Tag: individual mandate

Oklahoma Challenges Obama’s Illegal Employer Tax

Yesterday, the attorney general of Oklahoma amended that state’s ObamaCare lawsuit. The amended complaint asks a federal court to clarify the Supreme Court’s ruling in NFIB v. Sebelius, but it also challenges an IRS rule that imposes ObamaCare’s employer mandate where the statute does not authorize it: on employers in the 30 to 40 states that decline to implement a health insurance “exchange.”

Here are a few excerpts from Oklahoma’s amended complaint:

The Final Rule was issued in contravention of the procedural and substantive requirements of the Administrative Procedures Act…; has no basis in any law of the United States; and directly conflicts with the unambiguous language of the very provision of the Internal Revenue Code it purports to interpret…

Under Defendants’ Interpretation, [this rule] expand[s] the circumstances under which an Applicable Large Employer must make an Assessable Payment…with the result that an employer may be required to make an Assessable Payment under circumstances not provided for in any statute and explicitly ruled out by unambiguous language in the Affordable Care Act.

Plaintiff believes…that subjecting the State of Oklahoma in its capacity as an employer to the employer mandate would cause the Affordable Care Act to exceed Congress’s legislative authority; to violate the Tenth Amendment; to impermissibly interfere with the residual sovereignty of the State of Oklahoma; and to violate Constitutional norms relating to the relationship between the states, including the State of Oklahoma, and the Federal Government.

As for the latest claim to be made in defense of the IRS rule – that an Exchange  established by the federal government under Section 1321 is an Exchange “established by the state under Section 1311” – the complaint says this:

If the Act provides or is interpreted to provide that an Exchange established by HHS under Section 1321(c) of the Act is a form of what the Act refers to as “an Exchange established by a State under Section 1311 of [the Act],” then Section 1321(c) is unconstitutional because it commandeers state governmental authority with respect to State Exchanges, permits HHS to exercise a State’s legislative and/or executive power, and otherwise causes the Exchange-related provisions of the Act…to exceed Congress’s legislative authority; to violate the Tenth Amendment; to infringe on the residual sovereignty of the States under the Constitution; and to violate Constitutional norms relating to the relationship between the states, including the State of Oklahoma, and the Federal Government.

Oklahoma does not yet list any private-sector employers as co-plaintiffs, but that may change.

Since this IRS rule also unlawfully taxes 250,000 Oklahomans under the individual mandate – a tax that in 2016 will reach $2,085 for a family of four earning $24,000 – the attorney general has an awful lot of individual Oklahomans that he could add to its plaintiff roster.

Jonathan Adler and I first wrote about President Obama’s illegal taxes on employers in the Wall Street Journal and again in the USA Today. Since parts of those opeds have been overtaken by events, I recommend reading our forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Yes, all 82 pages of it.

Written Testimony on the Illegal IRS Rule to Increase Taxes & Spending under Obamacare

The written testimony that Jonathan Adler and I submitted for the House Oversight Committee hearing on the Internal Revenue Service’s unlawful attempt to increase taxes and spending under Obamacare is now online. An excerpt:

Contrary to the clear language of the statute and congressional intent, this [IRS] rule issues tax credits in health insurance “exchanges” established by the federal government. It thus triggers a $2,000-per-employee tax on employers and appropriates billions of dollars to private health insurance companies in states with a federal Exchange, also contrary to the clear language of the statute and congressional intent. Since those illegal expenditures will exceed the revenues raised by the illegal tax on employers, this rule also increases the federal deficit by potentially hundreds of billions of dollars, again contrary to the clear language of the statute and congressional intent.

The rule is therefore illegal. It lacks any statutory authority. It is contrary to both the clear language of the PPACA and congressional intent. It cannot be justified on other legal grounds.

On balance, this rule is a large net tax increase. For every $2 of unauthorized tax reduction, it imposes $1 of unauthorized taxes on employers, and commits taxpayers to pay for $8 of unauthorized subsidies to private insurance companies. Because this rule imposes an illegal tax on employers and obligates taxpayers to pay for illegal appropriations, it is quite literally taxation without representation.

