Taxing vs Regulating

Chief Justice Roberts: "Although the breadth of Congress's power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior."

The Nation‘s Ari Melber cites this passage as “the heart of the case” upholding the individual mandate:

“Although the breadth of Congress’s power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior. Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal: deprivation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment opportunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes.

By contrast, Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the severe burden that taxation—especially taxation motivated by a regulatory purpose—can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.

The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

Now, I think the Court erred in ruling that the mandate was effectively a tax. [Note: If you wish to discuss that question, do so at that post’s comment section, not here.] But Roberts is right here that the taxation power is more limited than the commerce power–even though its scope is wider in this instance.

While the Commerce Clause has been expansively interpreted through most of our history–today’s case is a relatively rare exception– the 1819 case of McCulloch v. Maryland famously declared “the power to tax involves the power to destroy” and inherently limited. Consequently, the scope and limits of Congress’ authority to levy taxes has been hotly contested and is among the most complicated areas of Constitutional interpretation. FindLaw, as usual, has an excellent annotated summary.

FILED UNDER: Law and the Courts, Quick Takes, US Politics
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. sam says:

    “Now, I think the Court erred in ruling that the mandate was effectively a tax. ”

    Let me repeat the question I asked earlier on tax vs penalty:

    Suppose that I fail to file one year and the Feds, as is their wont, catch up with me a few years later. I get a letter from the Treasury Department telling me that I owe unpaid taxes from year whatever and, moreover, I’m assessed a penalty for not paying my tax that year. I’m instructed to send a check to the the Treasury in the amount of Unpaid Tax + Penalty. In what sense is the “Penalty” I am assessed not a further tax on me?

  2. James Joyner says:

    @sam: By your logic, a fine and a tax are identical by virtue of their both going to the Treasury. The law typically sees them as different animals–fines are punitive rather than purely revenue collection. And they require due process.

  3. Maybe it’s my training as an engineer and a programmer, but I see it as what things are called, and a reduction to what they actually are. A number is a number, whether you represent it as a string, in base eight, or (with error) as a floating point representation.

    The mandate-as-tax is like that. We can call it a lot of things, but we should see those all as abstractions and alternate views of what lies beneath.

    I really hate backing up on this argument, to points that should have been made and understood years ago, but think again about the home buyer’s deduction and how it net-nets in our out of people’s pockets. It benefits everyone with a complying mortgage, and produces a cost for everyone who does not. It is, in this modern lingo, a home buying mandate.

    I really don’t like the home buying mandate. I’ve hated it both before and after I bought my first home. I just don’t pretend it is a Constitutional issue. Things like this have been in the law long before I was born. If it’s going to change it will be by new legislation. That’s the way it should be.

  4. Andy says:

    James,

    Taxing inactivity is a bit strange but IMO it’s better than the alternatives, so I’m ok with the decision. I’m not sure if there is another example of taxing inactivity – I can’t think of any.

  5. @Andy:

    Home-buying definitely nets out that way. So do credits for hybrid cars.

    Call it a numeric versus a semantic worldview.

  6. HarvardLaw92 says:

    You are citing McCulloch out of context.

    In continuance:

    But taxation is said to be an absolute power which acknowledges no other limits than those expressly prescribed in the Constitution, and, like sovereign power of every other description, is intrusted to the discretion of those who use it. But the very terms of this argument admit that the sovereignty of the State, in the article of taxation itself, is subordinate to, and may be controlled by, the Constitution of the United States.

    Marshall makes it clear that the only limits on the power of Congress to impose a tax are those properly contained within the Constitution itself. The Constitution imposes no limitations of which I am aware on the power of Congress to tax in furtherance of the general welfare. Indeed, it doesn’t even deign to define what “general welfare” means, leaving that construction to be defined by Congress itself. So, we’re left with “General welfare means pretty much whatever Congress wants to mean, and Congress can tax you in furtherance of it. But what limits then apply to a situation which would, as a result, seemingly have no limits?

    Let’s look further into McCulloch for the answer

    But all inconsistencies are to be reconciled by the magic of the word CONFIDENCE. Taxation, it is said, does not necessarily and unavoidably destroy. To carry it to the excess of destruction would be an abuse, to presume which would banish that confidence which is essential to all Government.

    Marshall makes it patently clear that the power to exert taxation is governed by the consent of those so taxed, to which end they have been extended the power to revoke that consent via the vote.

    In other words, if you don’t like this act, vote in somebody who’ll repeal or replace it. Don’t waste time whining about imagined offenses against the Constitution.

  7. Andy says:

    @john personna:

    The mortgage tax deduction isn’t specifically taxing an inactivity so I don’t think it’s analogous. Neither is a credit for a hybrid car. The semantics matter in terms of what it means legally.

    Look at it this way – suppose the feds gave a tax credit for having health insurance – that would be an analogous situation to the mortgage deduction and hybrid deduction. You purchase something (a house, a car, a health care policy) and you get a tax credit for that. A credit incentives a particular action – it is, by definition, not a penalty. That’s different from taxing people for NOT doing something.

    Again, I’m not saying it’s unconstitutional even though I can’t think of a direct analog. And I don’t think it’s a huge burden because the “tax” is low (and Roberts indicated things might be different if the tax penalty was more punitive). But it does appear to be something new.

  8. john personna says:

    @Andy:

    You get what I say about numeric versus semantic views, right.

    In the numeric you look at two families all the same, in everything but rent versus buy. The renter pays more for “inactivity.”

  9. john personna says:

    Another way to say it is that since this is a money issue, the numeric view should prevail.

    I care less about what my taxes are called than how much they cost.

  10. Andy says:

    @john personna:

    I realize the numbers work out that way, but process matters.

