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Saturday, June 30, 2012

More on The Affordable Care Act and the Taxing Power

Following up on my previous posts:

New developments:

http://taxprof.typepad.com/taxprof_blog/2012/06/more-on-.html

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Comments

Still looking for a silver lining in the ObamaCare decision ?

Given that the SCOTUS declared a monetary “penalty” to be a tax, I guess now I can deduct traffic and parking tickets under “Taxes other.”

Got fined by the EPA, FTC, FCC, SEC … deduct it .. they are now taxes
Got a penalty for early withdraw of 401(k) funds … deduct it .. they are now taxes

Every stupid action has unintended consequences.

Posted by: Neo | Jul 1, 2012 7:15:25 AM

Taxing power, smaxing power. Just as with the 16th Amendment, this Supreme Court decision has created no new powers for Congress. It has also not suddenly identified a previously unrecognized Congressional power.

A common question goes something like this. "If the government wants to encourage the use electric cars, could they not, under yesterday's rubric, enact a law saying that every American who owns more than one car (lots of people do, even if they are not Jay Leno) must own at least one electric vehicle or pay a tax for not owning an electric car."

The government already has done this. In 2006, for example, I paid an extra $1,800 in taxes because I failed to purchase a Mercedes-Benz GL320 BLUE TEC. I have also paid extra taxes since about 1997 because I didn't purchase day care services for any qualified dependent children. In fact, for the past several years I've paid extra taxes because I have failed to have any dependents.

My point is, the government doesn't have to impose a tax on those who fail to do something the government believes is desirable. Instead, it can (and does) give tax credits or deductions to those to engage in the favored behavior. The Dems could have used a refundable tax credit as an incentive to purchase health insurance. In my opinion, this part of Obamacare would be much simpler, and better in other ways, if anyone who paid health insurance premiums for anyone (self, employee, family member, stranger on the street) received a significant tax credit.

So move along, folks. There's nothing to see here.

Posted by: Bill Brown | Jul 1, 2012 12:43:16 PM

"Comments are moderated and will not appear until approved by the author."

For future reference, I hereby approve all comments authored by me in advance without qualification or limit of any sort.

Jus' bein' picky about the use of the English language.

Posted by: Bill Brown | Jul 1, 2012 12:45:32 PM

For an early (and prescient) discussion of this question, please see "The Health Insurance Mandate: If It Must Be, Let It Be A Tax," by Ryan Lirette, published in Tax Notes, July 26, 2010, available at http://www.aei.org/article/health/healthcare-reform/the-health-insurance-mandate-if-it-must-be-let-it-be-a-tax/. In this article, Lirette, then a research associate at AEI, argued that the Supreme Court should uphold the mandate as an exercise of the taxing power.

Alan Viard
American Enterprise Institute

Posted by: Alan Viard | Jul 2, 2012 6:43:16 AM

"Instead, it can (and does) give tax credits or deductions to those to engage in the favored behavior. The Dems could have used a refundable tax credit as an incentive to purchase health insurance. In my opinion, this part of Obamacare would be much simpler, and better in other ways, if anyone who paid health insurance premiums for anyone (self, employee, family member, stranger on the street) received a significant tax credit."
Yes, Bill, but that is not what congress did, is it?
Words, form, and constitutional structure should matter, but obviously they don't when the CJ can rewrite enacted legislation to suit his own purposes.

Posted by: ColoComment | Jul 2, 2012 9:24:00 AM

Help me out here. If I have dependents the government sends me a check. That would be welfare.

If I don't have dependents I don't send the government a check. I just don't get my welfare payment.

If I have health insurance the government doesn't send me a check.

If I don't have health insurance I send the government a check.

What am I missing here?

Posted by: greg | Jul 2, 2012 9:48:23 AM

For neo, deductible taxes are specifically listed in the law. Parking tickets aren't on the list. Sorry.

There are those who argue that any revenue flowing to a government is a tax including highway tolls, utility bills, user fees for otherwise public parks, and parking tickets. Be that as it may, the only deductible taxes are the ones the law says are deductible.

Posted by: Bill Brown | Jul 2, 2012 10:30:33 AM


Greg, paying people welfare is within the power of Congress. It does not, however, fall under the rubric of taxation. It simply is administered under the tax system.

Nor does requiring me to pay a penalty for not engaging in commerce have anything to do with taxation.

If, however, everyone is required to pay a "health care tax" ... different story, that's a tax.

A stretch would be, "there shall be imposed a tax on everyone not covered by health insurance."

Works, but still a mandate.

Posted by: greg | Jul 2, 2012 12:09:07 PM