Estate Planning Lawyer in Clinton Township
Call Today For a Consultation 586.690.4400

Why did the Supreme Court Need to Frame the 'Obamacare' Individual Mandate as a Tax?

I intentionally waited for some of the political debate to die before writing about the Supreme Court ruling on the constitutionality of the Patient Protection and Affordable Care Act of 2010 (the real name of “Obamacare” for those who have never heard it called by its real name). I do not intend to delve into any of the political aspect of the law or the policy issues involved; the purpose of this article is merely to explain why it was so important for Justice Roberts’ opinion to conclude that the individual mandate was a tax for “Obamacare” to survive SCOTUS scrutiny.

It seems that a common misconception among people today is that the federal government can regulate anything it wants. In reality, Congress has powers that are specifically given by the Constitution, and powers not granted to Congress are reserved to the States (Tenth Amendment). As the regulation of health care is not within the powers granted to Congress by Article I, Section 8 (or elsewhere) of the United States Constitution, Congress has no power to pass laws that purport to regulate health care throughout the nation. Other regulatory Acts of Congress have survived Supreme Court scrutiny under the Interstate Commerce Clause, but a discussion of that matter is beyond the scope of this writing…and subject to a lot of political debate. To my knowledge, no claim has been made that the individual mandate provisions of the Patient Protective and Affordable Care Act of 2010 was an act of interstate commerce regulation.

What does this have to do with taxes? Justice Roberts, in his opinion, concludes that the Individual Mandate of “Obamacare” is not outside the scope of Congress’ powers because it is, essentially, a tax on not having health insurance. Article I, Section 8 of the Constitution gives Congress the power to lay and collect taxes. This is why the conclusion that the individual mandate is a tax, rather than a penalty, is so important to the ultimate conclusion that the mandate is constitutional. Assuming the Court was correct in its conclusion that the mandate is a tax, it is difficult to then argue that the mandate is not within the powers granted to Congress under the Constitution.

A lot has been made about what limits apply to the power of Congress to tax. Can they really tax any activity (or lack thereof) that they want? The only constitutional limitations on the ability of Congress to lay and collect taxes are:

  1. All direct taxes must be apportioned among the states in proportion to the population of the States (Article I, Section 9);
  2. No Tax or Duty shall be laid on articles exported from any State (Article I, Section 9); and
  3. All Taxes must be applied uniformly throughout the United States (Article I, Section 8).

As the individual mandate is clearly not a direct tax or a tax on articles exported from a State, the only limitation that applies is that the law be applied uniformly throughout the United States. This is, no doubt, a very broad power but it is the power as granted by the Constitution. The greater limitation upon Congress’ power to tax is not a legal limitation but a practical limitation – election time makes Congress accountable for the exercise of the powers granted to them via the Constitution.

So, whether or not you agree with the policy behind “Obamacare”, we are at least hoping to shed a little light on the reasoning behind the Supreme Court’s opinion in this case so that the legal aspects of the Act are a little easier to understand.

Categories: