“The power to tax is the power to destroy,” wrote John Marshall, memorably, for a unanimous Court in McCulloch v. Maryland, 193 years ago. True enough. And Congress has the power to tax.
The federal taxing power, the very first power set forth in Congress’s arsenal of Article I, section 8 enumerated powers, is plenary over the objects to which it extends: Congress may tax anything it likes (or doesn’t like). The taxing power may be employed for regulatory purposes, and not merely to raise revenue. As long as an exaction really functions as a tax, it can be used to accomplish policy ends—to induce, deter, or change conduct. And those ends can include things the federal government otherwise would lack power to command directly: the power to tax is a freestanding constitutional power of Congress. It is not derivative of or dependent upon any other power, such as the power to regulate interstate commerce. The power to tax is the power to destroy, indirectly, even what little Congress cannot destroy directly.
Moreover, a tax is a tax, within Congress’s constitutional power to impose, regardless of what Congress calls it—a “fee,” an “exaction,” a “revenue enhancement,” or a “penalty.” Wielded with skill (or perhaps sinister finesse), Congress’s power to tax is an enormous and fearsome constitutional power, explicitly granted and subject to few limitations.
It follows, then—unfortunately—that the Supreme Court’s recent decision in National Federation of Independent Business v. Sebelius, which upheld the individual mandate provisions of the “Affordable Care Act,” was constitutionally correct. But it is important to be clear on what this means: the mandate is constitutional because it is a tax – and it is a tax on freedom. Congress has the power to tax, and thereby to destroy, individual freedom in health insurance.
* * *
Reduced to its barest essentials, NFIB v. Sebelius holds that even if Congress lacks power under the Commerce Clause to mandate that individuals purchase a commercial product such as health insurance (as a 5–4 majority of the Court held — a truly landmark ruling limiting national legislative power), Congress may accomplish much the same result by imposing a tax on the failure to purchase such a commercial product (as a different 5–4 majority of the Court held). The latter holding was not legally extraordinary; it merely applied longstanding views of the scope of Congress’s taxing power to a new situation.
NFIB v. Sebelius confirms that there is more than one way for the federal government to skin a cat. The Court held that the individual-mandate requirement, enforced by a penalty paid to the IRS with income tax payments, fell within Congress’s power to regulate or induce conduct through the power to tax. It made no difference that Congress did not label its financial exaction a tax. Something can fall within the taxing power of Congress even if Congress does not have the political courage to call it a “tax.”
This conclusion is legally correct. Indeed, it is difficult to come up with a good, principled, fully persuasive argument that Congress lacks constitutional power to impose a tax for not having health insurance, as an incentive to get people to buy such insurance. The dissenters certainly did not come up with such an argument. They did not argue that Congress could not impose such a tax. Indeed, they conceded that Congress had the power to do so. Rather, the dissenters argued only that Congress did not impose a tax, because the legislation insisted on calling the exaction a “penalty.”
That is not an argument about constitutional power; it is not a claim that the taxing power is narrower than the majority said it was. Rather, it is an argument that the taxing power requires the invocation of magic words—that to use the taxing power, one must use the word “tax,” or something close to it, or at least something ambiguous. At the very least, Congress must not use the word “penalty.”
Chief Justice John Roberts’s majority opinion blew that weak argument out of the water. He cited several cases holding that Congress’s label is immaterial to the existence of the taxing power: the substance of an exaction is what matters. As Roberts pointed out, Obamacare’s financial penalty is not a punishment for wrongful conduct, like a criminal fine, but a tax incentive designed to promote private conduct to achieve a public policy purpose. Congress does this sort of thing with the tax code all the time.
Roberts clinched the argument with a hypothetical: Suppose Congress required homeowners without energy-efficient windows to pay the IRS a $50 surcharge with their income taxes, exempting those below a certain income level. “No one would doubt that this law imposed a tax, and was within Congress’s power to tax,” Roberts wrote. “That conclusion should not change simply because Congress used the word ‘penalty’ to describe the payment.”
This has to be right. Congress acts within its power “to declare War” even when it does not use the words “declare” or “war,” but styles its act as an “Authorization for Use of Military Force.” Congress acts within its power over interstate commerce when it regulates commercial activity having substantial interstate effects, whether it uses the word “commerce” or not. So too with the power to tax: if an exaction walks like a tax, waddles like a tax, swims like a tax, and quacks like a tax, it is a tax for purposes of falling within Congress’s taxing power.
A more plausible, if still weak, objection might be that a tax on non-purchase of health insurance may be a “direct” rather than an indirect tax, subject to the Taxing Clause’s proviso that direct taxes be “apportioned” equally among the States. The dissent noted this possibility but could not bring itself to argue that this was actually the case. Chief Justice Roberts’s response is more than plausible: direct taxes were understood at the time of the Constitution’s framing to be “head” taxes—per capita exactions—like poll taxes. Obamacare’s tax-penalty is directed at conduct and fits into no known category of “direct” tax. (And even if it did, the proper remedy would be to require apportionment, not to invalidate the tax entirely.)
Does not such a broad federal taxing power threaten federalism? Does it not suggest that the national government could use the taxing power in effect to regulate anything and everything—one of the same arguments Roberts made so effectively against a no-limits reading of the Commerce Clause and Necessary and Proper Clause in the same case?
The answer is that the power to tax is simply a different constitutional power, with different dimensions, than the Commerce Clause power. There is no free-floating “Federalism Clause” in the Constitution that cuts across and limits all national powers. Federalism is simply the description for the institutional arrangement resulting from the Constitution’s enumeration and limitation of national powers and reservation of the rest to the states. If one of those national powers is a broadly worded taxing power, that power is simply part of the constitutional structure of our federalism, and must be given full effect by the courts. One might not like such a power, but there it is in black and white.
