private papers are released, until then its all speculation anyway.
You can’t earn your income from capital gains alone.
Really? I beg to differ.
So, even if you live solely on “tax-free” capital gains, the tax on your wages has reduced your income as effectively as it reduced the amount of gasoline a wage earner can buy. Taxing ordinary people’s gasoline and capital gains reduces their gasoline purchases and income still further.
This doesn’t address the point at all. No one is claiming that taxing labor and/or capital gains doesn’t reduce potential gains or quantity of gas consumed. That has no relevance.
If you gain most of your income from capital gains, taxed at a lower rate, you are receiving a tax break. This incentivizes you to invest more because you may have more earning potential than what you would have had if you had earned income completely through labor, regardless of other distortions.
The analogy between lower taxes on capital gains with respect to labor and a lower gasoline tax with respect to income taxes makes no sense. One taxes you on consumption, an activity where you spend your income, where another taxes you on your work/investment, where you earn income.
“This doesn’t address the point at all. No one is claiming that taxing labor and/or capital gains doesn’t reduce potential gains or quantity of gas consumed. That has no relevance.”
Agreed. This isn’t a debate on the merits of a capital gains tax. It’s just an admission that the government frequently chooses to change tax rates on particular behaviors to either encourage or discourage them. Merely disagreeing with what that behavior may be doesn’t make the tax itself unconstitutional.
You can’t earn your income from capital gains alone.
Really? I beg to differ.
When I said “you” I assumed you were some ordinary wage-earner, not an entrepreneur who has disguised his/her earned income as capital gains. Most people get their capital through hard work.
As I said, the argument applies for most people, but not everyone, but here, I am departing from what I have heard Steve say – Steve maintains quite strongly that capital gains should not be taxed, for the reasons given. When people raise objections such as the “one dollar salary” issue, he points out that earned income should be taxed, even if it’s disguised as capital gains.
I don’t recall whether he’s addressed the issue that it’s often hard to see through the disguise.