Three remedies exist. The IRS should rescind this rule before it takes effect in 2014. Alternatively, Congress and the president could stop it with a resolution of disapproval under the Congressional Review Act. Finally, since this rule imposes an illegal tax on employers in states that opt not to create a health insurance “exchange,” those employers and possibly those states could file suit to block this rule in federal court.

Requiring the IRS to operate within its statutory authority will not increase health insurance costs by a single penny. It will merely prevent the IRS from unlawfully shifting those costs to taxpayers.

Related: here is the video of my opening statement, and Adler’s and my forthcoming Health Matrix article, “Taxation without Representation: the Illegal IRS Rule to Expand Tax Credits under the PPACA.”

House Oversight Hearing on the IRS’s Illegal Rule Increasing Taxes & Spending under ObamaCare

Overall, this Tennessean article summarizes well yesterday’s House Oversight Committee hearing on the IRS rule that Jonathan Adler and I write about here and here. Unfortunately, the article does perpetuate the misleading idea that the nation’s new health care law is “missing” language to authorize tax credits in federally created Exchanges. (The statute isn’t missing anything. It language reads exactly as its authors wanted it to read.)

Excerpts:

Rep. Scott DesJarlais’ argument that the health-care reform law lacks wording needed to implement a crucial part of it took a major step forward Thursday.

The Jasper Republican got a hearing before the House Committee on Oversight and Government Reform on his claim that the Internal Revenue Service lacks authority to tax employers who fail to offer health policies and leave workers to buy coverage through federally established exchanges.

His arguments, while not uncontested during the hearing, apparently won over the committee chairman, Rep. Darrell Issa, R-Calif. Issa signed on Thursday as a co-sponsor of DesJarlais’ bill related to the issue. Other House Republican leaders also have shown interest, DesJarlais said in an interview afterward. He said he expects a vote on the House floor sometime this fall.

And a Senate version has been introduced by Sen. Ron Johnson, R-Wis…

DesJarlais contends that Congress worded the law in a way that authorizes the taxes and tax credits only for insurance bought through state-based exchanges, not federal ones…

The distinction is important because many states are balking at setting up their own exchanges. DesJarlais’ argument would mean federal exchanges couldn’t be implemented in those states, either…

“They have rewritten a law Congress haphazardly drafted,” DesJarlais said.

His bill, which has 35 cosponsors, would keep the IRS from moving forward with its regulatory language.

“I have employers watching this very closely,” DesJarlais added. Essentially, he said, the issue is “about whether ObamaCare can continue to exist.”

ObamaCare Lost on the Medicaid Mandate & Commerce Power. It May Yet Lose on the Tax Power.

Supporters of the Obama health law are incorrectly reading the Supreme Court’s ruling as a victory.

First, the ruling severely limited the Obama health law’s Medicaid expansion, effectively giving states the green light to refuse to expand their Medicaid programs. Coupled with the fact that the statute already enables states to block the other half-trillion dollars of new entitlement spending, the law is in a very precarious position.

Second, the Court ruled 5-4 that the individual mandate is not a legitimate use of the Commerce Power. That too is a defeat for the government, even if it is of no immediate consequence.

Third, while the Court upheld the individual mandate as a tax, that ruling may be vulnerable to legal challenge.

Chief Justice Roberts wrote, “The Federal Government ‘is acknowledged by all to be one of enumerated powers,’” and, “The Constitution’s express conferral of some powersmakes clear that it does not grant others.” So it is interesting that Roberts did not specify exactly what type of constitutionally authorized tax the mandate is.

As Cato chairman Bob Levy wrote in 2011, that’s not an easy thing to do:

Assume, however, the Supreme Court ultimately disagrees and finds that the penalty for not purchasing health insurance is indeed a tax. Nevertheless, say opponents of PPACA, the tax would be unconstitutional. They underscore that taxes are of three types—income, excise, or direct. Each type must meet specified constitutional constraints. Because the mandate penalty under PPACA does not satisfy any of the constraints, it is not a valid tax.

Income taxes, authorized by the Sixteenth Amendment, must (by definition) be triggered by income. Yet the mandate penalty is triggered by the nonpurchase of insurance. Except for an exemption available to low-income families, the amount of the penalty depends on age, family size, geographic location, and smoking status. So the penalty is not an income tax.

