Tuesday, July 13, 2010
Steven J. Willis
(Florida) & Nakku Chung
(J.D. 2010, Florida) have posted Constitutional Decapitation and Health Care
, 128 Tax Notes 169 (July 12, 2010), on SSRN. Here is the abstract
Willis and Chung demonstrate how I.R.C. § 5000A – the Health Care Act penalty – is an unapportioned capitation tax, violative of U.S. Constitution Article I, Section 9. As they demonstrate, the "penalty" is – at least on its face – a tax. To be a constitutional tax, it must be an excise tax, an income tax, or a proportional capitation tax. Through the process of elimination, they demonstrate the penalty is none of these.
Others convincingly demonstrate the "penalty" is unconstitutional under the Commerce Clause. They argue the "penalty" is indeed a penalty and not a tax. Willis and Chung pick up where that argument leaves off: if that argument fails and the Court finds this is a tax, it is an unconstitutional unapportioned direct tax.
Despite being labeled an excise tax by Congress, the penalty is unlike any existing excise tax because it applies to the failure to act by an individual. Existing failure-to-act excise taxes differ because they apply to entities which have chosen to partake in particular activities. The provision thus fails the historic requirements of an excise tax, namely that it apply to an activity, transaction, or the use of property. The tax also fails the traditional "pass-on" nature of excise taxes. If the Court were to approve it as a uniform excise tax, the direct tax apportionment requirement would be eviscerated.
The penalty similarly fails the 16th Amendment definition of an income tax. Not only does it appear not to tax income, it fails to operate as an income tax, and it fails the 16th Amendment realization requirement long accepted by the Supreme Court. Willis and Chung dismiss – as unrealistic academic dogma – arguments for ignoring the realization requirement. They acknowledge, but refute, academic arguments criticizing the Pollock and Macomber decisions, as well as arguments for ignoring the Constitution's direct tax apportionment requirement.