Justice Roberts on Commerce and Taxes

You may have heard some rumors and quick analysis from many of your friends about the recent Supreme Court decision on NFIB v. Sebelius (the health insurance decision). However, these uninformed statements often misquote the justices or show a lack of legal knowledge. People say things they “think”, not necessarily what is true. As a result, I hope you will consider again some of those statements by reading a quick and accurate overview of each side’s opinion in the decision. We’ll start with Chief Justice John Roberts.

The best summary of Supreme Court Chief Justice Roberts’ opinion (which is, technically, the “court’s opinion”),

“The Affordable Care Act is constitutional in part and unconstitutional in part. The individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause. That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it. In this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Congress’s power to tax.”

So what does this mean? Let’s break it down a bit and take a look at his reasoning. For those of you who have no desire to read the 65 pages of the Court’s opinion written by Roberts, here’s a beginner’s overview that should take you only 5 minutes or so to read – complete with direct quotes from the opinions and interpretations.

Commerce Clause:

The Commerce Clause is the part of the Constitution that says,

The Congress shall have Power […] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;” (Article 1, Section 8).

Over the years, the power granted to Congress has increased dramatically, especially with the famous Supreme Court case Wickard v. Filburn, where the Court decided Congress had the power to regulate a local farmer’s decision to grow wheat for himself and his livestock because, although it was not interstate commerce, it affected interstate commerce. Roberts cites this on page 5 of his opinion.

According to Chief Justice Roberts, the Patient Protection and Affordable Care Act is a command to buy health insurance. He says this is clear in that Congress labels it a penalty, not a tax – even though there are other measures described as “taxes” in other places in the law.

Congress’s decision to label this exaction a “penalty” rather than a “tax” is significant because the Affordable Care Act describes many other exactions it creates as “taxes.” See Thomas More, 651 F. 3d, at 551. Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally. (Page 12)

Chief Justice Roberts goes on to describe how this law does not fall under the authority of the Commerce Clause, because it creates commerce to be regulated:

The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product,on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. (Page 20)

What are the dangers to this new, vast domain of congressional authority? Well, an example that is often used by those who oppose this expansion of government is “healthy eating regulation”. Essentially, because eating unhealthily affects interstate commerce by costing money in terms of increased healthcare costs, the government should be able to regulate it under this bill, right? Some of you may say this is an exaggeration – however, if you look at one of my prior posts or a current crisis in New York, you’ll see this idea is perfectly acceptable among some people. Chief Justice Roberts uses this analog of “healthy eating regulation” to explain why allowing this law under the Commerce Clause is a bad idea:

Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Government’s theory, Congress could address the diet problem by ordering everyone to buy vegetables. See Dietary Guidelines, supra, at 19 (“Improved nutrition, appropriate eating behaviors, and increased physical activity have tremendous potential to . . . reduce health care costs”)….

People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures—joined with the similar failures of others—can readily have a substantial effect on interstate commerce. Under the Government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act. (Page 23)

I think he makes an excellent point here – he goes on to describe how a country where the government compels people to buy something is not what the Founders envisioned.

Is it a tax?

As most of you know, Roberts did still uphold the individual mandate on the grounds that it functioned as a tax. This is particularly upsetting to Americans who were told, over and over, that this law did NOT raise taxes on the middle class. Congress said it wasn’t a tax (evident by the fact that they didn’t call it one), and President Barack Obama also argued that it was not a tax, saying “I absolutely reject that notion.” According to Roberts quoting from four Supreme Court precedents, it doesn’t matter what people called it. It’s how it functions.

We thus ask whether the shared responsibility payment falls within Congress’s taxing power, “[d]isregarding the designation of the exaction, and viewing its substance and application.”United States v. Constantine, 296 U. S. 287, 294 (1935); cf. Quill Corp. v. North Dakota, 504 U. S. 298, 310 (1992) (“[M]agic words or labels” should not “disable an otherwise constitutional levy” (internal quotation marks omitted)); Nelson v. Sears, Roebuck & Co., 312 U. S. 359, 363 (1941) (“In passing on the constitutionality of a tax law, we are concerned only with its practical operation,not its definition or the precise form of descriptive words which may be applied to it” (internal quotation marks omitted)); United States v. Sotelo, 436 U. S. 268, 275 (1978) (“That the funds due are referred to as a ‘penalty’ Opinion of ROBERTS, C. J. 35 Cite as: 567 U. S. ____ (2012) Opinion of the Court  . . . does not alter their essential character as taxes”). (Page 34-35)

According to Roberts, it passes the test of qualifying for a tax because it does not affect every person – only those who make a certain income, but don’t have health insurance. He says it is similar to imposing a tax on cigarettes – the primary goal is not to raise revenue, but to encourage behavior. He also compares it to tax incentives for buying a house or going to college, which essentially function as tax penalties for those who don’t do these things.

Essentially, his decision turns the law into a political issue again. If you don’t like the tax, vote against the politicians who voted for it. Regardless of your political stance on the law, Chief Justice Roberts is clear that the Court must only decide constitutionality, not whether the policy works. It doesn’t matter if most of the country disagrees with the ruling. Even if 99% of us were to oppose the law now, we voted to pass it two years ago. Our opinion has no effect on whether it’s allowable under the Constitution.

