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.”

This blogpost was co-authored by Cato legal associate Kathleen Hunker.

There’s a fine line between protecting the public from fraud and censoring unorthodox opinions—a line across which the government often stumbles. That was the case in September 2007, when the Federal Trade Commission filed a contempt motion against Kevin Trudeau, author of the best-selling book The Weight Loss Cure “They” Don’t Want You to Know About.

The FTC alleged that Trudeau had misrepresented the contents of his book in several “infomercials” by describing it as “easy” and claiming that dieters, by the end of the regimen, could eat anything they wanted without gaining weight. Despite the fact that Trudeau merely quoted the book when making these statements, the district court upheld the FTC’s findings and smacked Trudeau with a staggering $37.6 million fine. The court also imposed a rare “prior restraint” on speech, demanding that Trudeau post a $2 million bond before running any future infomercials.

The district court imposed these sanctions even though the FTC never proved that Trudeau misled a single consumer or violated any part of the FTC Act. On appeal, the Seventh Circuit affirmed the district court’s decision and ruled that Trudeau’s book promotion constituted misleading commercial speech and was therefore not entitled to any constitutional protection. If left unchallenged, the Seventh Circuit’s ruling would have a dire chilling effect on authors trying to promote their work and could give government officials broad censorial power, in effect permitting the FTC to tax fine through the backdoor what it could never regulate directly (sound familiar?).

Cato has thus filed an amicus brief supporting Trudeau’s request that the Supreme Court take the case and establish a constitutional standard that allows the FTC to protect consumers from fraud while respecting the First Amendment. We argue that courts should apply strict scrutiny to any government actions that restrict or punish advertisements that merely quote and summarize parts of a book (which enjoys full constitutional protection), as Trudeau’s infomercials did.

We note that the Supreme Court has held that commercial speech inextricably intertwined with otherwise protected speech deserves a high degree of First Amendment protection. Moreover, it is well-established that falsity alone may not remove speech from the shelter of the First Amendment.

Free speech loses its vitality when confronted with overzealous regulation; strict scrutiny of would-be government censors would give authors the necessary “breathing space” to publicize their work without the threat of exorbitant fines.

The Supreme Court will decide this fall whether to take the case of Trudeau v. FTC.

Perhaps the first thing you should know about campaign finance “reform” proposals – at least those coming from the left – is that their ultimate goal is to deter speech about political issues.  Whether it’s limiting campaign donations or spending, restricting the ability of corporations or other groups to publicize their views, or imposing disclosure rules, the goal isn’t to have better-informed voters or a more dynamic political system, but to have less speech.   Those who advocate these things want the government to have the power to control who speaks and how much.

That lesson was repeated to me during two public events I participated in yesterday.  First, at a Senate hearing (which you can watch here; my opening remarks, a longer version of which you can read here, begin at 59:50) several senators seemed incredulous at my suggestion that we need more speech rather than less.  After Sen. Dick Durbin (D-IL) tried to get me to admit that I was a Koch pawn, a particularly laughable charge in a year when the Kochs sued Cato over management issues, Sens. Sheldon Whitehouse (D-RI) and Richard Blumenthal (D-CT) were incredulous that I would want fewer restrictions and less disclosures than them.  If I favor certain disclosure rules for donations to campaigns – which I do, in conjunction with eliminating donation caps, as I wrote yesterday – why am I against the DISCLOSE Act, which would impose certain further reporting requirements on independent political spending (and which failed last week after getting zero Republican votes)?

I should’ve just referred the senators to John Samples’s analysis of an earlier version of the proposed legislation, but in any event, the answer boils down to the idea that the required disclosures (of expenditures – which shouldn’t be confused with donations) are so onerous as to burden and deter speech with negligible impact on voter information.  That is, as former FEC chairman Brad Smith explains in this video, disclosing that a TV commercial was paid for by Americans for Apple Pie, one of whose donors is the local chamber of commerce, one of whose donors is the U.S. Chamber of Commerce, one of whose donors is the national widget manufacturers’ associations, one of whose donors is Acme Widgets … doesn’t tell a voter anything.  What it does do is require 20 seconds of the 30-second ad to be given over to disclosure rather than the actual political speech.  So what’s the purpose of the regulation if not to deter that speech?

Moreover, Super PACs already have to disclose their donors, and if their donors are corporations/associations rather than individuals, you can look up the people leading those entities in their corporate filings.  And if the problem is “millionaires and billionaires” – there was more than one reference to the Kochs during the hearing, and I helpfully suggested that I’m happy to defend Georges Soros and Clooney as well – then no law short of a complete ban on political speech by individuals will do.  Luckily, we have the First Amendment in place to stop self-interested incumbents from trying that.

My second public event was an unlikely appearance on the Rachel Maddow Show, where I joined Harvard law professor Larry Lessig, who also appeared at the earlier Senate hearing, to discuss campaign finance regulation.  I thought it went pretty well, and you can watch for yourself (segment titled “How to take American democracy back from the .000063 percent”).  What’s telling is that guest-host Ezra Klein was more even-handed than the senators at the earlier hearing.

Finally, here’s another nugget from yesterday: As I exited the Senate hearing room, a young “reform” activist said to me, “I think you’re a fascist.”  And here I thought that I did a decent job of getting across the point that we should have less government, not more.