  11. john personna says:

    @Andy:

    As I say in the other thread, I think we’d have to leave tax law completely, to criminal law, for a truly different process. Within tax it is just naming.

  12. David M says:

    @john personna:

    Another way to say it is that since this is a money issue, the numeric view should prevail. I care less about what my taxes are called than how much they cost.

    I never understood how the GOP could make the argument the mandate wasn’t a tax and was an unprecedented trampling of the constitution, but if they’d changed the wording slightly it would have been fine. The wording might change, but if the result and monetary amounts were exactly the same, there’s no real reason to pretend they are different.

  13. James, ISTM that you have missed the central implication of the Court’s ruling. Contrary to Melber, what the Court did today was rocket the expansiveness of the Congress’ taxing power well past what Congress has ever claimed under the Commerce Clause.

    The Court’s ruling means that Congress now has unlimited power to tax. That means that the Congress now has the power to tax absolutely any activity or inactivity by individuals. As long as Congress characterizes the penalty for non-compliance as a tax, Congress can indeed make us buy broccoli or else, as one Justice asked during the hearing.

    To claim, as Melber does, that this is just a little thing because we can always choose to pay the tax is typical left-wing claptrap. When I have a tax-free freedom today that will be coercively taxed tomorrow, how exactly is my freedom not diminished?

    More at my site, including why the Left should also be petrified by this ruling.

  14. @HarvardLaw92:

    In other words, if you don’t like this act, vote in somebody who’ll repeal or replace it.

    Sorry to disagree, but the Court’s ruling now means that November’s election does not matter.

  15. HarvardLaw92 says:

    @Donald Sensing:

    what the Court did today was rocket the expansiveness of the Congress’ taxing power well past what Congress has ever claimed under the Commerce Clause.

    The Court didn’t predicate this ruling on the Commerce Clause. Indeed, it said that the policy would be impermissible on Commerce Clause grounds.

    The Court’s ruling means that Congress now has unlimited power to tax.

    The Court’s ruling is consistent with over 70 years of precedent firmly stating that Congress’s power to tax under Article 1 pretty much already was unlimited. You act like this is some sort of ex novo policy shift. It isn’t. Not even remotely. Do try to keep up.

  16. HarvardLaw92 says:

    @Donald Sensing:

    Plugging your own blog is bad form.

  17. @Key web Jobs Online: @HarvardLaw92:

    Guess you haven’t been reading blogs very long.

  18. HarvardLaw92 says:

    @Donald Sensing:

    I’ve been reading them for years. It’s bad form.

  19. @HarvardLaw92:

    I find it amusing to be lectured by someone who lacks command of English enough to understand the context of what he reads or fails to understand the actual implications of what he is writing about.

    So after reading that comment of yours, I,m laughing pretty hard right now. But let me try to explain so you can keep up.

    That the Congress’ power to tax has steadily increased over the years is obvious. But this is, as I explained on my blog (which is not “bad form” to link to), a new leap because it taxes commercial activity that does not occur.

    This is qualitatively different than the mortgage-interest deduction, as some commenters referred to above. Not buying a home does not impose a tax.

    As I wrote, Congress now has the power to compel you to do anything it wants by taxing your failure to comply. If you think that’s no big deal and no different from the status quo as of yesterday, then I guess we’re done. Have a nice day.

  20. David M says:

    @Donald Sensing:

    This is qualitatively different than the mortgage-interest deduction, as some commenters referred to above. Not buying a home does not impose a tax.

    For all intents and purposes it is functionally the same.

  21. HarvardLaw92 says:

    @Donald Sensing:

    I find it amusing to be lectured by someone who lacks command of English enough to understand the context of what he reads or fails to understand the actual implications of what he is writing about.

    And I find it amusing to be lectured by former Army officers turned preachers who believe themselves to be lawyers. I suppose that makes us even, since everybody is laughing at somebody. I just tend to laugh at armchair lawyers.

    The court did not propose to enable carte blanche taxing of economic activity. It enabled the taxing of irresponsibility in the interest of a broader system.

    Consider: everybody participates, or will participate, in the healthcare system at some point. It’s not a question of if, but instead one of when, therefore that participation without the benefit of health coverage leads to higher costs for the market as a whole (due to the fact that health care providers will simply shift the largely unrecouped cost of providing that care for the uninsured to the insured.)

    Short version: It isn’t a question of inactivity. It’s a question of irresponsible activity, and there is no shortage of precedent regarding that phenomenon.

    By all means though, please do continue with your “Oh NOES! It’s the end of the world!!!!” rant. It’s quite amusing.

  22. HarvardLaw92 says:

    @David M:

    It’s qualitatively different in the context of how it is imposed, but I agree that the underlying concept remains the same. Don’t do something and pay a higher cost as a result.

    If one doesn’t purchase a home, then one can’t claim the mortgage tax deduction, and one’s taxes due therefore go up accordingly.

  23. sam says:

    @Donald Sensing:

    a new leap because it taxes commercial activity that does not occur.

    I and my friend make identical salaries. He buys a house, I do not. He deducts his mortgage interest from his taxes. I, a mere renter, cannot avail myself of his deduction. After his deduction, I pay more in taxes than he does. Am I not being taxed for “commercial activity that does not occur” (not buying a house)?

  24. @sam:

    It’s hard not to snark. Is the Republican position for people without math? Is it for emotional people who care more about what things are called? Or is it just weird tribalism with justification as an afterthought?

    Was there no Republican supporter of individual mandate, back when it was their plan, who stuck to his guns all the way through? It wasn’t just Romney who liked it. Many of them did. Did they all really flip? And now they’re stuck?

    Man, you’d think that if any Republican had stuck he might have the firm ground now. As in “I told you so.”