Constitutional Law Prof Blog

Daily Read: Linda Sugin on the Constitutional Tax Avoidance of the Roberts Court

The Roberts Court majority is avoiding taxes: not the income taxes revealed by the returns due today, April 15, but the constitutional scrutiny that taxes deserve.

Law Prof Linda Sugin (pictured left), in her article The Great and Mighty Tax Law: How the Roberts Court Has Reduced Constitutional Scrutiny of Taxes and Tax Expenditures, draft available on ssrn, analyzes two cases that are not typically paired. 

First, she considers National Federation of Independent Business v. Sebelius, in which, as she describes it, Justice Roberts' "newly muscular tax law saved Obamacare from near death at the hands of the Commerce Clause." 

Second, she examines Arizona Christian Schools v. Winn, in which, as dhe describes it, the majority   "adopted a novel judicial approach to targeted tax benefits" and denied standing in an Establishment Clause challenge.

Sugin argues that these two cases, taken together, "challenge the revenue-raising role of the tax law, and give it tremendous potential to overcome constitutional obstacles that legislatures face," including state legislatures.  She contends that the cases "introduce confusion into the law of taxation by incentivizing the adoption of more non-revenue policy in the tax law, and blurring the conceptual structure of taxation."  She claims that "these decisions undermine the important work on tax reform and fiscal responsibility that other branches of government are doing."  Ultimately, she argues that these decisions portend that "policies administered through the tax law" will be deemed constitutional "even where those same policies would be unconstitutional if administered as either direct regulation or appropriated spending."

Worth a read and not only on "tax day."

RR

Court Reignites Health Care Reform Challenge

The Supreme Court today reopened one of the cases challenging the federal Affordable Care Act and sent it back for further proceedings at the Fourth Circuit.  The move means that the lower court, and possibly the Supreme Court, will have another crack at certain issues that the Supreme Court dodged this summer in its ruling in NFIB v. Sebelius.

Recall that the Fourth Circuit rejected a challenge to the ACA by several individuals and Liberty University in September 2011, holding that the Anti-Injunction Act barred the claim.  The Supreme Court declined to review that case, Liberty University v. Geithner.  But today the Court reopened the case, vacated the Fourth Circuit ruling, and sent the case back for further proceedings in light of the Court's ruling in NFIB.

The plaintiffs in the case originally challenged the universal coverage provision (the so-called "individual mandate," requiring individuals to acquire health insurance or to pay a tax penalty) and the employer mandate (requiring employers with more than 50 employees to provide health insurance coverage for their employees), arguing that they exceeded Congress's taxing and commerce powers and violated the Tenth Amendment, Article I, Section 9's prohibition against unapportioned capitation or direct taxes (the Direct Tax Clause), and the Religion Clauses and the Religious Freedom Restoration Act (among others).  (As to the Religion Clauses, the plaintiffs argued that the requirements would cause them to support insurance companies that paid for abortions, a practice that they claimed ran against their religions.) 

The district court ruled against the plaintiffs on all counts and dismissed the case.  The Fourth Circuit dismissed the case under the AIA and didn't reach the merits. 

The Supreme Court ruled in NFIB that the AIA did not bar the Court from ruling on the tax question, that Congress validly enacted the universal coverage provision under its Article I, Section 8 power "to lay and collect Taxes," and that it didn't violate the Direct Tax Clause.  Thus after NFIB these issues appear to remain open on remand:

• Whether the mandates violate the Religion Clauses or the RFRA;
• Whether the employer mandate violates the taxing authority or the Direct Tax Clause;
• Whether the mandates violate equal protection;
• Whether the mandate violates free speech and associational rights.

As to the Religion Clauses, the district court ruled that the ACA's religious exemptions to universal coverage were permissible accommodations (and thus didn't violate the Establishment Clause) and that the ACA didn't require the plaintiffs to pay for abortions (and thus didn't violate the Free Exercise Clause or the RFRA).

As to the employer mandate: It's hard to see how the Supreme Court's tax analysis of the individual mandate in NFIB wouldn't apply with equal force to the employer mandate.

If the district court was right on the First Amendment and equal protection claims (as it seems), and if the Supreme Court's tax analysis applies with equal force to the employer mandate, this case doesn't seem to have much of a future.

But then again, that's what many of us said about NFIB.

SDS

Chief Justice Roberts's Necessary and Proper Clause

What did Chief Justice Roberts do to the Necessary and Proper Clause in last week's ruling on the universal coverage provision of the Affordable Care Act?

Not much.  Here's why.

Let's start with the opinion.  Chief Justice Roberts wrote last week that universal coverage--the so-called individual mandate--exceeded Congress's authority under both the Commerce Clause and the Necessary and Proper Clause (although he wrote for a five-Justice majority that it fell within congressional taxing authority).  (We wrote here about the Chief's opinion on the Commerce Clause.)  In so writing, the Chief rejected the government's argument that because Congress had authority under the Commerce Clause to enact the guaranteed issue and community rating provisions, it also had authority under the Necessary and Proper Clause to enact universal coverage.  After all, everybody agreed that guaranteed issue and community rating alone wouldn't work; they needed an individual mandate. 

(Here's a primer.  Guaranteed issue requires insurance companies to provide insurance to all comers.  Community rating control premium rates within a particular community.  Under these provisions, insurance companies will have to cover everyone (including those with high medical costs), within a range of premium rates.  But when an insurance company covers everyone (including those with high medical costs), premiums go up.  And when premiums go up, without an ability to discriminate, individuals are driven out of the market.  Thus, guaranteed issue and community rating will drive up costs and drive down coverage.  Unless, that is, individuals are required to buy insurance.  If everybody has to buy insurance, the cost-distribution within the insurance pool will keep rates low (because the healthy, in effect, subsidize the unhealthy through the pool), and coverage (obviously) goes up.)

Chief Justice Roberts wrote that the Necessary and Proper Clause wasn't so malleable.  He wrote that while universal coverage may be "necessary," it is not "proper," because universal coverage "draw[s] within its regulatory scope those who would otherwise be outside of it."  Op. at 30.  In other words, individuals are not the subject of the guaranteed issue and community rating regulations (insurance companies are); they are therefore not within the regulatory scope of valid congressional regulation under the Commerce Clause; and they are therefore outside of the scope of the Necessary and Proper Clause.  Op. at 29-30.  The Chief wrote that the Court's prior cases blessed congressional action under the Necessary and Proper Clause only when the subject of regulation under the Necessary and Proper Clause was already in the regulatory scope of congressional regulation under its principal Article I power.  Here's how he described it:

The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power.  This is in no way an authority that is "narrow in scope" . . . or "incidental" to the exercise of the commerce power.  Rather, such a conception of the Necessary and Proper Clause would work a substantial expansion of federal authority.  No longer would Congress be limited to regulating under the Commerce Clause those who by some preexisting activity bring themselves within the sphere of federal regulation.  Instead, Congress could reach beyond the natural limit of its authority and draw within its regulatory scope those who otherwise would be outside of it.  Even if the individual mandate is "necessary" to the Act's insurance reforms, such an expansion of federal power is not a "proper" means for making those reforms effective.

