Our betters in government have pinned the constitutionality
of Obamacare on the Commerce Clause. No case law exists that supports the
notion that Congress, through the Tax Clause, the Commerce Clause or Necessary
and Proper Clause, can regulate INactivity.
When Obamacare was being debated, its advocates—including
the president—sternly insisted that the mandate was not a tax. In one memorable exchange, President Obama
arrogantly chastised George Stephanopoulous for calling the fine assessed for
failing to purchase health insurance pursuant to the individual mandate a
“tax.” FN1 “George, the fact that you looked up Merriam's Dictionary, the
definition of tax increase, indicates to me that you're stretching a little bit
right now,” the president lectured, “Otherwise, you wouldn't have gone to the
dictionary to check on the definition… My critics say everything is a tax
increase. My critics say that I'm taking
over every sector of the economy. You
know that. Look, we can have a legitimate debate about whether or not we're
going to have an individual mandate or not, but... I absolutely reject that
notion (that the mandate penalty is a tax).”
Now, the government wants the I.R.C. Section 5000 - the
health care penalty - penalty to be a tax.
It argues that the "penalty" is a mere excise tax levied by
the Congress of the United States under its broad power of taxation conferred
by Article I, Section 8 of the Constitution.
According to Bouvier's Law Dictionary, a tax is a pecuniary burden
imposed for the support of the government.
The enforced proportional contributions of persons and property levied
by the authority of the state for the support of the government and for all
public needs. FN1
The Court, in City of New York v. Feiring, 313 U.S. 283
(1941), established a test to be utilised in making the determination of
whether an assessment is a tax or a penalty has been described as a four-part
test incorporating the following criteria:
(1) an involuntary pecuniary burden, regardless of name,
laid upon individuals or property; and,
(2) imposed by, or under authority of the legislature; and,
(3) for public purposes, including the purposes of defraying
expenses of government or undertakings authorised by it; and,
(4) under the police or taxing power of the state.
The individual mandate is NOT a tax. The Obama
administration CANNOT make the argument that the FDR administration relied upon
(Taxing and Spending powers) when it argued for the constitutionality of Social
Security. In Helvering v. Davis, 301 U.S. 619 (1937), the Court said that
Congress had the authority to tax income to provide for Social Security BECAUSE
IT WAS A TAX PAID TO THE GOVERNMENT. Blue Cross/Blue Shield is not an arm of
the Federal government; thus, paying premiums to it CANNOT be viewed as a form
of taxation.
The other argument that the administration has made concerns
that monetary sum one must pay in the event he fails to obtain insurance. Most
would call it a penalty. The Obamacare legislation does not have the section on
the “penalty” in the revenue-raising section. It is no referred to as a tax,
but the administration is arguing that it is a tax. So, the Court will have to
decide whether it is a tax or a penalty. Fortunately, the precedent is not on
the government’s side.
As the Court noted in a somewhat different context, “a tax
is an enforced contribution to provide for the support of the government; a
penalty…is an exaction imposed by statute imposed for an unlawful act.” United
States v. La Franca, 282 U.S. 568, 571 (1931).
As the Court explained as recently as 1996 in United States
v. Reorganized CF&I Fabricators of Utah, Inc., et al., 518 U.S. 213 (1996)
distinguishing between taxes and penalties, “a tax is a pecuniary burden laid
upon individuals or property for the purpose of supporting the government.” In
contrast, the Court went on to say that, “if the concept of penalty means
anything, it means punishment for an unlawful act or omission, and a punishment
for an unlawful omission.” The Court could not have been more clear in
enunciating the difference between a tax and a penalty. It would be very
difficult to arrive at a better example of a penalty than the fine imposed on
Americans for failing to purchase mandated and government-approved health
insurance.
The labeling of an exaction as a tax by Congress is not
determinative of its character for all purposes. In New Jersey v. Anderson, 203
U.S. 483 (1906), the Court held that the name given to an exaction by the state
legislature is not conclusive.
