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A taxing, but potentially hopeful decision

Today’s 5-4 Supreme Court decision upholding the individual health insurance mandate is an extremely frustrating result for those of us who argued that the mandate is unconstitutional. One might even call it taxing. The plaintiffs came about as close as one can to winning a major constitutional case without actually winning it. It is the legal equivalent of losing the World Series after leading in the bottom of the ninth inning in the seventh game. It is not a happy day for supporters of limited government.

Yet the Court also offers us a measure of hope and vindication. A majority of the justices rejected claims that the mandate is authorized by the Commerce Clause and Necessary and Proper Clause. That has little immediate impact, but bodes well for the future. The numerous pundits who claimed that this case was a slam dunk for the federal government turned out to be spectacularly wrong. The struggle over the constitutional limits on federal power is far from over.

A Partial Victory for Federalism

Although he cast the deciding vote in favor of the mandate, Chief Justice John Roberts’ opinion actually rejected federal government’s main argument for the law: the assertion that the mandate is authorized by the Commerce Clause, which gives Congress the power to regulate ”Commerce…among the several states.” As Roberts puts it “the power to regulate commerce presupposes the existence of commercial activity to be regulated.” But, he continues, the mandate “does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce.”  If Congress can “regulate individuals precisely because they are doing nothing,” it could impose pretty much any mandate of any kind. It could force people to purchase broccoli, cars, movie tickets or any other product. By endorsing this distinction between regulation of activity and inactivity, Roberts validated the main argument advanced by the mandate’s opponents.

Roberts’ opinion also has a compelling answer to the many who argued that the mandate is justified by precedents such as Wickard v. Filburn, which ruled that the Commerce Clause allows Congress to limit the amount of wheat farmers can grow on their land: “The farmer in Wickard was at least actively engaged in the production of wheat, and the Government could regulate that activity because of its effect on commerce.” By contrast, “[t]he Government’s theory here would effectively override that limitation, by establishing that individuals may be regulated under the Commerce Clause whenever enough of them are not doing something the Government would have them do.”

Roberts also rejected the federal government’s various arguments to the effect that this mandate is constitutional because health insurance is a special case. The government’s central “health care is special” argument was that this market is unique because it  involves a product everyone uses at some point.  But this analysis relies on shifting the focus from health insurance (the product actually covered by the mandate) to health care, claiming that the former is just one way to obtain the latter. But pretty much any product government might force you to buy is part of some larger market that is difficult to avoid. Not everyone purchases broccoli. But everyone does participate in the market for food. As Roberts puts it “[e]veryone will likely participate in the markets for food, clothing, transportation, shelter, or energy; that does not authorize Congress to direct them to purchase particular products in those or other markets today. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions.”

For similar reasons, Roberts rejected the government’s argument that the mandate is authorized by the Necessary and Proper Clause, which gives Congress the power to “make all Laws which shall be necessary and proper for carrying into Execution” other powers granted to Congress under the Constitution. Roberts recognizes that the Supreme Court has defined the term “necessary” very broadly. But even a “necessary” law may be unconstitutional if it is not also “proper.” As Roberts puts 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.”  In this case, Roberts contends that the law is improper because, under the government’s logic, Congress would “[n]o longer… be limited to regulating under the Commerce Clause those who by some preexisting activity bring themselves within the sphere of federal regulation.”  The individual mandate, he explains, “vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power.”

Overall, the Chief Justice endorsed the central arguments of the plaintiffs, as has a majority of the Court. The four dissenting justices – Alito, Kennedy, Scalia, and Thomas — also concluded that the mandate exceeds Congress’ Commerce and Necessary and Proper powers. This has potentially significant implications for future legislation imposing mandates under the Commerce Clause.

The Tax Clause
After agreeing with the plaintiffs on so much, Roberts still voted to uphold the mandate because it is a “tax” authorized by Congress’ power under the Tax Clause.  He endorsed an argument that had been rejected by every lower court ruling that addressed it. Even the lawyers for the federal government seemed to have little confidence in it, as indicated by the fact that they relegated it to a brief section near the very end of their brief.

The ruling also runs counter to repeated statements by President Obama and numerous congressional Democrats, who assured us that the mandate was not a tax. As the president put it in 2009, “for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.”  It is perhaps not surprising that Roberts voted to uphold the mandate. But it is a huge shock that he did so on the basis of the government’s weakest argument, one that even most liberal lower court judges had rejected.

Roberts argues that the mandate is a tax because it imposes only a monetary penalty on those who fail to comply, the mandate does not apply to people too poor to pay income taxes, and the fine is collected by the IRS. He admits that this not the “most natural interpretation” of the law.

The  text of the statute  refers to the fine as a “penalty,” not a tax. And the Supreme Court has repeatedly distinguished between taxes and penalties, defining the latter as “an exaction imposed by statute as punishment for an unlawful act” or omission. The health insurance mandate fits the definition of penalty almost perfectly: it imposes a fine as punishment for the unlawful refusal to purchase government-mandated health insurance.

Chief Justice Roberts claims that this is not a real penalty because “the mandate is not a legal command to buy insurance,” but merely a requirement that violators pay a fine to the IRS. Failure to purchase health insurance, is therefore, not really “unlawful. ” The logic here is underwhelming. Is speeding or jaywalking not really unlawful if the penalty for it is a fine payable to the treasury, and the very poor are exempt from it?

Moreover, pretty much any other mandate can be magically converted into a tax so long as it is structured in the same way as this mandate is. Congress can therefore use similar fines to force people to purchase broccoli, cars, or just about anything else.  The danger here is not just theoretical. Numerous interest groups could potentially lobby Congress to enact a law requiring people to buy their products, just as the health insurance industry did in this case.

In  his discussion of the Commerce Clause, Roberts ruled that the Constitution denies Congress the power to “bring countless decisions an individual could potentially make within the scope of federal regulation and … empower Congress to make those decisions for him.” Yet, having closed the front door of the Commerce Clause, the Chief Justice has now “empowered” Congress to make those same decisions for us through the tax power.

Prospects for the Future

Today’s decision is unlikely to be the last word on the constitutional limits of federal power. As the close 5-4 division in the Court shows, the justices remain deeply divided on federalism issues. Both Chief Justice Roberts’ opinion and the powerful four-justice dissent reaffirm the need to enforce limits on congressional authority. And both accept all or most of the main constitutional arguments against the mandate. The latter will constrain future mandates imposed under the Commerce and Necessary and Proper Clause. No one can any longer say that the case against the mandate was a sure loser that could only be endorsed by fringe extremists or people ignorant of constitutional law.

Defenders of extremely broad federal power won an important battle today. But the war will continue.

Recommended Citation: Ilya Somin, A taxing, but potentially hopeful decision, SCOTUSblog (Jun. 28, 2012, 6:13 PM),