Op. at 29-30.

So, what's the effect of the Chief's opinion on the Necessary and Proper Clause?  Very little.

There are two problems.  The first one is exactly the same problem with the Chief's opinion on the Commerce Clause, only here it's even more pronounced.  That is: the opinion may well be dicta, and, even if it's not, it doesn't have strong support as a guiding opinion under the Marks rule.  Like Chief Justice Roberts's opinion on the Commerce Clause, his opinion on the Necessary and Proper Clause is not necessary to the Court's conclusion.  Moreover, he's writing just for himself.  The four "liberals" would have upheld universal coverage under the Necessary and Proper Clause.  And the four other "conservatives" declined to join the Chief--and were in even sharper disagreement with him than they were on the Commerce Clause.  (The four other conservatives would apparently read the Necessary and Proper Clause as allowing only regulation that is absolutely necessary to the named Article I powers--a reading that flies in the face of McCulloch v. Maryland and the Clause's entire history.  Dissent, at 9-10.)

Moreover, the Chief's analysis is weak and apparently disavowed by all on the Court (though for different reasons), further alienating and weakening it.  Chief Justice Roberts supports his new Necessary and Proper rule--that Congress can regulate only those things already within the regulatory scope--by describing the Court's prior Necessary and Proper cases.  But while his description may be accurate on the facts, it is not supported by the language and analysis of those rulings.  For example, the Court just two terms ago ruled in Comstock that the Necessary and Proper Clause allowed congress to authorize the detention of federal prisoners beyond their release date if they were deemed "sexually dangerous."  Why?  Because the Necessary and Proper Clause allows Congress to enact federal criminal law (in furtherance of its named Article I powers), and therefore to sentence offenders, and therefore to jail offenders, and therefore to keep dangerous offenders off the streets, even after their release dates--all in the name of the Necessary and Proper Clause.

Now it turns out that offenders were already within the regulatory scheme.  But the Court's ruling did not turn on that, and, in fact, nowhere mentioned it.  Instead, the Court said, quoting the usual language from McCulloch, that the Necessary and Proper Clause authorized Congress to take any action that was rationally related to its enumerated powers.

(The Court's opinion in Comstock was written by Justice Breyer.  And Chief Justice Roberts joined it in full, even though he could have signed on with one of two more restrictive concurrences, written by Justice Kennedy and Justice Alito.)

In short, nothing in Comstock, or the Court's other Necessary and Proper decisions, sets out Chief Justice Roberts's new rule.  It's just his gloss.  And one, apparently, that nobody else on the Court subscribes to in his way and for his reasons. 

But assuming that the courts treat the Chief's opinion as (at least) guiding, however--as they likely will--the second problem is that the Chief's opinion is quite narrow and thus only applicable to a small set of cases, if any.  After all: How often does Congress seek to regulate something under the Necessary and Proper Clause that isn't within the regulatory scheme of its power-in-chief?  By the Chief Justice's own reckoning: The Court has never seen this case.

And even if the Chief's opinion is guiding, courts must read it alongside Justice Breyer's majority opinion in Comstock--the Court's next-most recent foray into the Necessary and Proper Clause, and, again, an opinion that Chief Justice Roberts signed in full.  Read alongside the expansive and capacious Necessary and Proper Clause described in Comstock, Chief Justice Roberts's new rule seems a narrow exception, indeed.  Chief Justice Roberts did nothing last week to chip away at that expansive and capacious Clause; in fact, his opinion last week reaffirmed its long-standing principles (just as his opinion on the Commerce Clause reaffirmed the Court's broadest interpretations of that Clause).

In the end, the Chief's opinions on both the Commerce Clause and the Necessary and Proper Clause are almost certainly moot, anyway.  The real story of the case is Chief Justice Roberts's majority opinion upholding universal coverage under the tax power.  Any future Congress seeking to enact legislation that would push up against Chief Justice Roberts's new rules for the Commerce Clause and the Necessary and Proper Clause would do well to simply enact the policy as a tax penalty.

SDS

Supreme Court Upholds Affordable Care Act

A sharply divided Supreme Court today upheld key provisions in the Affordable Care Act (the "ACA," or Obamacare).  The upshot is that five Justices (Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan) held that universal coverage (or the individual mandate) is upheld, and that a three-Justice plurality (Chief Justice Roberts and Justices Breyer and Kagan) held Medicaid expansion is upheld in a somewhat weaker form.  A different five Justices (Chief Justice Roberts and Justices Scalia, Kennedy, Thomas, and Alito) held that the commerce clause did not support universal coverage (but for different reasons).

The ruling means that universal coverage stands, and Medicaid expansion stands, although in a somewhat weaker form.

Our analyses of oral arguments are here, here, and here.  We'll have more analysis of the opinion; here's just a breakdown of the holding.

Chief Justice Roberts wrote for the majority; by issue:

Taxing Clause.  A five-Justice majority held that Congress could enact the universal coverage provision (also called the individual mandate) under the taxing authority.  Chief Justice Roberts, joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan, wrote that the tax penalty for failing to purchase health insurance was a valid tax.  

First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more.  It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the "prohibitory" financial punishment in Drexel Furniture.  Second, the individual mandate contains no scienter requirement.  Third, the payment is collected solely by the IRS through the normal means of taxation--except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution.

Op. at 35-36.  The majority was untroubled that the tax penalty could be a "tax" for taxing authority purposes, but a non-"tax" for Anti-Injunction Act purposes: Chief Justice Roberts wrote that Congress itself enacted the AIA and could therefore itself draft around it (which it did here); but Congress's taxing authority may support congressional action whether or not Congress calls its action a "tax."

Justices Scalia, Kennedy, Thomas, and Alito dissented, arguing that universal coverage exceeded the taxing power.

Commerce Clause.  A five-Justice majority concluded that the Commerce Clause did not support congressional authority to enact universal coverage, but for two different reasons.  Chief Justice Roberts, writing for himself alone, wrote that universal coverage amounted to regulating before entrance into the market for health services--i.e., regulating someone who's "inactive."  (And Chief Justice Roberts didn't buy the government's claim that the maarket for health insurance was integrally connected to the market for health care.)  Chief Justice Roberts wrote that universal coverage was unprecedented and unsupported by the Court's cases.  (Chief Justice Roberts justified reaching the issue--even though the case could be (and was) decided on the taxing power alone--because, he said, the government designed universal coverage first as a regulation and only secondly (or alternatively) as a tax.)

Justices Scalia, Kennedy, Thomas, and Alito took a harder line, arguing that Congress here went too far, because it first sought to create commerce, and then to regulate it.

