Friday, April 15, 2011
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.
[image: Arabic numerals via]
Sunday, April 3, 2011
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.
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.
Thursday, February 24, 2011
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.
Tuesday, November 30, 2010
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.
November 30, 2010 in Association, Commerce Clause, Congressional Authority, Equal Protection, Establishment Clause, Federalism, Fifth Amendment, First Amendment, Free Exercise Clause, Fundamental Rights, Jurisdiction of Federal Courts, News, Opinion Analysis, Recent Cases, Religion, Ripeness, Speech, Standing, Taxing Clause, Tenth Amendment | Permalink | Comments (0) | TrackBack (0)
Friday, October 15, 2010
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.
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.
Sunday, May 16, 2010
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.
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.
Thursday, April 15, 2010
"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.
April 15, 2010 in Current Affairs, Due Process (Substantive), Family, Fourteenth Amendment, Fundamental Rights, Gender, Privacy, Reproductive Rights, Scholarship, Taxing Clause | Permalink | Comments (0) | TrackBack (0)
Friday, January 8, 2010
Simon Lazarus, Public Policy Counsel to the National Senior Law Center, published an Issue Brief with the American Constitution Society last month taking on the various claims that a health insurance mandate (in the Senate version of health care reform) and tax incentives encouraging the purchase of health insurance (in the House version) are unconstitutional. We've covered the issue here, here, and here.
Here's Lazarus on the claim that requiring health insurance amounts to regulating non-activity--one of the more popular arguments that health care reform exceeds Congress's Commerce Clause powers:
This "inactivity" is empty and verbal gimmickry. Individuals who go without health insurance--if health insurance is available to them and affordable, a contingency that the legislation goes to great lengths to eliminate--are not "doing nothing." They are deciding to put off paying for health insurance and for health care--because they believe that they won't need it until some future date, or because they recognize that, one way or the other, through hospital emergency room care or other means, necessary care will be available if serious illness or an accident strikes.
Brief at 8-9.
Lazarus concludes by putting the issue in a larger context:
If, as opponents claim, the burden of mandatory health contributions was--in principle--oppressive and unfair, Medicare, and for that matter Social Security taxes would raise constitutional questions no less if these landmark statutory programs were cast as regulations of interstate commerce. In fact, of course, since 1937, such questions have never been raised either in the courts or in Congress. The reason is simple: most people regard these mandatory contributions--in light of what they expect to receive in exchange--as a bargain not a burden.
Brief at 15 (emphasis in original).
Thursday, March 19, 2009
What are the constitutional ramifications of Congressional action seeking recoup of the bonuses paid to AIG executives?
Over at TaxProf Blog, Paul Caron has a great post with supporting materials for Larry Tribe's
opinion that "the proposed 90% tax on the bonuses paid out by AIG would pass constitutional muster under the Bills of Attainder and Ex Post Facto clauses Article I, Section 9; the Contract Clause of the Article I, Section 10; the Due Process Clause of the Fifth Amendment; and the Takings Clause of the Fifth Amendment."
Over at Balkanization, Sandy Levinson argues in his post that Congress could abrogate the contracts: "the Contract Clause prohibiting the "impairment" of contracts applies, textually, only to state governments, not to the national government."
One of the most innovative ideas I've seen - - - and one seemingly not being considered by Congress - - - comes from ConLaw Prof, Mae Kuykendall.
She posted what she calls a "novel" notion on the ConLawProf listserve; it is quoted here with her permission: