Saturday, December 18, 2010
Little attention was paid when two federal District Courts recently concluded that the new federal health care law was constitutional, but Monday’s ruling by a federal District Court Judge, Henry Hudson, in Commonwealth of Virginia v. Sebelius, was front page news because he held the insurance mandate at the center of the new law to be unconstitutional. The provision struck down by Judge Hudson imposes a tax penalty on individuals, other than those exempted by reason of religious beliefs or lack of suffi cient income, who fail to maintain a minimum level of health insurance coverage starting in 2014. There is good reason, though, to believe that, when the Supreme Court ultimately addresses the issues, its analysis may not follow Judge Hudson’s opinion. ...
Congress also can impose taxes on Americans, with almost no practical constraints. The Framers basically saw the remedy for Congress imposing foolish or overreaching taxes as our collective right to throw the rascals out at the next election, not for courts to decide which taxes are most appropriate. Here, the only penalty for not maintaining health care insurance is the imposition of a tax. The penalty tax will be collected on your Form 1040, like your other taxes, and it will be determined as a percentage of your income (with exemptions for low-income Americans and a cap for high-income ones). What is more, the nonpartisan budget staffs of Congress have estimated that individuals will pay some $4 billion per year in these penalty taxes. So why isn’t the penalty imposed for failure to comply with the individual mandate simply another tax?
Judge Hudson’s answer is dumbfounding: In his view, this tax is really a disguised form of regulation of commerce, citing a case (the Child Labor Tax Case) decided some 90 years ago, and one which the Supreme Court itself has said represents a line of reasoning that the Court has long since abandoned. The Internal Revenue Code is fi lled with tax provisions whose overriding purpose probably is to change behavior rather than collect revenues (for example, the disallowance of a deduction for bribing foreign offi cials, or tax penalties imposed on taxexempt foundations for self-dealing). Moreover, in this case there are substantial revenues that will be collected, yet Judge Hudson simply brushes aside as “incidental” the $4 billion in revenue that this tax will raise every year — an amount far greater than the taxes that are raised through other penalty provisions that unquestionably are taxes.
Judge Hudson makes much of the new tax’s label as a penalty, but it is clear that such labels carry little weight in constitutional analysis. The new law could just as easily have been described as a new universal tax measured by your income, with a proviso that you receive a dollar for dollar credit against the tax for the cost of private health insurance that you might obtain directly or through your employer.
The health care legislation has set American politics on edge. The law may be wise or foolish, but the remedy for those who believe the latter should lie squarely in the realm of the political process, not in resurrecting doctrines of constitutional interpretation wisely abandoned many decades ago.