Medicaid Expansion.  Chief Justice Roberts wrote for himself and Justices Breyer and Kagan that Medicaid expansion as-is under the ACA--in which a state declining to participate in Medicaid expansion would stand to lose its entire pot of federal Medicaid money--was unduly coercive.  But the same plurality held that Medicaid expansion could be saved by simply reading the statute to mean that a declining state could lose only the additional federal money that would have come with the expansion.

Justices Ginsburg and Sotomayor wrote separately to argue that Medicaid expansion as-is under the ACA did not violate the Constitution.

Justices Scalia, Kennedy, Thomas, and Alito dissented, writing that Medicaid expansion was flatly unconstitutional.

SDS

President Obama Comments on Health Care Arguments at Court

In case you missed it, here are President Obama's full comments on the ACA litigation in response to a reporter's question yesterday at a joint press conference, with President Calderon of Mexico and Prime Minister Harper of Canada:

With respect to health care, I'm actually--continue to be confident that the Supreme Court will uphold the law. And the reason is because, in accordance with precedent out there, it's constitutional. That's not just my opinion, by the way; that's the opinion of legal experts across the ideological spectrum, including two very conservative appellate court justices that said this wasn't even a close call.

I think it's important--because I watched some of the commentary last week--to remind people that this is not an abstract argument. People's lives are affected by the lack of availability of health care, the inaffordability of health care, their inability to get health care because of preexisting conditions.

The law that's already in place has already given 2.5 million young people health care that wouldn't otherwise have it. There are tends of thousands of adults with preexisting conditions who have health care right now because of this law. Parents don't have to worry about their children not being able to get health care because they can't be prevented from getting health care as a consequence of a preexisting condition. That's part of this law.

Millions of senior are paying less for prescription drugs because of this law. Americans all across the country have greater rights and protections with respect to their insurance companies and are getting preventive care because of this law.

So that's just the part that's already been implemented. That doesn't even speak to the 30 million people who stand to gain coverage once it's fully implemented in 2014.

And I think it's important, and I think the American people understand, and I think the justices should understand, that in the absence of an individual mandate, you cannot have a mechanism to ensure that people with preexisting conditions can actually get health care. So there's not only a economic element to this, and a legal element to this, but there's a human element to this. And I hope that's not forgotten in this political debate.

Ultimately, I'm confident that the Supreme Court will not take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress. And I'd just remind conservative commentators that for years what we've heard is, the biggest problem on the bench was judicial activism or a lack of judicial restraint--that an unelected group of people would somehow overturn a duly constituted and passed law. Well, this is a good example. And I'm pretty confident that this Court will recognize that and not take that step. . . .

As I said, we are confident that this will be over--that this will be upheld. I'm confident that this will be upheld because it should be upheld. And, again, that's not just my opinion; that's the opinion of a whole lot of constitutional law professors and academics and judges and lawyers who have examined this law, even if they're not particularly sympathetic to this particular piece of legislation or my presidency.

SDS

Skeptical Court Hears Arguments on Minimum Coverage, Individual Mandate

The Supreme Court today heard oral argument in the congressional authority portion of the challenge to the Affordable Care Act--whether Congress had authority under the Commerce Clause or its taxing power to enact the minimum coverage requirement.  Links to the audio files and transcript are here.

The questions at argument suggest that the case may turn on Chief Justice Roberts or Justice Kennedy (or both), both of whom, in different ways, appeared to give serious attention and thought to both sides of the argument.  But if they leaned, both also seemed to lean toward opponents of the provision.  For example, both (but Chief Justice Roberts perhaps more than Justice Kennedy) seemed much more skeptical of the government's argument than the opponents' argument.  And Justice Kennedy at one point suggested that the government face an even higher burden, given the "unprecedented" nature of the provision.  He also gave a short statement on the tradition in American law of not imposing a duty to act.

Justices Scalia and Alito seemed more set in their positions against the provision; and Justices Ginsburg, Breyer, Sotomayor, and Kagan seemed more set in their positions in favor.  (Justice Thomas was silent, but his position (against) was never seriously in doubt.)

In short, this could be a squeaker one way or the other. 

Several themes caught the Court's attention:

Nature of the Market.  The Court spent time figuring out whether the relevant market is unique, because everyone will at some point enter it.  This question turns on what the relevant market is (see below) and, at least in part, on the issue of timing (see below). 

A Limiting Principle.  The Court looked for a limiting principle in the government's position--one that would distinguish the parade of horribles offered by the Justices, including everything from the government requiring us all to eat broccoli to the government requiring us all to buy cell phones to use for emergencies.  SG Verrilli came back with limiting principles distinguishing these examples, and Justice Kennedy seemed genuinely interested in them (or at least in hearing the states' responses to them).

The Relevant Market.  The Court spent considerable time on the familiar arguments about the relevant market--is Congress regulating the market for health insurance, or the market for health care (or health care payment)?  If the former, opponents argue that Congress is requiring something of people not yet in the market, and thus exceeding its authority under the Commerce Clause.  Chief Justice Roberts and Justice Kennedy both seemed open at least to hearing the government's argument that the minimum coverage requirement regulates the market for health care (not health insurance).

Timing.  Timing was an issue--whether Congress could regulate substantially before a person enters the market for health care, or whether Congress could only regulate at the point of entry, when, e.g., a person goes to the emergency room.  Everyone seemed to agree that Congress could regulate at the point of entry; the question is how far before that Congress can regulate--and whether the Commerce Clause has anything at all to say about this.

Congressional Creation of the Market (and the Problem).  Some expressed some concern that Congress created the interstate market and the very problem that it sought to address through the minimum coverage requirement by mandating that providers give free care to indigents.  Even if this is so, however, it's not clear, as Justice Breyer noted, why this would be a constitutional problem: Congress creates interstate markets all the time. 

Part of a Package.  The Court gave some attention to the government's argument that the minimum coverage requirement was necessary to make the guaranteed issue and community rating provisions work--an argument that draws on Gonzales v. Raich.  Opponents argued that Congress could have enacted these provisions without the minimum coverage provision; the government said that would have been ineffectual.

Policy.  There were a couple exchanges on pure policy, in particular other ways that Congress might have achieved its goals.  This shouldn't have any bearing on the constitutional question: congressional authority doesn't require something like a least-restrictive-means analysis.  If these exchanges should translate into constitutional law, however--if, e.g., the Court looks to alternatives to show why the minimum coverage provision exceeds congressional authority--the result could tighten congressional authority in general along the lines of a least-restrictive-means test.  This would mark an important change in the level of deference the Court usually gives to Congress in areas of congressional authority.

The Court spent more time on the Commerce Clause than on the taxing authority, but that's perhaps not a surprise.  The Justices' leanings didn't seem to change whether the questioning went to the Commerce Clause or to the taxing authority.

