That fact that the minimum coverage provision (MCO) was upheld via the taxing power will lead to a couple of things – 1) Spin outside of the context of reality. As in, “Supreme Court rules Obamacare is a giant tax hike” and “Democrats said it wasn’t a tax but now it is!” This is inevitable. 2) More importantly, there will be widespread confusion as to how the mandate could be a tax but not a tax.
Via SCOTUSblog (my emphasis):
Today, the Court held that the AIA does not bar the challenge to the individual mandate because the mandate is not a “tax” within the meaning of the AIA. But if the individual mandate is only constitutional as an exercise of Congress’s taxing power, then how can that be?
The short answer is that – at least after today’s opinion – courts apply a different test to determine whether a law constitutes a tax for constitutional purposes (i.e., the taxing power) than they do to determine whether the same law constitutes a tax for statutory jurisdiction purposes (i.e., the AIA). The constitutional test looks not to the label on the law, but instead to the way that the law functions.
What Chief Justice Roberts is saying, essentially, is that if it the MCO functions as a tax (in the same way as a credit or deduction) then the constitutionality of the mandate can be judged on the ability of Congress to levy taxes. Even some smart people I follow on Twitter don’t seem to understand the nuance – the mandate is not a tax in the traditional sense as it relates to the Anti-Injunction Act, and thus is not applicable.
[…] the Constitution imposes limits upon the Congress, and it would undermine those limits if Congress could circumvent them merely by altering the label on a piece of legislation. That is why for purposes of determining the scope of the taxing power, the label does not matter. However, the AIA is Congressional policy, and so the key question in that context is whether Congress intended for that policy to apply in a particular case. If Congress wants the AIA to apply, it knows to use language echoing that statute. Similarly, if Congress does not want the AIA to apply, it will use different language, and courts should respect that judgment. In this case, because Congress deliberately avoided using the word “tax,” opting instead to describe the shared responsibility payment (the consequence of not purchasing insurance, and thus the sole incentive to comply with the mandate) as a “penalty,” the Court held that Congress did not intend for the AIA to preclude judicial consideration of the mandate.
Update: My feeling is that as we move towards the November elections I’ll have more to say on this matter of the MCO being a “tax” versus a “penalty,” given that it’s currently (and will probably still be) spun as a tax hike. For now, though, I want to borrow some words from Derek Thompson on yesterday’s ruling (my emphasis in bold):
Because the small fee “looks like a tax,” he[C.J. Roberts] wrote, the individual mandate could stand on the basis of Congress’ broad power to tax.
But does that make any sense? How can a penalty also be a tax?
It can’t. That was the simple, stark conclusion from the dissenting Justices: Scalia, Kennedy, Alito, and Thomas. “We have never held–never–that a penalty imposed for violation of the law was so trivial as to be in effect a tax,” they wrote. “We have never held that any exaction imposed for violation of the law is an exercise of Congress’ taxing power–even when the statute calls it a tax.” The two are mutually exclusive, they said.
Roberts disagreed — and his distinction swung the case. Roberts argued that the penalty resembled a tax in a few ways.
It resembles a tax to a degree that Roberts found constitutionally salient. Yet Thompson is correct to make the distinction that that the MCO is much more a penalty whose purpose is to discourage a particular type of behavior – in the same way that credits and deductions work – than a traditional tax meant to raise revenue.
What is perhaps more interesting is that by arguing that the mandate represents a tax increase, those opposed to the law are implicitly at odds with the dissenting opinion – in effect, assenting that the MCO is constitutional.
Anyone Those who wish to continue the argument of the mandate being unconstitutional must contend that the tax itself is unconstitutional (see comments), or by default join Kennedy and the rest by admitting that it isn’t a tax after all.
*Updated 06/30/2012 for clarity in the final paragraph.