Tag: Supreme Court

The IRS’s Illegal Employer Tax

With all eyes on the Supreme Court, whose ruling on ObamaCare’s individual mandate could come as early as today, almost no one noticed that last month the IRS imposed an illegal tax on employers of up to $3,000 per worker.

Jonathan Adler and I explain in today’s USA Today that this illegal tax is the indirect but very real result of the IRS offering ObamaCare’s tax credits and subsidies in health insurance “exchanges” created by the federal government, even though ObamaCare restricts those entitlements – explicitly, laboriously, and unambiguously – to Exchanges established by states.

That illegal action has the effect of imposing ObamaCare’s $2,000-$3,000 per worker tax (i.e., the “employer mandate”) on employers who otherwise would be exempt (i.e., employers in states that do not create an Exchange). Perhaps President Obama thought “taxation without representation” would be a winning campaign slogan.

If the Supreme Court fails to strike down ObamaCare’s employer mandate, Exchanges, and health insurance tax credits and subsidies, this thoroughly unconstitutional IRS rule will begin illegally taxing employers in 2014.

Reps. Scott DesJarlais (R-TN) and Phil Roe (R-TN) have introduced a resolution under the Congressional Review Act that would block the rule. Barring that, expect more angry employers to haul ObamaCare into federal court.

Adler discusses the IRS rule here:

Adler on How the IRS Is Rewriting ObamaCare to Tax Employers

Jonathan H. Adler is the Johan Verheij Memorial Professor of Law and director of the Center for Business Law and Regulation at Case Western Reserve University.  In this new Cato Institute video, Adler explains how a recently finalized IRS rule implementing ObamaCare taxes employers without any statutory authority.

For more, see this previous Cato video, “States Should Flatly Reject ObamaCare Exchanges”:

See also our November 2011 op-ed on this IRS rule that appeared in the Wall Street Journal.

NRO Op-ed: IPAB, ObamaCare’s Super-Legislature

Yesterday, Cato released “The Independent Payment Advisory Board: PPACA’s Anti-Constitutional and Authoritarian Super-Legislature,” by the Goldwater Institute’s Diane Cohen and me.

Today, National Review Online publishes our op-ed based on that study. An excerpt:

[U]nder the statute as written, if Congress fails to repeal IPAB in 2017, the secretary must implement IPAB’s edicts even if Congress votes to block them. Nancy Pelosi was right: We needed to pass ObamaCare to find out what was in it. We’re still finding out.

ObamaCare is so unconstitutional, it’s absurd. It delegates legislative powers that Congress cannot delegate. It creates a permanent super-legislature to supplement—and when conflicts arise, to supplant—Congress. It tries to amend the Constitution via statute rather than the amendment procedure of Article V.

ObamaCare proves economist Friedrich Hayek’s axiom that government direction of the economy threatens both democracy and freedom. After decades of failing to deliver high-quality, low-cost health care through Medicare, Congress struck upon the “solution” of creating a permanent super-legislature—or worse, an economic dictator—with the power to impose taxes and other laws that the people would reject.

Fortunately, one Congress cannot bind future Congresses by statute. If the Supreme Court fails to strike down ObamaCare, Congress should exercise its power to repeal IPAB—and the rest of ObamaCare with it.

Cohen is also the lead attorney for the plaintiffs in Coons v. Geithner, which challenges the constitutionality of IPAB and which a federal court has put on hold pending the Supreme Court’s ruling in the individual-mandate and Medicaid-mandate cases.

Cato Study: Heretofore Unreported ObamaCare ‘Bug’ Puts IPAB Completely beyond Congress’ Reach

Today, the Cato Institute releases a new study by Diane Cohen and me titled, “The Independent Payment Advisory Board: PPACA’s Anti-Constitutional and Authoritarian Super-Legislature.” Cohen is a senior attorney at the Goldwater Institute and lead counsel in the Coons v. Geithner lawsuit challenging IPAB and other aspects of the Patient Protection and Affordable Care Act of 2010, a.k.a. ObamaCare.

From the executive summary:

When the unelected government officials on this board submit a legislative proposal to Congress, it automatically becomes law: PPACA requires the Secretary of Health and Human Services to implement it. Blocking an IPAB “proposal” requires at a minimum that the House and the Senate and the president agree on a substitute. The Board’s edicts therefore can become law without congressional action, congressional approval, meaningful congressional oversight, or being subject to a presidential veto. Citizens will have no power to challenge IPAB’s edicts in court.