SDS

Few Clues, Con Law Issues in First Day of Health Reform Arguments

For those hoping to get an idea of where the Court is heading with the core constitutional issues in the ACA challenge, yesterday's oral arguments on the Anti-Injunction Act must have been a disappointment.  The Court yesterday drilled into the finer points of tax law--in particular, arguments whether the AIA is jurisdictional and, if so, whether it applies--but it gave few, if any, clues on the con law issues that will dominate oral argument today and tomorrow.  Yesterday's argument did suggest this, though: The Court will get to the merits now, and not punt based on the AIA.

The audio file and transcript are available here.

Justice Alito got right to a main con law point with SG Verrilli, asking how the government can consider the tax penalty a non-tax for AIA purposes but a tax for Article I purposes:

Justice Alito: General Verrilli, today you are arguing that the penalty is not a tax.  Tomorrow you are going to be back and you will be arguing that the penalty is a tax [to support the universal coverage provision of the ACA].

Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?

General Verrilli: No, Justice Alito, but the Court has held in the license tax cases that something can be a constitutional exercise of the taxing power whether or not it is called a tax.  And that's because the nature of the inquiry that we will conduct tomorrow is different from the nature of the inquiry that we will conduct today.

Tomorrow the question is whether Congress has authority under the taxing power to enact it and the form of words doesn't have a dispositive effect on that analysis.  Today we are construing statutory text where the precise choice of words does have a dispositive effect on the analysis.

It's not clear whether this concern about the government's position on the tax penalty will have any constitutional traction today, however.  There's no requirement that a "tax" for taxing authority purposes must also be a "tax" for every other purpose.  The government's position may seem at odds with itself, but it probably doesn't matter for any constitutional reason.

Other Justices asked about those subject to the universal coverage requirement, but exempt from the tax penalty, particularly the poor, suggesting that the taxing authority alone isn't enough to support the universal coverage requirement for this population.  Several Justices were interested in whether the universal coverage requirement could be separated from the tax penalty, apparently setting up a line of inquiry today about whether the Commerce Clause alone could support the universal coverage provision for this population.  Again, though, it's not clear how much this will matter for arguments today: The Commerce Clause has always been a potentially independent authority--maybe even the best authority--to support the universal coverage provision for every population.

The Court asked some questions about whether the tax penalty raised revenue.  This line is almost certainly more important for AIA purposes than for taxing authority purposes, though.  And in any event, as SG Verrilli reminded the Court, the CBO has projected that the tax penalty will raise revenue. 

Finally, Justice Sotomayor asked a line of questions about state standing to challenge the universal coverage provision.  This line may come back today, but it's not clear from the brief exchange (on page 72 of the transcript) that it will get much play.

In short, argument yesterday gives few clues about the con law issues on display today and tomorrow.  At most, we have some likely themes for arguments today and tomorrow.  And we almost certainly have this: The Court is likely to address the merits now, and not punt under the AIA.

SDS

Court Allots Time in Health Care Reform Challenges

The Supreme Court issued an order today alloting oral argument time in the challenges to the Affordable Care Act--six hours of argument altogether.  Here's how the argument time will be shared:

March 26 and 27

• On the Minimum Coverage Provision, the Solicitor General gets 60 minutes; respondents Florida, et al. get 30 minutes; and respondents National Federation of Independent Business, et al. get 30 minutes.
• On the Anti-Injunction Act, the Court-appointed amicus gets 40 minutes; the Solicitor General gets 30 minutes; and the respondents get 20 minutes.

March 28

• On Medicaid expansion, the petitioners get 30 minutes; and the Solicitor General gets 30 minutes.
• On severability, the petitioners get 30 minutes; the Solicitor General gets 30 minutes; and the Court-appointed amicus gets 30 minutes.

SDS

Opening Briefs Filed in Health Reform Challenge

Parties today filed opening briefs in the cases challenging the federal Affordable Care Act, now before the Court.  We covered the Court's grant and argument schedule here.

The government filed its opening brief defending the minimum coverage provision, also called the individual mandate, under the Commerce Clause, the Necessary and Proper Clause, and Congress's taxing power.  As we might expect, the government emphasizes the congressional findings in the act and the data supporting its argument that everyone is in the relevant market.  It defends Congress's power to enact the provision principally as an essential part of a larger regulatory scheme:

The minimum coverage provision plays a critical role in that comprehensive regulatory scheme by regulating how health care consumption is financed.  It creates an incentive for individuals to finance their participation in the health care market by means of insurance, the customary way of paying for health care in this country, and it works in tandem with the Act's other provisions to expand the availability and affordability of health insurance coverage.  In particular, the minimum coverage provision is key to the viability of the Act's guaranteed-issue and community-rating provision.

Brief, at 17-18.

The government also defends the provision as a stand-alone regulation of commerce.  In particular, it argues that the election to self-insure is an economic act that Congress can regulate and hotly disputes the opponents' claim that some self-insured are non-cost-shifters, thus not subject to regulation:

The circumstances of this case well illustrate the flaws in respondents' premises.  At the outset of this litigation, respondent Mary Brown thought she had made a rational choice to forgo insurance . . . .  That belief proved incorrect.  Ms. Brown and her husband recently filed a petition for bankruptcy, and they list among their liabilities thousands of dollars in unpaid medical bills, including bills from out-of-state providers.

Brief, at 44.  The government forcefully challenges the claimed distinction between "activity" and "inactivity," and argues that the self-insured aren't "inactive" in this market, anyway.  Brief, at 47-52.

Also today the state petitioners and private petitioners filed their briefs on severability.  The arguments are very similar and familiar.  The states summarize:

Severability is a remedial inquiry that turns on legislative intent.  The ultimate question is not whether the balance of an act can function independently without an invalidated provision.  That is a necessary, but not sufficient, condition for preserving the balance of the statute.  The ultimate question is whether Congress would have enacted the statute without the invalidated provision.  Here, the answer is clear[: No.]

Brief, at 24.

Recall that the connection between the government's principal argument--that the minimum coverage provision is an essential part of the larger ACA--and the state and private petitioners' argument--that the minimum coverage provision is not severable--was a focus of Judge Vinson's ruling (holding that the minimum coverage provision exceeded Congress's authority, and that it was not severable, because the government said that it formed an essential part of the ACA) earlier in this litigation.

The briefs today break little new ground.  The fundamental arguments are familiar, even if they're sharpened, considerably.

SDS

Atlas Shrugged and Economic Liberties

An interesting segment on NPR's Morning Edition comparing Ayn Rand's economic thoughts to pronouncements of current politicians.  Rand is the author of the novels Atlas Shrugged (1957) and The Fountainhead (1943).

The highlight is a 1959 interview with Rand by Mike Wallace, who asks about the United States' political direction of "the gradual growth of social, protective legislation, based on the principle that we are our brothers' keepers."

These programs are destroying individual liberties, Rand says, especially the freedom of producers, entrepreneurs, businessmen. The government has no right to take their property, she says.

