In watching this morning’s arguments on the Anti-Injunction Act (AIA), we were looking not only for indications whether the Court would dismiss the present challenges to the Affordable Care Act as premature (the actual question up for discussion), but also for any clues on the Justices’ thinking about the merits of the challenge (the question up for argument tomorrow). In general, the Justices seemed careful not to ask questions or make comments that gave much insight on their broader views on the constitutionality of the statute. But a couple of issues did arise in this morning’s arguments that may have broader implications.
In particular, there is some overlap between the arguments regarding the scope of the AIA and the scope of Congress’s tax power, one of the sources of authority the government cites to support Congress’s enactment of the individual mandate. And some of the questions at today’s argument may shed some light on some of the Justices’ thinking on those overlapping questions.
Connection between individual mandate and tax penalty
In challenging the individual mandate as a valid exercise of the tax power, the challengers point to the individuals who are exempted from the tax penalty (for example, because of poverty) but, the challengers say, are still subject to the mandate. For those people, the challengers claim, the only thing the mandate does is impose an obligation to buy insurance; it does not impose a tax of any sort. Therefore, the government must point to some other source of authority to justify imposing the mandate on people who, for whatever reason, are not subject to the tax penalty. Indeed, the challengers argue, this example simply demonstrates the broader point that the tax penalty is simply an enforcement mechanism for the very distinct individual mandate. To allow Congress to justify the mandate by pointing to its authority to impose a tax penalty on those who do not comply with the mandate is a kind of boot-strapping that the Court should not allow.
The government, on the other hand, goes to some lengths to resist disconnecting the individual mandate from the tax penalty. In particular, the government denies that the mandate applies to those who are exempt from the tax penalty provision. If you are too poor to pay the tax penalty, the government says, you are not violating the law by not getting insurance. The challengers, on the other hand, say that the opposite is true – even if you are too poor to pay the penalty, you are still a lawbreaker if you don’t get insurance (for example, by enrolling in Medicaid).
At the same time, the government position seems to imply that even those who are subject to the penalty have a choice – they can comply with the law either by obtaining insurance or paying the penalty. If they pay the penalty, they are not lawbreakers. The point is to avoid making it seem like the tax penalty is just a stick to enforce a requirement that has little to do with raising tax revenues.
The Justices asked a number of questions at today’s argument about the relationship between the mandate and the tax penalty. Justice Kagan, for example, seemed to express skepticism of the government’s assertion that the statute gives individuals a choice whether to obtain insurance or pay a tax. Speaking to the Court-appointed amicus, she said “You are trying to suggest that the statute says: Well, it’s your choice; either buy insurance or . . . pay a fee. But that’s not the way the statute reads.” Tr. 27.
Justice Sotomayor subsequently asked Solicitor General Verrilli outright whether “there are any collateral consequences for the failure to buy . . . health insurance?” Were the challengers right that people on probation, for example, could have their probation revoked if they disobeyed the mandate, even though they are exempt from the tax penalty, on the theory that “they would be disobeying the law”? Tr. 44. The SG reiterated the government’s position that there is no non-compliance in that scenario. The Justice later summed up the government’s position (seemingly with skepticism) as being that “this was inartful drafting by Congress,” given that the statutory language could be read to impose the mandate on everyone, not just those subject to the tax penalty for noncompliance. Tr. 46.
Several Justices returned to the topic – Justice Kagan asked directly whether the government’s position was that those who refuse to buy insurance but pay the penalty would have to admit to breaking the law (for example, during a security clearance). Tr. 49. Solicitor General Verrilli said that was correct — “If they pay the tax, then they are in compliance with the law.” Tr. 49.
Justice Alito asked whether a hospital that provides care to an indigent patient could “point to the mandate and say, well, you’re obligated to enroll” in Medicaid? Tr. 50. Again, Verrilli said “no.”
However, not all the questions were skeptical of the government’s position. For example, when the challengers’ lawyer argued that the AIA did not apply because his clients were challenging the mandate, not the tax penalty, the Chief Justice commented, “the idea that the mandate is something separate from . . . a penalty or a tax just doesn’t seem to make much sense.” Tr. 64. He later asked “Why would you have a requirement that is completely toothless? You know, buy insurance or else. Or else what? Or else nothing.” Tr. 66.
Is a penalty a revenue-raising measure?
Another question of potential relevance both today and tomorrow is whether the tax penalty is properly seen as a measure to raise revenue or simply a means of enforcing compliance with a regulatory measure (the individual mandate).
The proper characterization matters for the Anti-Injunction Act because, the plaintiffs argue, a penalty that is really just a means for enforcing a regulatory requirement is not a tax within the meaning of the AIA. For essentially the same reason, they argue, because it is not really directed at raising revenue, the penalty (and the related mandate) cannot be seen as an exercise of the taxing power.
Justice Breyer asked several questions that indicated that he did not believe that the penalty is a “tax” within the meaning of the AIA, in part because he viewed it as designed not to raise revenue, but instead to prompt compliance with the individual mandate. Tr. 16-17. That may indicate he will be less receptive of the government’s argument tomorrow that the mandate and penalty are proper exercise of the taxing power.
As with most reading of tea leaves, all of this has to be taken for the limited value it has. A Justice’s questions do not necessarily reflect her actual conclusions about an issue, and the Justices may well think that there are relevant differences between what constitutes a tax for AIA purposes and for purposes of Congress’s tax power (a position the government urges).
Perhaps more importantly, at best these questions shed some light on some of the Justices’ dispositions regarding the argument that the individual mandate falls within Congress’s tax power. But the main argument in the case is that even setting aside the tax power, the mandate is valid Commerce Clause legislation. On that question, the argument today shed very little light.