D.C. Circuit Rules that Obamacare Is a “Tax” but Not a “Bill for Raising Revenue”

The D.C. Circuit Court of Appeals today tossed out the latest constitutional challenge to Obamacare, which argues that if the individual mandate is a “tax,” as the Supreme Court said it is, it’s still unconstitutional because it did not originate in the House of Representatives, as the Constitution requires. I argued the case on behalf of entrepreneur Matt Sissel in May.

Today’s decision, written by Judge Judith Rogers and joined by Judges Cornelia Pillard and Robert Wilkins, holds that while the mandate may be a “tax,” it isn’t a “bill for raising revenue,” and is therefore exempt from the Origination Clause.

What’s the difference between a tax and a bill for raising revenue? Some court decisions have held that there are things that may appear to be taxes but are actually only penalties designed to enforce other kinds of laws. For example, in a 1943 case called Rodgers v. United States, the court of appeals said that a tax that was imposed on people for growing more wheat than the government allowed (that’s the same wheat law that was at issue in the infamous Wickard v. Filburn) wasn’t really a tax, but just an enforcement penalty or a fine. Such penalties aren’t “bills for raising revenue,” so they don’t have to start in the House.

The problem with that line of argument is that in NFIB v. Sebelius, the Supreme Court said that the individual mandate, whatever else it might be, is not a penalty or a fine. That’s just why Chief Justice Roberts concluded that it was a tax! And that means that no such exemption should apply.

Today’s D.C. Circuit decision acknowledges this, but holds that there is another variety of tax that isn’t a “bill for raising revenue.” And that is, taxes whose “main object or aim” is something other than generating income for the government. According to this “purposive approach,” the court says, the court should look to “the primary aim” of the bill to decide whether the Origination Clause applies—without regard for whether it will “generate substantial revenues.”

But the Supreme Court has never endorsed this vague “purposive approach,” and for good reason. Laws often have many “objects or aims”—particularly in an era of massive omnibus bills. The ACA is over 2,000 pages long, with provisions on all sorts of different subjects. Which one is its “main” object? What is the “main” object of a “stimulus package” or a general appropriations bill? What about a tax imposed to support the military? Is its “main object” to raise money—or to support the military? If judges are free to decide what the “main object or aim” of a bill is, and to apply the Constitution or not accordingly, then they should at least have some objective criteria for making that call…and the court can point to none. That’s because the Constitution makes no distinction, and the constitutional analysis does not hinge on what the “main object or aim” of a bill is. Instead, the question is whether the bill levies a tax, and puts that money into the general treasury for Congress to spend at will—which Obamacare’s individual mandate tax does.

Worse, the vague “purposive approach” creates a loophole that the Senate can easily walk through to originate revenue-raising bills. All it needs to do is originate a tax by saying that its main purpose is some other thing. One reason we know that isn’t what the Constitution says is that the Framers rejected a proposed draft of the Origination Clause that would have applied only to “[b]ills for raising money for the purpose of revenue.” The reason is obvious: because the vague “purpose” test would allow Congress to evade constitutional limits too easily.

There’s remarkably little Supreme Court precedent interpreting the Origination Clause. It seems likely that the Sissel case will change that eventually.