To be a constitutional tax, a levy must be an excise tax, an
income tax, or a proportional capitation tax.
The penalty is none of these. An
excise tax may be defined broadly as an inland tax (as opposed to a customs
duty, etc.) on the production for sale, or sale, of specific goods, or narrowly
as a tax on a good produced for sale, or sold, within the country. An example would be a sales or VAT tax. An income tax is based on, obviously, income. It is not assessed based on activity or
inactivity. Finally, it is not a proportional
capitation tax, which is an equal tax on all individuals. A poll tax, for example, is a proportional
capitation tax. Even if the penalty was
a tax, it would still violate the Constitution Article I, Section 9 because it
would be an unapportioned capitation tax. FN3
Despite being labeled an excise tax by Congress, the penalty
is unlike any existing excise tax because it applies to the failure to act by
an individual. Existing failure-to-act excise taxes differ because they apply
to entities which have chosen to partake in particular activities. The
provision thus fails the historic requirements of an excise tax, namely that it
apply to an activity, transaction, or the use of property. The tax also fails
the traditional "pass-on" nature of excise taxes. If the Court were
to approve it as a uniform excise tax, the direct tax apportionment requirement
would be eviscerated. FN4
The Commerce Clause has been coupled with the Necessary and
Proper Clause to provide a constitutional basis for a wide variety of Federal
laws. "The Congress shall have
Power - To make all Laws which shall be necessary and proper for carrying into
Execution the foregoing Powers, and all other Powers vested by this
Constitution in the Government of the United States, or in any Department or
Officer thereof." - Article I, Section 8, Clause 18. Just because Congress has the power to enact
measures that are necessary and proper to the execution of its power to
regulate commerce – in the case of Obamacare, health care markets – that does
not mean that Congress has the power to do anything and everything that, on the
margin, facilitates or makes more efficient other federally enacted regulatory
measures. This argument is no less
untenable if one takes seriously the notion that there are judicially
enforceable limits on the federal government’s enumerated powers. FN3
In McCulloch v. Maryland, 17 U.S. 316 (1819), the Court held
that, while the Constitution did not explicitly give permission to create a
federal bank, it had the implied power to do so under the Necessary and Proper
Clause in order to realise or fulfill its express taxing and spending powers.
This fundamental case established the following two principles:
1. The Constitution grants to Congress implied powers for
implementing the Constitution's express powers, in order to create a functional
national government.
2. State action may not impede valid constitutional
exercises of power by the Federal government.
"We admit, as all must admit, that the powers of the
Government are limited, and that its limits are not to be transcended. But we
think the sound construction of the Constitution must allow to the national
legislature that discretion with respect to the means by which the powers it
confers are to be carried into execution which will enable that body to perform
the high duties assigned to it in the manner most beneficial to the people. Let
the end be legitimate, let it be within the scope of the Constitution, and all
means which are appropriate, which are plainly adapted to that end, which are
not prohibited, but consistent with the letter and spirit of the Constitution,
are constitutional," C.J. John Marshall, writing for the majority in
McCulloch.
McCulloch does not stand for the proposition that Congress
has plenary power over citizens and the several states nor has its powers been
granted to a body in absolute terms, with no review of, or limitations upon,
the exercise of the power. "Should Congress, in the execution of its
powers, adopt measures which are prohibited by the Constitution, or should
Congress, under the pretext of executing its powers, pass laws for the
accomplishment of objects not entrusted to the Government, it would become the
painful duty of this tribunal, should a case requiring such a decision come
before it, to say that such an act was not the law of the land."
McCulloch, supra.