Excise taxes are assessed on selected transactions. Because the penalty arises from a nontransaction, perhaps it qualifies as a reverse excise tax. If so, it has to be uniform across the country (U.S. Const., Art. I, sec. 8). But the penalty varies by location, so it cannot be a constitutional excise tax.

Direct taxes are assessed on persons or their property. Because the penalty is imposed on nonownership of property, perhaps it could be classified as a reverse direct tax. But direct taxes must be apportioned among the states by population (U.S. Const., Art. I, sec. 2). The mandate penalty is assessed on individuals without regard to any state’s population. Hence, it is not a lawful direct tax.

On the last point, Roberts agreed: ”A tax on going without health insurance does not fall within any recognized category of direct tax.” But then what kind of constitutionally authorized tax is it?

The dissent suggests the Court has given this issue scant attention:

Finally, we must observe that rewriting [the mandate] as a tax in order to sustain its constitutionality would force us to confront a difficult constitutional question: whether this is a direct tax that must be apportioned among the States according to their population. Art. I, §9, cl. 4. Perhaps it is not (we have no need to address the point); but the meaning of the Direct Tax Clause is famously unclear, and its application here is a question of first impression that deserves more thoughtful consideration than the lick-and-a-promise accorded by the Government and its supporters. The Government’s opening brief did not even address the question—perhaps because, until today, no federal court has accepted the implausible argument that [the mandate] is an exercise of the tax power. And once respondents raised the issue, the Government devoted a mere 21 lines of its reply brief to the issue…At oral argument, the most prolonged statement about the issue was just over 50 words…One would expect this Court to demand more than fly-by-night briefing and argument before deciding a difficult constitutional question of first impression.

There is even less discussion about what type of constitutionally authorized tax the mandate is.

I’m not a lawyer. But it seems to me there may be room here for the same individual citizens who brought this case to again file suit against the federal government for trying to impose an unconstitutional tax. It may seem unlikely that Roberts would reverse himself on the Tax Power issue. Then again, since he never specified what type of constitutionally permissible tax the mandate is, perhaps voting to strike the mandate would not be reversing himself.

Obamacare’s Unconstitutional—-Let’s Implement! No Wait, We’re Not Implementing—-Yes We Are!

The Washington Post reports:

For 14 months, a bipartisan group of 17 states has been quietly collaborating with the Obama administration to help build a foundation for the health-care reform law’s success.

The group includes some of the law’s staunchest supporters working alongside a handful of its bigger detractors. They are backed by $3 million in funding from eight nonprofit organizations that hope to see the Affordable Care Act succeed.

Together, they have come up with a tool to help consumers navigate the health insurance exchanges—the marketplaces that each state is required to have by 2014.

In other words, at the same time Alabama, Arizona, Colorado, and Kansas are suing to overturn Obamacare as unconstitutional, officials in those states are helping to implement the same unconstitutional law.

The Post reports, without rebuttal, several myths about the states’ role under Obamacare. It refers three times to the “tight deadlines” states face under the law. (There are no deadlines. HHS has said that if states decline to create exchanges, they can change their minds later.) It claims, “If a state does not have a framework in place by 2013, the Department of Health and Human Services will come in and do the job itself.” (That’s highly questionable. Obamacare appropriates zero funds for federal exchanges and HHS has admitted it doesn’t have the money.) It quotes Kansas insurance regulator Linda Shepphard as saying, “There is no work being done to build an exchange in Kansas at this point.” (Well, which is it? Is Kansas doing “no work,” or is it “collaborating with the Obama administration”?) I’d say certain state officials got some ‘splaining to do.

In the video below the jump, I explain to state officials why flatly refusing to create an Obamacare exchange is the best thing they can do for their states.

States Should Flatly Refuse to Create ObamaCare Exchanges (New Cato Video)

This new Cato Institute video explains why it is in no state’s interest to create an ObamaCare Exchange.

Many thanks to Cato’s very talented Caleb O. Brown and Austin Bragg.

For the more-words-no-pictures version, click here or here. For a word about ObamaCare profiteers the pro-Exchange lobby, click here. Click here to read about what is happening in the states.