"I imagine that you're talking now about taxes," Wallace says. "And you believe that there should be no right by the government to tax. You believe that there should be no such thing as unemployment compensation, regulation during times of stress."

"That's right," Rand replies. "I am opposed to all forms of control. I am for an absolute, laissez-faire, free, unregulated economy."

A video of the interview is available in 3 parts; here's part 1:

 

 

While the usual constitutional law link might be Lochner, Rand's interview could prompt an interesting discussion of Commerce Clause, Takings Clause, or Taxing Clause, or Campaign Finance cases - - - and of course the Affordable Care Act (last discussed here).

RR

Plaintiffs and Government Move to Take Health Reform to the Supreme Court

Three parties--two sets of plaintiffs and the U.S. government--filed petitions today asking the Supreme Court to review the Eleventh Circuit ruling last month in State of Florida v. HHS striking down aspects of the Affordable Care Act.  In seeking Court review of the three-judge panel decision, the parties are bypassing en banc review and taking the case directly to the Court.

Recall that the Eleventh Circuit ruled the so-called individual mandate unconstitutional, but also ruled it severable from the rest of the ACA.  In particular, the court ruled that the individual mandate exceeded congressional authority under both the Commerce Clause and the Taxing Clause; that the individual mandate was severable from the rest of the ACA; and that Medicaid expansion did not unduly coerce the states and thus exceed congressional authority under the Spending Clause.  The ruling gave both sides plenty to appeal.

And the petitions for cert. filed today reflect it.  Thus the National Association of Independent Business and two private individuals, all plaintiffs in the case, took on the Eleventh Circuit's ruling on severability.  (Recall that the district court ruled the individual mandate non-severable, in part because the government argued that it was an essential part of the overall ACA.  And becuase it ruled that Congress lacked authority to enact the individual mandate, the district court also struck down the entire ACA.  The Eleventh Circuit reversed.)  These petitioners also say that the Eleventh Circuit's case is a better vehicle with which to evaluate the ACA, because it involves all the issues, but none of the problems, of the cases out of the other circuits.  Thus, they say that the Sixth Circuit ruling in Thomas More, upholding the individual mandate, includes a contested standing issue and failed to address severability of the individual mandate (because the parties didn't argue it); the Fourth Circuit in Liberty University ruled that the plaintiffs' case was barred by the Anti-Injunction Act, an erroneous and now "irrelevant" ruling, in their judgment.

The state plaintiffs in the case took on the Eleventh Circuit's ruling on the Tenth Amendment and federalism.  They argue that the Eleventh Circuit erred in ruling that Medicaid expansion in the ACA isn't unduly coercive and that the Supreme Court should resolve whether the so-called employer mandate provisions are constitutional as applied to the states.

Finally, the government argued that Congress had authority to enact the individual mandate under the Commerce Clause and, alternatively, the Taxing Clause.  It also asks the Court to address whether the Anti-Injunction Act bars the plaintiffs' suit.

The petitions today make it all the more likely that the Court will hear a challenge to the ACA this Term.  And this case seems the most likely vehicle, for all the reasons argued by the NFIB: This case puts it all before the Court--Commerce Clause, Taxing Clause, severability, Tenth Amendment, federalism, and the AIA.  Both sides want a ruling on the whole thing, and this is the right case.

SDS

[Image: Pieter Huys, A Surgeon Extracting the Stone of Folly, Wikimedia Commons]

Fourth Circuit: Anti-Injunction Act Bars Health Reform Challenge

The same day that a unanimous three-judge panel ruled that the State of Virginia lacks standing to challenge the individual health insurance mandate in the Affordable Care Act, the same three-judge panel ruled by a vote of 2-1 in Liberty University v. Geithner that the Anti-Injunction Act bars individual plaintiffs from challenging the mandate as exceeding congressional taxation authority.  (The AIA bars preenforcement suits challenging "any tax."  The ACA imposes a tax penalty on anyone who doesn't obtain health insurance and on employers who get notice that an employee received a government subsidy for health insurance.)  The ruling means that the AIA bars the suit (the first ruling of this kind by a circuit court).  But it says nothing about the merits (although Judge Wynn in concurrence and Judge Davis in dissent both got to the merits--and both would have upheld the mandate).

Judge Motz wrote for herself and Judge Wynn on the AIA question.  She looked to the plain language of the ACA to determine that the mandate was a tax for AIA purposes, and therefore that the AIA barred a preenforcement challenge to it.  She rejected arguments that the ACA operated as a "penalty," not a "tax," that Congress intended it to operate as a penalty, and that it wasn't designed to raise revenue.  But because she ruled that the AIA barred the suit, she said nothing about the underlying issue--whether Congress had authority to enact the mandate under its taxing power under the General Welfare Clause.

The ruling was (oddly) a loss for both the plaintiffs and the government on this narrow AIA question.  The government previously argued that the AIA barred the suit, but it abandoned its previous position presumably to get a ruling on the merits.  It didn't get such a ruling from this panel.  But Judge Wynn, in addition to agreeing with Judge Motz that the AIA barred the suit, also wrote that Congress had authority to enact the health mandate under its taxation authority under the General Welfare Clause.  And while Judge Davis dissented on the AIA point, he wrote that Congress had authority to enact the mandate under the Commerce Clause.  

All this means that two judges on this Fourth Circuit panel would have ruled that the government had power to enact the mandate under some authority.  That's the real story of the case.

SDS

Sixth Circuit Upholds Individual Health Insurance Mandate

A three-judge panel of the Sixth Circuit today upheld the individual health insurance mandate in the federal Patient Protection and Affordable Care Act (ACA) under Congress's Commerce Clause authority.  The ruling affirmed District Judge Steeh's earlier ruling in the case, Thomas More Law Center v. Obama.

The panel split on a couple issues.  Here are the highlights of the opinion:

Commerce Clause Authority: Two of the three judges, Judge Martin and Judge Sutton, agreed that Congress has authority under the Commerce Clause to enact the individual mandate.  But they agreed for slightly different reasons--see below.  Judge Graham disagreed.

Regulating Action versus Regulating Inaction: Given the play this distinction has received in litigation and in public debates, this is the most important--and most interesting--part of the case.  All three judges agreed that there's no constitutional line between activity and inactivity--and that there's therefore no per se restriction on Congress regulating inactivity.  While they agreed on this point for slightly different reasons, they all seemed to agree (at least) that the text of the Constitution does not support the distiction.  Beyond that, they had just slightly different reasons for rejecting the distinction, mostly focusing on how it doesn't square against the Court's Commerce Clause precedents and how it's unworkable in practice.

Outside the Market: Judges Martin and Sutton agreed, again for different reasons, that those who decline to purchase health insurance are nevertheless part of the market--the market for national health care--because they self-insure for the cost of health care services.  Judge Graham disagreed.  He wrote that those who self-insure (and again, the "inactivity" didn't give him a constitutional bother), are not a part of the relevant market--the market for health insurance. 