In Lambert v. Yellowley, 272 U.S. 581 (1926, the Court
upheld a law restricting medicinal use of alcohol as a necessary and proper
exercise of power under the Eighteenth Amendment establishing Prohibition in
the United States. The Federal
government was empowered to act against the possession or consumption of
alcohol. The law was both necessary and
proper to carry out its powers authorised under the Eighteenth Amendment. On the other hand, in New York v. United
States, 505 U.S. 144 (1992), the Court recognised that it was proper for
Congress to address the problem of what to do with radioactive waste and that
this national issue was complicated by the political reluctance of the states
to deal with the problem individually; however, it ruled that the "take
title" incentive of the Low-Level Radioactive Waste Policy Amendments Act
of 1985 was an attempt to "commandeer" the state governments by
directly compelling them to participate in the federal regulatory programme.
THE FEDERAL GOVERNMENT "CROSSED THE LINE DISTINGUISHING ENCOURAGEMENT FROM COERCION." The distinction was that, with respect to the "take
title" provision, the States had to choose between conforming to federal
regulations or taking title to the waste. Since Congress cannot directly force
States to legislate according to their scheme, and since Congress likewise
cannot force States to take title to radioactive waste, Justice O'Connor,
writing for the majority, reasoned that Congress cannot force States to choose
between the two. Such coercion would be counter to the federalist structure of
government, in which a "core of state sovereignty" is enshrined in
the Tenth Amendment. FN4
With the challenges to the individual mandate, however,
Congress is explicitly asserting that the individual mandate is “necessary and
proper” to execute its power under the Commerce Clause. Moreover, the argument
for “necessity” is reasonably straight-forward: it is necessary to compel all
uninsured persons into the insurance pool to pay for the increased costs being
imposed on insurance companies by the Act. Under the Court’s normal deferential
approach, finding “necessity” won’t be hard.
FN2
The problem with the mandate is whether it is a “proper”
means to achieve a constitutional end. The Court has previously held that
mandating state legislatures, New York v. United States, 505 U.S. 144 (1992)
and executive officials, Printz v. United States, 521 U.S. 898 (1997.) is an
“improper” commandeering of states and therefore violates the Tenth Amendment’s
reservation of powers “to the states.”
FN3
It is not contestible that the Constitution established a
system of "dual sovereignty." Gregory v. Ashcroft, 501 U. S. 452, 457
(1991); Tafflin v. Levitt, 493 U. S. 455, 458 (1990). Although the States
surrendered many of their powers to the new Federal Government, they retained
"a residuary and inviolable sovereignty," The Federalist No. 39, at
245 (J. Madison). This is reflected throughout the Constitution's text, Lane
County v. Oregon, 7 Wall. 71, 76 (1869); Texas v. White, 7 Wall. 700, 725
(1869), including (to mention only a few examples) the prohibition on any
involuntary reduction or combination of a State's territory, Art. IV, § 3; the Judicial
Power Clause, Art. III, § 2, and the Privileges and Immunities Clause, Art. IV,
§ 2, which speak of the "Citizens" of the States; the amendment
provision, Article V, which requires the votes of three-fourths of the States
to amend the Constitution; and the Guarantee Clause, Art. IV, § 4, which
"presupposes the continued existence of the states and . . . those means
and instrumentalities which are the creation of their sovereign and reserved
rights," Helvering v. Gerhardt, 304 U. S. 405, 414-415 (1938). Residual
state sovereignty was also implicit, of course, in the Constitution's conferral
upon Congress of not all governmental powers, but only discrete, enumerated
ones, Art. I, § 8, which implication was rendered express by the Tenth
Amendment's assertion that "[t]he powers not delegated to the United
States by the Constitution, nor prohibited by it to the States, are reserved to
the States respectively, or to the people." FN4
In Printz, state officials objected to being pressed into
federal service, and contended that congressional action compelling state
officers to execute federal laws was unconstitutional. FN6 The Court held that
the Brady Act purported to direct state law enforcement officers to
participate, albeit only temporarily, in the administration of a federally
enacted regulatory scheme. FN4 The Court
overturned the portions of the Brady Act that attempted to dictate to and use
the labour of state officials as an unconstitutional commandeering.
