Tag: Origination Clause

The Latest Obamacare Case on Appeal

Last year’s Supreme Court decision holding that Obamacare imposes a “tax” on people who don’t buy health insurance came as a surprise to most Americans. The law doesn’t call it a “tax,” but a “penalty,” and the law’s authors and supporters never called it a “tax” when it was enacted. But Chief Justice Roberts and the four liberal justices held that unlike the penalty in the 1922 case of Bailey v. Drexel Furniture – which was disguised as a tax – what the Patient Protection and Affordable Care Act imposed looked like a penalty but was really a tax.

One of the problems with that – left unaddressed in the NFIB v. Sebelius ruling – is that the Constitution requires “all bills for raising revenue” to “originate” in the House of Representatives. If the PPACA imposes a tax, then it fails this requirement because it originated in the Senate.

That’s the argument being made in the case of Matt Sissel, a veteran and small business owner represented by the Pacific Legal Foundation (including one of us, Sandefur). In a brief filed yesterday in the U.S. Court of Appeals for the D.C. Circuit, Sissel’s lawyers argue that the Obamacare “tax” originated in the Senate in violation of Constitutional standards.

There’s little case law interpreting the Constitution’s Origination Clause. The leading case is 1911’s Flint v. Stone Tracy Corp., which held that the Clause wasn’t violated when the Senate amended a House-passed bill to add a tax to it. The Court held that the Senate – which has the constitutional authority to “propose or concur with amendments” to House-passed revenue bills – was allowed to do this because that Senate amendment “was germane to the subject-matter of the bill.” It’s hard to see how the “germaneness” requirement was satisfied in the PPACA’s case, though. That law originated in the Senate, which took a House-passed bill on a completely different subject (providing incentives for veterans to buy their first homes), deleted its entire text, and replaced it with the bill that became Obamacare. This “shell bill” tactic is not uncommon in legislatures, but the Supreme Court has never held that it satisfies the origination requirement. A federal trial court threw Sissel’s case out in June, on the grounds that the Senate’s “amendment” satisfied the “germaneness” rule because the original House bill had something to do with taxes. But if the standard is that lax, the Origination Clause would mean nothing: the Senate could originate taxes at any time when they have some extremely broad similarity with some other bill the House has passed. In an age of boxcar-sized omnibus bills, that would be easy to do.

That trial court also said that the Origination Clause doesn’t apply to the Obamacare tax anyway, because, while it’s a tax, it isn’t a “bill for raising revenue.” There are precedents that have exempted certain kinds of taxes from the Origination Clause because they’re not revenue measures, but are instead earmarked for some specific fund, or are actually just enforcement penalties meant to ensure compliance with another law. But funds raised by the PPACA aren’t earmarked – they go into the general Treasury, to be spent as Congress chooses. And in NFIB, Chief Justice Roberts’s opinion specifically held that the provision at issue is not a penalty, but only a tax. It’s the reverse of Drexel Furniture.

These are reasons why the judge-made exceptions to the Origination Clause shouldn’t apply here. But there’s a broader reason why the courts should be reluctant to exempt Obamacare. In their decision last year, the majority of justices expressed a desire to preserve what they saw as democratic lawmaking. “We possess neither the expertise nor the prerogative to make policy judgments,” wrote Roberts. “Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.” Whatever you might think of this idea, if the courts are concerned about our democratic process, they should not hesitate to enforce a constitutional provision designed to preserve democratic accountability.

The Origination Clause was written to ensure that the power to tax – government’s most pervasive, dangerous, and easily abused power – was kept close to the people’s chamber: the House of Representatives, elected every two years directly by local districts. Had Obamacare been properly proposed in the House as a tax on not buying insurance in the first place, it wouldn’t have survived more than a few days – and as it stands the backlash against the law’s enactment swept out the House majority that supported that law. If the courts are concerned with empowering the will of the voters, that’s all the more reason that procedural requirements like the Origination Clause – that help ensure accountability and transparency, and keep the taxing power as close to the people as possible – are fully enforced.

Wait, Didn’t the Fiscal Cliff Deal Originate in the Senate?

If you thought the policy side of the “American Taxpayer Relief Act of 2012” is bad, did you notice that there’s a constitutional problem too? I’m sure there’s more than one, actually, but this one was easy to spot without even digging into the gory details.

Recall that the fiscal cliff bill was first passed by the Senate in the wee hours of New Year’s Day, and then seconded by a vote of the House some 20 hours later. And yet, Article I, Section 7, Clause 1—known as the Origination Clause—states: “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” 

Far from being “archaic, idiosyncratic and downright evil”—as Georgetown law professor Mike Seidman claimed as part of his argument for throwing out the Constitution altogether—this provision serves, or at least is supposed to serve, the very real and timeless purpose of keeping the taxing power as close to the voters as possible. Mindful of the potential for abuses of this awesome power (see, e.g., John Roberts on Obamacare) the Constitution’s authors chose to give it to the congressional body that is elected every two years directly by people in local districts (the House), instead of the one whose members serve alternating six-year terms and weren’t initially directly elected (the Senate). As Cato adjunct scholar Tim Sandefur explains in a forthcoming law review article (footnotes/citations omitted):

When the Anti-Federalist “Brutus” warned that the taxing power, “exercised without limitation,” will “introduce itself into every corner of the city, and country” and “light upon the head of every person in the United States” crying “GIVE! GIVE!” the Constitution’s supporters answered that this risk was minimized by the political checks over the taxing power. “The exclusive privilege of originating money bills [belongs] to the house of representatives,” wrote Alexander Hamilton.  This would ensure that the power to tax belonged to “the most popular branch” of the government, “the favorite of the people.” James Madison reiterated this point: the “principal reason” why the House was given the power “of originating money bills” was that the Representatives “were chosen by the people, and supposed to be the best acquainted with their interest and ability.” Perhaps the point was put best by George Mason, who considered the Senate “[a]n aristocratic body” which “should ever be suspected of an encroaching tendency,” and believed that “[t]he purse strings should never be put into its hands.”

So what happened last week? Did Harry Reid, John Boehner, and Barack Obama simply agree to ignore the Constitution? (Specifically here, I mean—we know they do generally where federal power is concerned.) Were the House and Senate parliamentarians overruled by a naked political deal?