Worse, PPACA forbids Congress from repealing IPAB outside of a seven-month window in the year 2017, and even then requires a three-fifths majority in both chambers…

IPAB’s unelected members will have effectively unfettered power to impose taxes and ration care for all Americans, whether the government pays their medical bills or not. In some circumstances, just one political party or even one individual would have full command of IPAB’s lawmaking powers. IPAB truly is independent, but in the worst sense of the word. It wields power independent of Congress, independent of the president, independent of the judiciary, and independent of the will of the people.

The creation of IPAB is an admission that the federal government’s efforts to plan America’s health care sector have failed. It is proof of the axiom that government control of the economy threatens democracy.

Importantly, this study reveals a heretofore unreported feature that makes this super-legislature even more authoritarian and unconstitutional:

[I]f Congress misses that repeal window, PPACA prohibits Congress from ever altering an IPAB “proposal.”

You read that right.

The Congressional Research Service and others have reported that even if Congress fails to repeal this super-legislature in 2017, Congress will still be able to use the weak tools that ObamaCare allows for restraining IPAB. Unfortunately, that interpretation rests on a misreading of a crucial part of the law. These experts thought they saw the word “or” where the statute actually says “and.”

How much difference can one little conjunction make?

Under the statute as written, if Congress fails to repeal IPAB in 2017, then as of 2020 Congress will have absolutely zero ability to block or amend the laws that IPAB writes, and zero power to affect the Secretary’s implementation of those laws. IPAB will become a permanent super-legislature, with the Secretary as its executive. And if the president fails to appoint any IPAB members, the Secretary will unilaterally wield all of IPAB’s legislative and executive powers, including the power to appropriate funds for her own department. It’s completely nutty, yet completely consistent with the desire of ObamaCare’s authors to protect IPAB from congressional interference.

It’s also completely consistent with Friedrich Hayek’s prediction that government planning of the economy paves the way for authoritarianism.

Can the Government Destroy Propety Values ‘Temporarily’ Without Compensation?

This blogpost was co-authored by Trevor Burrus.

A seemingly complicated legal case that has caught Cato’s attention, CCA Associates v. United States, boils down to a simple constitutional question: If the government reneges on a contract and forces a property owner to rent apartments at below-market rates for longer than originally agreed, does it constitute a taking under the Fifth Amendment (which would require the government to pay just compensation)?

In 1961, Congress amended the National Housing Act to create incentives for private builders to supply housing to low- and moderate-income families. Builders were given below-market mortgages backed by the federal government and, in return, the owners agreed to certain restrictions from the Department of Housing and Urban Development, the most relevant being limitations on raising rent. Owners were also given the right to pre-pay the 40-year mortgage after 20 years, however, freeing them at that time from their rent-control obligations.

In 1990, as one 20-year period came to a close, Congress took away the owners’ right to pre-pay their mortgages. In 1996, however, Congress returned the property owners’ right to pre-pay. Therefore, between 1991 (when the original 20-year period would have lapsed) and 1996, the property owners were forced to rent at below-market rates.

CCA Associates is one of many similarly situated property owners who are suing the federal government for its clear act of duplicity. CCA Associates’ case, among many others, has been bouncing back and forth between the Court of Federal Claims and the Federal Circuit for many years.

One of the key questions is how to determine the degree to which the government’s actions economically affected CCA Associates’ property. One view is that there was substantial economic impact during the five-year period between when Congress eliminated and then restored the pre-pay right – CCA Associates lost approximately 81% of the property’s possible value during those five years. Another view looks at the impact during the five-year period as fraction of the entire life of the property, not just the diminished value during the five-year period. Under this calculation, CCA Associates only lost 18% of the total value of the property.

The Federal Circuit adopted the latter formula and held that 18% is not a substantial enough economic impact to constitute a Fifth Amendment taking. Cato has joined the National Federation of Independent Business, the Center for Constitutional Jurisprudence, and Professor Steven Eagle of George Mason University Law School on an amicus brief urging the Supreme Court to take CCA Associates’ case.

We argue that adopting the Federal Circuit’s answer to the so-called “denominator question” – that is, whether the denominator in the “economic impact” fraction should be the entire life of the property or the shorter (here five-year) period during which the government temporarily took the owners’ right to rent at the market price – could preclude all possible claims that the government committed a “temporary taking.” By choosing a big-enough denominator, courts can always characterize an economic impact as being below the constitutional threshold.

We also argue that, in applying the Supreme Court’s factors in the famous 1978 Penn Central case (which set up the analytical framework for regulatory takings), the Federal Circuit incorrectly treated the factors as a magic formula and ignored other relevant factors. Finally, we point out how courts are obviously confused about the proper standards to apply in these cases, thus creating a perfect time for the Supreme Court’s guidance.

The Court will decide this fall whether to hear CCA Associates v. United States.

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.