The challenges to the individual mandate raise the issue of
whether mandating all persons to enter into a contract with a private company
is “improper” commandeering of the people and therefore violates the Tenth
Amendment’s reservation of powers “to the people.” FN5 Because such a commandeering has never been
previously been attempted, the Court will have to address whether it is an
“appropriate”, McCulloch v. Maryland, 17 U.S. 316 (1819), means to achieving an
enumerated end, however “necessary” it may be. Deciding this question return
the Court to the scope of the Commerce Clause.
In Comstock, No. 08-1224 (2010), nothing about the
incarceration of sexually dangerous persons was alleged to be an “improper”
means of pursuing an enumerated end. The issue was whether or not the statute
was enacted pursuant to an enumerated power. The majority held it was–all the
enumerated powers for which the original criminal incarceration was the
means–while the dissent disagreed. One
encouraging aspect of the case was Justice Kennedy’s denial that the Commerce
Clause required only the sort of rational basis scrutiny described in the Due
Process case of Lee Optical. But even this has no bearing on the challenge to
the individual mandate as the mandate would likely satisfy even heightened
scrutiny for necessity or means-ends fit. Once again, the issue is not
necessity, it is propriety. In this regard, it is very encouraging to see
Justice Scalia joining Justice Thomas’s dissenting opinion in which Justice
Thomas reiterates Justice Scalia’s characterization in Printz , supra, of the
Necessary and Proper Clause as “the last, best hope of those who defend ultra
vires congressional action." FN5
Identifying the line to distinguish between permissible and
impermissible exercises of the federal government’s power under the Necessary
and Proper Clause is the task at hand, and existing precedent is only of
limited use. The Court’s decisions, from
McCulloch to Comstock, only go so far in addressing this question. They clearly confirm that Congress can take
some steps beyond the scopes of the other enumerated powers, but also reaffirm
that federal power is limited, and none of the relevant cases stand for the
proposition that it is for Congress, and Congress alone, to determine what may
be enacted as necessary and proper to the execution of other constitutional
measures. FN5
This is why the individual mandate presents a difficult
question. It is beyond dispute that, on
the margin, requiring all Americans to purchase health care will reduce the
costs of seeking to expand coverage by, for instance, prohibiting health
insurers from denying coverage for preexisting conditions. The same can be said for any measure,
however, that increases the participation of relatively healthy people in health
insurance pools or that increases the average health of those that are
insured. So unless one wants to adopt
the view that any provision adopted as part of some broader legislative scheme
is necessary and proper just because Congress says it is so long as there is
some plausible justification for it’s relation to the broader scheme, one needs
to identify some alternative limit. This
is something the individual mandate’s defenders have yet to do. FN7
How the Court will decide will depend on whether they take
the Wickard v. Filburn, 317 U.S. 111 (1942), and Gonzales v. Raich (previously
Ashcroft v. Raich), 545 U.S. 1 (2005) approach to the Commerce Clause or the
United States v. Alfonso Lopez, Jr., 514 U.S. 549 (1995) and United States v.
Morrison, 529 U.S. 598 (2000) route.
The Court recognised in identified the three broad
categories of activity that Congress could regulate under the Commerce Clause,
United States v. Alfonso Lopez, Jr.,:
* the channels of interstate commerce,
* the instrumentalities of interstate commerce, or persons
or things in interstate commerce, and
* activities that substantially affect or substantially
relate to interstate commerce
The failure to purchase health insurance is an INactivity.
It doesn't affect commerce nor is it economic in nature. The Violence Against
Women Act, United States v. Morrison, 529 U.S. 598 (2000), Gun-Free School
Zones Act of 1990, United States v. Alfonso Lopez, Jr., 514 U.S. 549 (1995),
and The Child Pornography Prevention Act of 1996, Ashcroft v. Free Speech
Coalition, 535 U.S. 234 (2002) were all struck down because Congress had
attempted to use the Commerce Clause to regulate inactivity and activity not
economic in nature.