What do you think about Roberts’ opinions? Should the law have been supported by the Commerce Clause? Was Roberts correct in saying it functioned as a tax?

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10 responses to “Justice Roberts on Commerce and Taxes

  1. Thanks for doing your “due diligence” by reading the Chief Justice’s opinion. It’s something I’m afraid I won’t undertake anytime soon.

    Given what you’ve reported, I think I’m only left with a deeper question. Does the work of the Supreme Court presume that lawmakers are always developing internally consistent, coherent legislation? It’s clear that in 2010 the sponsors of ACA didn’t want us to think it a tax, but Roberts seems justified to deem it so by invoking the Nelson v. Sears “magic words” precedent.

    I will defer to a seasoned jurist in his reading. I understand it’s good practice to interpret charitably the intention of the drafters. But what if, in this case or another, the legislators produced an incoherent or internally inconsistent law? The weaselly way that ACA was billed, slapped together, and defended makes me think this will be a real scenario sooner or later.

    Perhaps there has been no precedent by which the court has found the original intent irretrievable. In some superior, alternate reality, Justice Roberts may have sided with the conservatives and stamped the majority opinion with a new precedent: “unconstitutional by way of incoherence.”

    Nonetheless, it’s best to abandon the apocalyptic wailing and gnashing of teeth. As Roberts put before us, it is not the constitutionality of a law alone that makes a law good or bad. This is best decided at the ballot box. So let’s get a Republican sweep this November!

    • Agreed! Honestly, regardless of whether the Congress passes an “incoherent” law, the Court shouldn’t base legal decisions off of that. Otherwise we get subjectivity. It becomes political and each Justice tries to make decisions based on his own opinions of “how well the process went”.

      I feel like Roberts is saying, “Listen, it’s not our job to save you. You did this to yourselves”.

  2. I am a tax attorney and have analyzed the Supreme Court’s ruling on Affordable Care Act (ACA), otherwise known as ObamaCare. Certainly, the fact that Congress compels penalties for non-compliance, with such penalties to be assessed, administered and collected by the Internal Revenue Service, underlies these penalties, regardless of terminology, as a tax. If it walks like a duck, and sounds like a duck….it is a duck, no matter what Democrats (or Republicans in other settings or laws) call it.

    Further analysis follows:

    1) Chief Justice John Roberts is very keen on keeping the reputation of the Supreme Court as a non-political and independent body intact.

    2) If the Court simply overturned the Act, or even part if it, much of the media would have portrayed the Supreme Court’s decision in such a light – i.e as politically motivated.

    3) If the Act had been ruled constitutional upon based on the Commerce Clause, governmental power would have been expanded almost without limit…since the Act, using that clause as a basis, compels by regulation people to buy health insurance – i.e. to do something. But the regulatory power stands only if the Act is upheld using the Commerce Clause. Thus, the regulatory power of Congress under the Commerce Clause has at a minimum, been stopped where it currently stands, and perhaps has even been curtailed in this decision. The Court explicitly said in the opinion that the Act is unconstitutional under the Commerce Clause precisely because it would have made governmental power and reach almost unlimited with the mandate to purchase insurance foisted on Americans.

    4) So…the Court held that the Act is constitutional only under its taxing authority, since requiring people to buy insurance by congressional action is a tax. What Obama says is irrelevant. Taking money by government mandate is a tax – and the Supreme Court found this constitutional only under its taxing authority in Article 1, Section 8 of the United States Constitution.

    5) That makes the ACA the largest tax increase in U.S. history…impacting most members of society. This violates a pledge President Obama made that no taxes of any kind would be raised on people earning less than $250,000 a year. Thus, the Court’s decision puts the largest tax increase in history on the table right now as a central issue in this presidential campaign.

    6) The ACA was voted on via reconciliation in the Congress. Perhaps most significantly, since the Court has now held the ACA to be a tax, only 51 votes are needed in the Senate to repeal it. Originally, the Act called for 60 votes within the law itself for repeal – but that does not come into play when the law is construed as a tax – only if it is construed as a regulation, and not a tax. It would have been almost impossible to repeal this law with 60 votes in the Senate – which is what the writers of it intended by putting in that provision. But the writers of the ACA went to great pains to not call it a tax in the law itself, because they knew in passing it in Reconciliation in Congress, that tax laws can be repealed by simple majorities in the House and Senate.

    So…the ACA (ObamaCare) is now on the table as a central issue in this campaign. Its survival is an issue. And 65% – 70% of the public does not want it. And it is a tax. Who wants more of that? Not very many voters. Yes, it will take a Romney win to get rid of it…and an Obama victory means a veto of an act of repeal and government control and bureaucracy over the entire health care system in the United States…1/6th of our economy.

    In summary, the Court’s reputation is intact, and the possibility of getting rid of this law has grown due to the possibility of legislative repeal. It will require a Republican win in November of the White House and gaining at least a net of 3 Senate seats, to have 50 total members of the U.S. Senate. It is a tax – an incredibly large one impacting a large majority of the American public. As in prior elections, our society’s future depends greatly on the outcome of the voting public’s decisions this November.

  3. It’s a tax. I do believe it’s a just tax. Many who freely choose not to be insured and who happen to experience a catastrophe healthwise still benefit at the expense of the rest of us. I also believe it’s compassionate in its effect, that is, in so far as it enables more uninsured who desire insurance to afford it.

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