Taxing Authority: Judges Sutton and Graham agreed that the tax penalty goes beyond congressional authority under the General Welfare Clause.  Judge Sutton wrote at length detailing why.  Judge Martin (like Judge Steeh below) didn't reach this issue, because he concluded that the Commerce Clause adequately supported the individual mandate.

In all, the three opinions well reflect the array of arguments in this case (and in other cases, and in the public debate).  Between the three, they reflect a spectrum--with Judge Martin ruling most clearly that Congress had authority under the Commerce Clause, Judge Martin ruling the same way but with a shade greater caution, and Judge Sutton ruling against.

SDS

Footnote of the Day: Taxes and Numbers

Tax day, usually April 15 but this year with a filing extension until Monday, remains a suitable day to appreciate numeracy and try to maintain a sense of humor.  The law review article, The Law of Prime Numbers, 68 NYU Law Review 185 (1993), authored by 19 authors, attempts to do both.

 

Slight on text, the article's footnotes are appreciations of individual prime numbers.  Footnote “l” of the article highlights the prime number “37” with a discussion of a famous tax footnote, a more loosely linked interpretative question, and an even more tangentially related, but exceedingly important, constitutional criminal procedure case:

 37 was the footnote number in Crane v. Commissioner, 331 U.S. 1, 14 (1947), in which the Supreme Court set forth a proposition that would bedevil tax practitioners and scholars for decades. In what has come to be acknowledged as the most famous footnote in tax history, see Boris I. Bittker, Tax Shelters, Nonrecourse Debt and the Crane Case, 33 Tax L.Rev. 277 (1978), the Court suggested that the inclusion in income occurring on the relief of a liability for which the taxpayer had no personal liability should be limited to the fair market value of the property securing the debt, rather than the full amount of the debt. It was not until the Court revisited the issue in 1983, in Commissioner v. Tufts, 461 U.S. 300, 307 (1983), that footnote 37 was repudiated, laying the issue to rest (we think). In the intervening period, however, much effort was consumed in the pursuit of the true meaning of this cryptic footnote. See, e.g., Christian C. Day, Commissioner v. Tufts: The Fall of Footnote 37; The Confirmation of the Functional Relationship, 45 U.Pitt.L.Rev. 803, 804 n. 3 (1984) (“If footnote 37 did not launch a thousand ships, it certainly killed more than its share of trees in its day and still continues to do so.”).

37 dollars was the price per 100 pounds of chicken established in the contract at the heart of Frigaliment Importing Co. v. B.N.S. Int'l Sales Corp., 190 F.Supp. 116, 117 (S.D.N.Y.1960). A dispute arose between the buyer (plaintiff) and seller (defendant) as to whether the chickens that were delivered met the specifications of the contract. Judge Friendly faced the difficult hermeneutical issue of just what, exactly, is a “chicken”:

Plaintiff says “chicken” means a young chicken, suitable for broiling and frying. Defendant says “chicken” means any bird of that genus that meets contract specifications on weight and quality, including what it calls “stewing chicken” and plaintiff pejoratively terms “fowl.” Dictionaries give both meanings, as well as some others not relevant here. To support it, plaintiff sends a number of volleys over the net; defendant essays to return them and adds a few serves of its own. Assuming that both parties were acting in good faith, the case nicely illustrates Holmes' remark “that the making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs—not on the parties' having meant the same thing but on their having said the same thing.” I have concluded that plaintiff has not sustained its burden of persuasion that the contract used “chicken” in the narrower sense.

Id. (citation omitted). Upon learning of the court's decision, the plaintiff undoubtedly clucked “FOWL.”

37 was the age of the detective who arrested Clarence Earl Gideon when he testified at Gideon's retrial. Gideon had secured a retrial by successfully arguing to the U.S. Supreme Court that, as an indigent, he had a constitutional right to representation by counsel. See Anthony Lewis, Gideon's Trumpet 233 (1966). In Gideon v. Wainwright, 372 U.S. 335, 345 (1963), the Warren Court established the right of indigent defendants to the appointment of counsel in both federal and state prosecutions. The Court generously referred to members of the legal profession in this instance as “necessities, not luxuries.” Id. at 344.

 

In need of further tax numbers?  Check out the new "Taxpayer Recepit" program from the White House, an idea that was articulated by Ethan Porter and David Kendall.

 

RR
[image: Arabic numerals via]

Government Files Opening Brief in Florida Health Reform Appeal

The government on Friday filed its opening brief in Florida v. HHS, the appeal before the Eleventh Circuit of Judge Vinson's (N.D. Fla.) ruling that federal health reform is unconstitutional.  (Thanks to the ACA Litigation Blog for the link to the brief.  Recall that Judge Vinson ruled that the individual health insurance mandate was unconstitutional, that it was not severable from the rest of the Affordable Health Act, and that the entire Act was therefore unconstitutional.  Our last post on the case is here.)

The government's core arguments are by now familiar; there are no major surprises.  There's just one new piece to the appeal, based on Judge Vinson's sweeping ruling: The government argues that his ruling that the entire Act is unconstitutional (because the individual mandate is not severable) goes too far, and that he fails to address several plaintiffs' lack of standing.  (These arguments begin on page 55 of the brief.)

Here are the point-headings from the Table of Contents:

I.    The Minimum Coverage Provision Is a Valid Exercise of Congress's Commerce Power.

    A.    The minimum coverage provision regulates the way people pay for health care services, a class of economic activity that substantially affects interstate commerce.

        1.    The minimum coverage provision regulates the practice of obtaining health care services without insurance, a practice that shifts substantial costs to other participants in the health care market.

        2.    The minimum coverage provision is essential to the Act's guaranteed-issue and community-rating insurance reforms.

    B.    The minimum coverage provision is a necessary and proper means of regulating interstate commerce.

        1.    The provision is plainly adapted to the unique conditions of the health care market.

        2.    Congress can regulate participants in the health care market even if they are not currently "active" in the insurance market.

        3.    The minimum coverage provision regulates economic activity as part of a broad regulation of interstate commerce, and bears no resemblance to the statutes in Lopez and Morrison.

II.    The Minimum Coverage Provision Is Also Independently Authorized by Congress's Taxing Power.

III.    The District Court Impermissibly Departed from Controlling Doctrine in Declaring the Affordable Care Act Invalid in Its Entirety and in Awarding Relief to Parties Without Standing.

SDS

 

District Court Upholds Health Insurance Mandate

Judge Gladys Kessler (D.D.C.) on Tuesday upheld the individual health insurance mandate in the federal health reform package, the Affordable Care Act.  Judge Kessler granted the government's motion to dismiss the case, Mead v. Holder, handing the government its third district court victory.  (We posted on the earlier two cases upholding the individual insurance mandate here and here.  We posted on the two earlier cases ruling the mandate unconstitutional here and here.  District court rulings are on appeal, but no federal appellate court has yet ruled on the constitutionality of the individual health insurance mandate.)