As the CBO and CRS told Hillary Clinton in 1994, the
individual mandate is unprecedented and unconstitutional. "A mandate
requiring all individuals to purchase health insurance would be an
unprecedented form of federal action," the CBO report stated. FN6 "The government has never required
people to buy any good or service as a condition of lawful residence in the
United States. An individual mandate would have two features that, in
combination, would make it unique. First, it would impose a duty on individuals
as members of society. Second, it would require people to purchase a specific
service that would be heavily regulated by the federal government." Never in the history of the United States had
the Federal government mandated American citizens purchase a
governmentally-approved good or service as a condition of good citizenship.
In the course of dismissing the plaintiff’s Commerce Clause
challenge, the Judge Steeh has vindicated an important element of all such
pending challenges: this claim of power by the government is without any
precedent in experience or in law. In Judge Steeh’s words:
“The Court has never needed to address the
activity/inactivity distinction advanced by plaintiffs because in every
Commerce Clause case presented thus far, there has been some sort of activity.
In this regard, the Health Care Reform Act arguably presents an issue of first
impression.”
He's right! Never before in American history has the Federal
Government imposed an economic mandate commanding that persons engage in
economic activity. Given that there is no current Supreme Court doctrine
recognising such power in Congress, the appropriate stance of a district court
judge is to follow Court precedent and deny this claim of power until the Court
decides in due course to expand its doctrine.
Instead, Steeh accepted the government’s expansion of
Congressional power beyond regulating economic activity to regulating economic
“decisions:
“While plaintiffs describe the Commerce Clause power as
reaching economic activity, the government’s characterisation of the Commerce
Clause reaching economic decisions is more accurate.”
But this was not “plaintiff’s description.” It was how the
Supreme Court itself described its own doctrine in each and every Commerce
Clause case that allowed Congress to reach wholly intrastate activity because
it was necessary and proper (N&P Clause) to the regulation of interstate
commerce.
By inventing a new “economic decisions” doctrine FN5, Steeh
has gone beyond the Commerce and Necessary and Proper Clause doctrines established
by the Supreme Court. He made it up. He disregarded every single Supreme Court
case on the Commerce Clause.
Only the Supreme Court is authorised to expand its own
interpretation of the scope of Congressional power.
Of course, judges in other challenges are having their
opportunity to opine on whether Congress has the power to regulate any
“economic decision” that may substantially affect interstate commerce. The
“economic decision” not to buy a car, the “economic decision” not to buy or
sell your home, or even the “economic decision” not to have a physical exam.
For make no mistake, if the Court ever accepts the government’s “economic
decision” theory, then there is nothing it cannot mandate in the future in the
name of regulating “commerce . . . among the several states. FN7
Allowing the federal government to force citizens to buy a
private product would “invite unbridled exercise of federal police powers’’ and
Congress will then have the general police power that both the Constitution and
the Supreme Court have always denied it.
Finally, let’s slay this silly auto insurance analogy that
“constitutional scholars” in DC continue to trot out at every opportunity. This
is such a bad argument that it staggers the imagination why the administration
would *still* be making it. In fact, I am embarrassed that these people even
think that they have the knowledge and experience to make life and death
decisions over American citizens.
The Federal government CANNOT force you to purchase auto
insurance. Driving is a privilege not a right and the ability of states to
regulate it is very broad. (For those that want to claim that driving is a
right, the Court has been very clear that states can regulate driving and, as
long as the state presents a compelling interest in encumbering driving,
whether right or privilege, it is acting within its constitutional powers. See:
Bell v. Burson, 182 F.2d 46 (1971), Hendrick v. Maryland, 235 U.S. 610,
622; Kane v. New Jersey, 242 U.S. 160, 167, Packard v. Banton, 264 U.S. 140
(1924)). States impose the insurance
requirement, not the Federal government because states licence drivers and
vehicles. If you are blind or a user of public transportation or just refuse to
drive, a state is not going to force you to purchase auto insurance. Drivers
carry required insurance to cover *damage done to others,* not themselves.