A faithful interpreter of the Constitution must give the taxing power the force dictated by the original public meaning of the words of the text, and not impose policy-driven limitations or additions upon a text whose words do not properly bear such a reading. (Along that interpretive road lies judicial activism of the Dred Scott, Plessy, Lochner, Roe, and Lawrence variety. Conservatives, no less than liberals, should be faulted if they allow their policy preferences to drive their constitutional interpretation.)
Finally, NFIB v. Sebelius held that there are limits even to the taxing power. To fit within the taxing power, an exaction must actually operate as a tax. As Chief Justice Roberts’s opinion makes clear, a “tax” so confiscatory as to make the taxed conduct practically impossible is not really a tax, but a civil or quasi-criminal penalty for conduct that the individual is not truly free to choose. This limitation on the power to tax mirrors the standard Roberts used, later in the opinion, to strike down the act’s provisions coercing states to change their Medicaid programs, as exceeding Congress’s power to spend. Congress cannot constitutionally leverage its power to spend into a power to command states, by making offers that cannot be refused. The new Medicaid provisions of the Affordable Care Act were an unconstitutional “gun to the head,” in Roberts’s colorful phrase—an extremely important ruling in its own right.
But the individual-mandate penalty did not approach the limits of the power to tax. The charge for not complying with the individual mandate was less than the cost of complying. In the end, nobody is truly forced to buy health insurance; they are merely taxed, to an annoying extent, for not doing so, with the goal of getting people to decide that they might as well buy health insurance.
Chief Justice Roberts’s opinion quickly produced wailing and gnashing of teeth in conservative circles — wailing and gnashing that is only now beginning to die down, a month or so later. On policy grounds this may be understandable. On legal grounds it is far less so. One might have wished that the Court had ventured a bold, new limitation on the scope of the federal taxing power — as it did with the Commerce Clause, the Necessary and Proper Clause, and the spending power.
But to suggest that Roberts was somehow a “traitor” for not signing on to a position he ultimately found unpersuasive (and that is unpersuasive) or, more absurdly yet, that he “flipped” positions for political purposes (an utterly preposterous proposition that no one remotely familiar with Roberts or his opinions could possibly credit), fails to recognize the simplest, most straightforward explanation for Roberts’s actions. He voted and wrote as he did based on his convictions and soundly reasoned principles. The dissenters’ position on the taxing power is not “correct” simply because four conservative justices reached it. Roberts’s position is not incorrect because four liberal justices joined it. To suggest either is to swallow a large ad hominem fallacy and to fail to engage Roberts’s legal analysis on its merits.
The only persuasive explanation for Roberts’s position is that, in the end, he thought it was correct. He surely did not change his position in response to perceived White House pressure, as some have speculated. Roberts is one of the least likely persons to be cowed by political pressure (or by peer pressure, as his willingness to depart from his conservative colleagues’ views demonstrates). The better account is that Roberts’s vote always hung in the balance because of the Taxing Clause issue. This may explain why President Obama clumsily weighed in after oral argument: as I hypothesized in April, someone in the Court’s liberal camp, after the Court’s conference on the case, likely leaked the closeness of the vote and suggested talking points to the administration (which President Obama promptly flubbed). But to suggest that the president’s remarks influenced Roberts is utterly unrealistic.
What doubtless did influence Roberts was the weakness of the draft opinion rejecting the Taxing Clause power. If the “joint dissent” was once a draft majority opinion (and there are hints of this in the opinion itself), it appears that the argument offered was that the taxing power was not implicated because the legislation did not call the exaction a tax. In the end, Chief Justice Roberts rightly found that approach unpersuasive. The taxing power argument could not thus be dismissed with the back of the hand, as the dissenters proposed to do.
So, though John Roberts is an ardent defender of constitutional federalism—as demonstrated by his rejection of the Commerce Clause as an all-purpose device for plenary regulatory power of any conduct affecting commerce; by his aggressive reining-in of the Necessary and Proper Clause; and by the important ruling striking down the Medicaid expansion as improperly leveraging the spending power to coerce recipients of federal funds—he was forced to conclude that the individual mandate fell within the federal government’s power to tax.
* * *
And what Obamacare taxes is personal freedom in health care insurance. The individual mandate is a tax on freedom, and the power to tax such freedom is the power to destroy that freedom.
Even worse, as interpreted by the Obama administration, the Affordable Care Act empowers the administration to destroy religious freedom by compelling religious groups to provide or pay for “health” coverage in the form of contraception or abortion drugs in violation of their religious beliefs. National Federation of Independent Business v. Sebelius does not address that question, leaving very much in play in the religious freedom argument that such compulsion violates the federal Religious Freedom Restoration Act and the First Amendment. Had the Court struck down the Affordable Care Act in its entirety, the religious freedom objection to its implementation would have become moot. As matters stand, the cases challenging this administration mandate have now become the most important religious freedom litigation in decades.
NFIB v. Sebelius failed to provide a judicial deus ex machina dismantling Obamacare’s freedom-destroying machinery. Religious freedom is now the next line of defense against Obamacare’s most egregious threats to liberty. But even if successful, that defense will not eliminate Obamacare itself. Such complete dismantling must be achieved by political means. The power to tax is the power to destroy, but the power to elect is the power to repair.
Michael Stokes Paulsen is University Chair and Professor of Law at the University of St. Thomas, in Minneapolis, and is co-director of its Pro-Life Advocacy Center (PLACE).
Support the work of Public Discourse by making a secure donation to The Witherspoon Institute.
Copyright 2012 the Witherspoon Institute. All rights reserved.