HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Friday, December 7, 2012

A new straw man argument for challenging the ACA

Two of the architects of the original challenge to the individual mandate have just published an op-ed in the Wall Street Journal that promotes a new theory by which they would challenge the ACA's constitutionality.  The meat of their argument is as follows:

If the mandate is an indirect tax, as the Supreme Court held, then the Constitution's "Uniformity Clause" (Article I, Section 8, Clause 1) requires the tax to "be uniform throughout the United States." The Framers adopted this provision so that a group of dominant states could not shift the federal tax burden to the others. It was yet another constitutional device that was simultaneously designed to protect federalism and safeguard individual liberty.

The Supreme Court has rarely considered the Uniformity Clause's reach, but it cannot be ignored. The court also refused to impose meaningful limits on Congress's power to regulate interstate commerce for decades after the 1930s, until justices began to re-establish the constitutional balance in the 1990s with decisions leading up to the ObamaCare ruling this summer. And although the court has upheld as "uniform" taxes that affect states differently in practice, precedent makes clear that a permissible tax must "operate with the same force and effect in every place where the subject of it is found," as held in the Head Money Cases (1884). The ObamaCare tax arguably does not meet this standard.

ObamaCare provides that low-income taxpayers, who are nevertheless above the federal poverty line, can discharge their mandate-tax obligation by enrolling in the new, expanded Medicaid program, which serves as the functional equivalent of a tax credit. But that program will not now exist in every state because, as a matter of federal law, states can opt out. The actual tax burden will not be geographically uniform as the court's precedents require.

Thus, having transformed the individual mandate into a tax, the court may face renewed challenges to ObamaCare on uniformity grounds. The justices will then confront a tough choice. Having earlier reinterpreted the mandate as a tax, they would be hard-pressed to approve the geographic disparity created when states opt out of the Medicaid expansion. But that possibility is inherent in a scheme that imposes a nominally uniform tax liability accompanied by the practical equivalent of a fully off-setting tax credit available only to those living in certain states. To uphold such a taxing scheme would eliminate any meaningful uniformity requirement—a result that the Constitution does not permit.

Just a little unpacking shows how specious these arguments are.  Article I, section 8, clause 1 is an enumerated power for Congress to raise taxes so that it would not be as powerless as the Confederation had been (the Articles of Confederation did not give the fledgling national government the ability to raise its own money by taxes or otherwise).  It is an empowering clause.  The clause's minor limitation, designed to prevent "undue preferences of one state over another" (US v. Ptasynski, 462 U.S. 74, 80-84 (1983)) states "all Duties, Imposts and Excises shall be uniform throughout the United States" - the "Uniformity Clause."  About this clause, the Court wrote in 1983: "The one issue that has been raised repeatedly is whether the requirement of uniformity encompasses some notion of equality. It was settled fairly early that the Clause does not require Congress to devise a tax that falls equally or proportionately on each State. Rather, as the Court stated in the Head Money Cases, 112 U.S. 580 (1884), a “tax is uniform when it operates with the same force and effect in every place where the subject of it is found.” Id. at 594."

Congress has created a uniform tax penalty on individuals who fail to carry health insurance - Congress has not varied this tax by state, only by individual income.  Any 'geographic disparity' is created by the states themselves, not by Congress.  And, whether or not the Medicaid expansion existed, low-income individuals would be exempted from the tax penalty by virtue of their low income status -- just like other such exceptions that exist in the tax code.  Finally, Medicaid is not a tax credit.  Medicaid is a welfare-type program by which the federal government helps to pay for medical care by giving money to the states.  Individuals cannot count Medicaid benefits as income, Medicaid payments are not a taxable benefit, and welfare programs have never been deemed to be tax credits.  The Medicaid program is simply not "the functional equivalent of a tax credit;" Congress created tax credits for the exchanges, and they don't look like Medicaid...

Charging the federal government with 'disuniformity' when states always seek more flexibility within conditional spending programs seems hypocritical. Nevertheless, the ACA's challengers have a lot of money to fight their cause, so the new theory is worth noting.


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