Driving is, after all, a voluntary activity conducted on public property
(roads); there is no requirement for licencing or insurance for those who drive
only on their private property. People who don’t drive on public roads aren’t
required to buy a licence or the insurance.
There are additional problems with this analogy as well.
Those who *do* have auto insurance only file claims when significant damage
occurs. Auto insurance doesn’t pay for routine maintenance, like oil changes,
lube jobs, and tire rotation. That’s why auto insurance is relatively
affordable.
Unlike Obamacare, auto insurance is priced to risk. If a
driver lives in a high-crime area, then the premiums will rise to cover the
risks associated with theft. If a driver has moving violations and accident,
his premiums will go up, or in some cases, the insurer will cancel the policy.
Other risk factors are factored into price, as well. Due to their propensity
for causing losses, the youngest and oldest drivers pay more. Those who drive
well and present a lower risk get rewarded with lower premiums. Right now, the
federal government is preventing insurers in some instances from risk-pricing
health insurance to impose government-approved *fairness.* Or, since the Obama
administration loves the auto insurance analogy, your premiums will rise to
compensate for the 18 year-old kid with 6 moving vehicle violations and 2
totaled automobiles. We will all pay more because the incentives for good
behaviour, defencive driving, and reasonable maintenance have been removed.
Finally, can we please direct the extinguisher and put out
the fire insurance analogy? If there is any analogy worse than the auto
insurance dog, it is fire insurance laugher. If we forced insurers to write
comprehensive policies on burning homes, we would have no insurers left in the
market. In fact, IT IS NO LONGER INSURANCE. IT IS A COMPENSATION POLICY. Obama,
Holder and Sebelius want health insurers, however, to do the same thing — and
need the mandate to force all of us to assume that risk through the higher
premiums that subsidise it. And, by the way, the government is doing *exactly*
what they derogate — forcing insurers to write policies after the
accident/fire/illness. Of course, this is what they want.
Now, I loathe government-run or even government-directed
health care. I hate the NHS and would ONLY wish it on my worst enemies. If we
get stuck with this lemon a/k/a Obamacare, I have only one, small favour to ask
of you socialists, please put in a good word for me. I want a seat on the
Comparative Effectiveness Board. You won’t have to worry about paying or even
insuring me. I’ll take care of everything. Just, please, give me that seat
because I would love to ration you nuts right out of existence!
FN1 : Barnett, Randy,
http://www.cato.org/pub_display.php?pub_id=10942
FN2: Cassidy v.
Dumle, 983 F.2d 161 (1992)
FN3: Harrison v.
Merrimac, No. 05-1010
FN4: The
"Elastic" Clause - The Necessary and Proper Clause,
http://emp.byui.edu/MarrottR/101_ElasticClause.pdf
FN5: Preliminary
Thoughts on Comstock, Constitutional Decapitation and Health Care,
http://papehttp://volokh.com/2010/05/17/preliminary-thoughts-on-comstock/rs.ssrn.com/sol3/papers.cfm?abstract_id=1589190
FN6: The 1.5 Trillion Dollar Fraud,
http://www.cato.org/pub_display.php?pub_id=10944
FN7: Further Thoughts
on the Virginia Health Care Ruling and the Necessary and Proper Clause,
http://volokh.com/2010/12/13/further-thoughts-on-the-virginia-health-care-ruling-and-the-necessary-and-proper-clause/
FN8:
http://volokh.com/author/randy/page/2/
FN9:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=410542&http://www.bing.com/search?FORM=DMDTDF&PC=VEOH&q=randy+barnett+%26+necessary+and+proper
FN10: White House
Concedes Mandate is Unconstitutional, http://volokh.com/author/randy/page/2/