Plaintiffs in the case argued that they were outside the scope of congressional Commerce Clause authority, because they planned never to use the health care system.  And if they did, they'd pay out of pocket.  Moreover, they claimed, the individual mandate violates their religious freedom under the Religious Freedom Restoration Act.

Judge Kessler surveyed the Commerce Clause landscape in some detail and synthesized this three-part rule from Wickard v. Filburn, United States v. Lopez, United States v. Morrison, and Gonzales v. Raich:

• First, the Court must consider whether the decision not to purchase health insurance is an economic one.
• Second, if the decision is economic, the Court must determine whether Congress had a rational basis for concluding that such decisions, when taken in the aggregate, substantially affect the national health care market.
• Third, the activity may be found to be within the reach of Congress's Commerce Clause power if it is an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the interstate activity were regulated.

Op. at 35-36.  (Internal quotes and citations omitted.)

The first part--whether the (in)activity is economic--has perhaps received the most attention in the public debates and court cases.  But Judge Kessler had little trouble concluding that the activity was economic, ruling simply that "[b]oth the decision to purchase health insurance and its flip side--the decision not to purchase health insurance--therefore relate to the consumption of a commodity: a health insurance policy."  Op. at 38.  She dismissed the plaintiffs' related argument that the non-purchase is non-activity, not subject to Commerce Clause regulation: "It is pure semantics to argue that an individual who makes a choice to forgo health insurance is not "acting," especially given the serious economic and health-related consequences to every individual of that choice.  Making a choice is an affirmative action, whether one decides to do something or not to do something.  They are two sides of the same coin.  To pretend otherwise is to ignore reality."  Op. at 45.

Judge Kessler went on to rule that Congress rationally concluded that the decision not to purchase insurance substantially affected the health care market, and that the individual health insurance mandate was an essential part of the regulatory scheme--that it was a critical tool in preventing free-riding and cost-distribution by those who would opt out.

Judge Kessler ruled against the government on the General Welfare Clause: the penalty for not insuring was not a "tax," she ruled, because Congress never intended it to act as a tax. 

She rejected the plaintiff's RFRA claim.  She ruled that their argument that the mandate undermines their religion (because they believe that God will take care of their health, and the mandate forces them into a back-up plan) represented only a de minimis impact on their religious beliefs.  And moreover, she ruled, the mandate is the least restrictive way for the government to achieve its compelling interest.

SDS

Federal Judge Dismisses Case Against Health Care Reform

Judge Norman Moon (W.D. Va.) today dismissed Liberty University v. Geithner, a case filed by state lawmakers, a doctor, Liberty University, and individuals challenging the federal healthcare reform legislation.  The plaintiffs argued that the legislation exceeds Congress's Article I authority, and that it violates the Tenth Amendment, the religion clauses, the Religious Freedom Restoration Act, equal protection, free speech and free association, Article I, Section 9's prohibition against unapportioned capitation or direct taxes, and the Guarantee Clause.

Judge Moon ruled that the state lawmakers lacked standing by virtue of their opposition to federal reform.  The doctor lacked standing, because his claims that reform may interfere with his ability to provide quality care for his patients were too vague.  Judge Moon ruled that other plaintiffs have standing; the case is ripe; and it's not barred by the Anti-Injunction Act.

On the merits, Judge Moon ruled that Congress acted within its authority under the Commerce Clause in enacting the individual health insurance mandate.  Judge Moon wrote that

The conduct regulated by the individual coverage provision--individuals' decisions to forego purchasing health insurance coverage--is economic in nature, and so the provision is not susceptible to the shortcomings of the statutes struck down by the Court in Lopez and Morrison.  Nearly everyone will require health care services at some point in their lifetimes, and it is not always possible to predict when one will be afflicted by illness or injury and require care.  The "fundamental need for health care and the necessity of paying for such services received" creates the market in health care services, of which nearly everyone is a participant." . . .  Far from "inactivity," by choosing to forgo insurance, Plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now, through the purchase of insurance.

Op. at 27 (quoting Thomas More Law Ctr., another challenge to federal health care reform).  Judge Moon had less trouble concluding that the employer mandate fell within Congress's Commerce Clause authority:

As defendants correctly point out, it is well-established in Supreme Court precedent that Congress has the power to regulate the terms and conditions of employment. . . .

The requirement imposed by the Act on employers to offer a minimum level of health insurance resembles the requirement imposed by the [Fair Labor Standards Act] on employers to offer a minimum wage upheld in Darby, and Plaintiffs fail to distinguish the two.

Op. at 31.

As to the Tenth Amendment, Judge Moon ruled that Congress had authority (and therefore the Tenth Amendment is no bar), Congress can regulate in the area of insurance (and therefore federal reform doesn't infringe upon an area reserved to the states, or upon state sovereignty), and state participation is voluntary (and therefore there's no commandeering of states or state officials).

As to the Establishment Clause, Judge Moon ruled that the religious exemptions to the individual mandate were permissible accommodations under Cutter v. Wilkinson.  The exemptions do not differentiate based on faiths, they are based upon a secular government purpose, and they do not lead to excessive government entanglement with religion.

As to Free Exercise and the Regligious Freedom Restoration Act, Judge Moon ruled that the federal law does not require the plaintiffs to pay for abortion, in violation of their religious practices.  "Indeed, the Act contains strict safeguards at multiple levels to prevent federal funds from being used to pay for abortion services beyond those in cases of rape or incest, or where the life of the woman would be endangered."  Op. at 43.

Judge Moon ruled that the religious exemptions also did not violate equal protection.  "Accordingly, with no reason to believe the exemptions were designed to favor or penalize a particular religious group, I proceed to analyze the exemptions under rational basis review."  Op. at 46.  The exemptions, toward the end of accommodating religion, clearly satisfied rational basis review.

As to speech and association, Judge Moon ruled that federal reform does not require the plaintiffs to support or associate with individuals who obtain an abortion in violation of free speech and association.  "The Act does not require health plans to cover abortion, and it ensures that at least one policy offered through each health benefit exchange will not cover non-excepted abortion services."  Op. at 49.  Any required association is minimal.  And the federal act does not require the plaintiffs to speak on, or to support, abortion.

As to taxes, Judge Moon ruled that the penalties for noncompliance are not taxes; instead they are "mere incident[s] of the regulation of commerce."  Op. at 52 (quoting Head Money Cases.)

Finally, as to the Guarantee Clause, Judge Moon rejected the plaintiffs' claim that the federal act gives Congress the ability to veto private choices about health care and thus gives the federal government absolute sovereignty over the people.  "The Act does no such thing; nothing prevents the people and their representatives from amending or repealing the Act through the democratic process."  Op. at 53.

SDS

Florida Health Care Decision: Democracy Reinforcing or Judicial Overreaching?

