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.