Saturday, March 31, 2012

Obamacare and the Supreme Court

I don't know how the Court will come down on Obamacare, but I know how it should.  The mandate in the law is constitutional, just like the childcare mandate already on the books.

What childcare mandate? The one in Section 21 of the Internal Revenue Code.  Stripped of all the if's, an's and but's, Section 21 says in effect that if you are a married couple with two or more kids, and you both work, and you do not pay at least $6,000 for childcare, then you will have to pay a penalty equal to 20% of the shortfall.  The penalty is dressed up as a credit for people who do pay for childcare.  But as they say in Latin, tometo, tomato.  Obamacare raises your taxes unless you buy healthcare, in which case you get what amounts to a credit equal to the increased tax.

Some (maybe all) of the arguments advanced against the Obamacare mandate are downright silly.  The first is the big deal claim that the mandate forces people to buy something "from a private party," a really strange argument coming from people who fought tooth and nail against a single-payer, government system.  But the objection is trivial.  The childcare credit is available to people who get their childcare from a private provider, just like the healthcare credit.  You buy the service, or you pay the tax.  

I won't say that there is no "compulsion."  The power to tax is the power to destroy, which, I think can fairly be said to include the power to compel for constitutional purposes.  But the power to tax exists, so the fact that there is some compulsion to it hardly negates a law ipso facto.  It's not clear why the home mortgage deduction is not a compulsion, the childcare credit is not a compulsion, but the Obamacare penalty is a compulsion.  Medicare forces us to buy insurance from the government and even garnishes our wages to pay the price.  How a private analog that collects payment on the 1040 can be seen as constitutionally worse is not clear to me.

Nor do I find the "broccoli" argument terribly persuasive.  For one thing, a mandate as specific as broccoli might give purveyors of other cruciferous veggies a valid reason to complain.  The Congress is not in the business of picking winners and losers at so granular a level.  The larger point is that the state's right to set reasonable speed limits does not imply that a speed limit of 5 mph could not be struck down for impeding interstate travel or freedom or some such thing.  Courts draw distinctions based on real-world implications all the time.  Healthcare is healthcare, and broccoli is broccoli.  (Which is not to say that Congress could not provide a tax credit for anyone whose physician certifies that he has been following a wellness program with observable results.  Remember, every tax credit is a penalty on those who do not qualify for it.)

So what about the Anti-Injunction Act (AIA), which precludes challenges to tax laws before someone is actually face with paying the tax?  Justice Alito rightly pointed out that the Solicitor General, who is expected to argue, as I do, that the "penalty" is really a tax for constitutional purposes is also arguing that it is not a tax for purposes of the anti-injunction statute.  The jurisprudence of that law is pretty murky, so I don't know, for example, if the government can waive it or if the court can raise it sua sponte to throw cases out.

Calling the tax a "penalty" does not seem to me a way out, but Congress has the power to exempt any act from the AIA, so it might be deemed to have used the word "penalty" with that purpose, if that's where the Court decides to go.  But this point really takes us back to broccoli.  If the Court decides to reach the merits on this case, it may  someday have to limit the holding to its peculiar facts so as not to permit a broccoli mandate.  But the Court has done that whenever it has had to, so I don't see why it should be an obstacle in this particular case.  Still, if I were on the Court, I would be sorely tempted to throw the case out as premature and let Congress expressly bypass the AIA if it wants to.  Apparently, both sides want the case heard, so they ought to be able to pass an exemption for it.

If the penalty is held unconstitutional, the law fails.  I think the mandates directed at insurance companies may become unconstitutional absent a legislative solution to adverse selection.  I wonder if any insurers were invited to brief that issue.  If not, they will bring their own lawsuit, which would not be subject to the AIA as the compulsion applied to them is not enforced by a tax of any kind.  If I were on the Court, I think I'd be agree with Justice Breyer that the Court should not have to read through the whole act and decide what rises and falls.  But then, I would vote to uphold the penalty, so the question is moot even inside my own brain, i.e., I don't need to say what I would do if I struck down the penalty, which I think I would have to do if that were how I would vote.  So I won't.


  1. I don't know that I would argue that something is "right" because another "wrong" thing exists.

    I agree with your assessment that Obama care is constitutional, at least as constitutional as a tax can get, but does that make it the right thing to do?

    You mention the child care credit. I won't pretend to be any sort of expert on the subject, cause I am not. I am going to assume that what you have stated about the child care credit is accurate.

  2. WLL -

    Thanks for the comment. Can you quote the part of the post where I appear to give that impression? I did not intend to make such an argument. The point of the child care example is that all tax credits can be viewed as exemptions to excise taxes, and vice versa, i.e., that there is no logical difference between them. No suggestion that either law was a good one or a bad one was implied. Indeed, the post is entirely neutral on the wisdom of the law.

  3. Sorry my first comment got cut off, I blame it on the iPad.


    You said the child care penalty applies to individuals who are married and have two or more children without child care.

    I am struggling with your connection between the two examples because, if what you say is true then the credit should be given in full and only to those individuals, but its not. It is given to anyone who has child care expenses that also claims a child on their taxes, including single individuals. It is also not given in full, it is given in the dollar amount that they spend not to exceed said maximum.

    I would conclude that if all of this is true, that single individuals are receiving funds in the terms of credits, that they should not receive, and that married couples are being over taxed if their child care expenses amount to less than $6000.

    Correct me if I am wrong on any of this, because I do not claim any expertise.

    I suppose the point of your blog is not whether you agree with Obama Care or not, rather how it should be handled in court, but I am curious as to why you do agree with Obama Care and why you think it should stand.


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