One of the several eye-catching features of this week's decision on health care reform out of the Northern District of Florida is this: The court's homage to publicity as a core value in our representative democracy.  The remarkable statement comes in the section of the opinion dealing with Congress's taxing power--whether Congress can enact the individual mandate under its taxing power, when there's no clear indication from Congress that it intended to enact the mandate under its taxing authority and when Congress seemed to treat the mandate as anything but a tax in the public discourse.  Thus:

In other words, to the extent that the [government is] correct and the penalty was intended to be a tax, it seems likely that the members of Congress merely called it a penalty and did not describe it as revenue-generating to try and insulate themselves from the potential electoral ramifications of their votes.

. . .  In other words, the members of Congress would have reaped a political advantage by calling and treating it as a penalty while the Act was being debated . . . and then reaped a legal advantage by calling it a tax in court once it passed into law.

Op. at 27-28 (emphasis in original).  And then this kicker:

This should not be allowed, and I am not aware of any reported case where it ever has been.

Op. at 28 (my emphasis).  Further explained here:

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.

Id.

This isn't much of the court's 65-page opinion, to be sure.  But consider this: The court addressed the issue of Congress's taxing power (including these passages) first, even before it addressed justiciability--the threshold questions of standing and ripeness.  It seems that the court had something to say about the political branches' duplicity in enacting and defending the mandate.

By one reading, the court is reinforcing democracy, in the spirit of Ely.  More particularly, it's imposing its value of publicity (and related values of transparency and accountability)--deliberative democracy values--upon the political branches.  By demanding that members of Congress maintain consistency in their positions, the court helps educate citizens as to their representatives' true purposes and helps voters hold their representatives' feet to the fire.

But by another reading, the court is dramatically overreaching.  It is imposing consistency and truth demands on Congress, requiring members to articulate their political claims in the same terms that the institution articulates its constitutional claims in court.  While, as the court says, there's no precedent for upholding a tax law that was justified on the basis of a penalty, there seems to be no precedent the other way, either.  The court seems to support its claim based only on normative principles: "This should not be allowed."  This seems like a remarkable lack of deference to a co-equal branch interpreting its own constitutional authority.  

And moreover the court's authority for its methodology seems quite thin: Helwig v. United States (1903).  The court uses Helwig to delve into "the nature of the act" in order to determine what authority Congress relied upon in enacting the mandate.  According to the court, the nature of the mandate includes legislative language, clear congressional intent (as to the authority it is employing), public defenses of the mandate under the Commerce Clause, the method of collection, and Congress's "fail[ure] to identify in the legislation any revenue that would be raised from it . . . ."  According to the court, these all point away from the taxing power as authority for the mandate.

But Helwig didn't deal with "the nature of the act" in order to determine congressional authority in the abstract.  Rather, Helwig, a 1903 case, looked to "the nature of the act" to determine specifically whether Congress intended the act to be a penalty (not authorized) or a tax (authorized).  This penalty-tax dichotomy went away 73 years ago--24 years after Helwig.  The court too easily glosses over the fact that the "Helwig methodology" that it borrows is in fact bound up (perhaps inextricably so) with the debunked penalty-tax dichotomy. 

Whether the court was reinforcing democracy or overextending its judicial authority, it was clearly making a statement.

SDS

Government Defends Individual Health Insurance Mandate

The Justice Department last week filed its first defense of the new health insurance mandate in federal court.  The government responded to the plaintiffs' motion for a preliminary injunction in Thomas More Law Center, et al. v. Obama in the Eastern District of Michigan, a case filed just after President Obama signed into law the Patient Protection and Affordable Care Act (the health care reform act), which includes the mandate.

Plaintiffs filed their motion and brief on April 5, arguing that Congress lacked authority under the Commerce Clause to require individuals to purchase health insurance.  The arguments are by now all too familiar; from the plaintiffs' brief:

The Act does not even pretend to fit within any of the Court's previous Commerce Clause rulings.  The Individual Mandate attaches to a legal resident of the United States who chooses to sit at home and do nothing.  This resident is, quite literally, merely existing.  He or she is neither engaged in economic activity nor in any other activity that would bring him or her within the reach of even a legitimate regulatory scheme. . . .  In this case, we have neither economics nor activities.

. . .

If the Act is understood to fall within Congress' Commerce Clause authority, the federal government will have the absolute and unfettered power to create complex regulatory schemes to fix every perceived problem imaginable and to do so by ordering private citizens to engage in affirmative acts, under penalty of law, such as taking vitamins, losing weight, joining health clubs, buying a GMC truck, or purchasing an AIG insurance policy, among others.  The term "Nanny State" does not even begin to describe what we will have wrought if in fact the Health Care Reform Act falls within any imaginable governmental authority.  To be sure, George Orwell's 1984 will be just the primer for our new civics.

(Citations, primarily to Wickard v. Filburn, U.S. v. Lopez, U.S. v. Morrison, and Gonzales v. Raich, omitted.)

The government responded that the plaintiffs lacked standing--no actual or imminent injury and no ripeness, because the mandate doesn't go into place until 2014, and the plaintiffs' situations may change between now and then.  On the merits, the government argued both Commerce Clause and Taxing Clause.  As to the activity-inactivity distinction that has attracted so much attention in Commerce Clause arguments, it wrote:

Plaintiffs' claim that individuals who forgo health insurance are not engaged in any economic "activity," is fallacious.  Some individuals make what Congress found is an "economic and financial decision" to try to pay for health care services without reliance on insurance.  Indeed, plaintiffs here concede that they intend to "pay for health care services as [they] need them."  Plaintiffs thus have not opted out of health care; they are not passive bystanders divorced from the health care market.  They have made a choice regarding the method of payment for the services they expect to received, no less "active" than a decision to pay by credit card rather than by check.

The government went on to argue that the mandate is an essential part of the larger health reform package and therefore within Congress's Commerce Clause authority under Raich, and that the mandate also falls under Congress's broad taxing power in the general welfare as a legitimate revenue-raising device notwithstanding its regulatory goal.

SDS

Taxation and Privacy

"Surrogate birth mothers" often have income from the "service" they have provided, but must they report that income as income?   Or, as Bridget Crawford (pictured left) asks, does an income tax reporting requirement infringe upon a surrogate’s constitutional right to privacy, as envisioned by Griswold, Eisenstadt  and Lawrence?

Crawford's newest article, Taxation, Pregnancy, and Privacy, 16 William & Mary Journal of Women and the Law 327-368 (2010) (available on ssrn here), argues that surrogacy payments should be taxed, despite any constitutional (or other) claims of privacy.  She reaches the same conclusion about the sale of body parts, virginity (as auctioned to the highest bidder), and the proceeds from prostitution. 

It seems that substantive due process under the Fourteenth Amendment is no shield against the power of the Sixteenth Amendment.  Our most recent discussion of the Sixteenth Amendment, including efforts to repeal it is here.

RR