Action, Inaction, Taxes, Penalties and Health Insurance

Over at the League of Ordinary Gentlemen, Jason Kuznicki objects to two defenses of the Affordable Care Act,

The first distinction is between action and inaction. This is a common distinction in law and even in political theory. It is also utterly fundamental to maintaining at least some limits to government power.

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“But wait,” supporters say. “This isn’t a command, because there is no penalty. It’s only a tax, combined with the remission of a tax, for some. And you’ve already said that taxation is authorized.” This is the second obfuscation. The very fact that it was necessary to hide a penalty within the taxing power should make proponents blush with shame. But, of course, it doesn’t.

I'll restate up front my position that the "mandate and penalty" was a poor way to structure the system - a much easier, more honest means of achieving the same end would have been to simply impose a payroll tax that is credited (along with any subsidy) toward the cost of your health insurance. You don't want to buy insurance? You don't get the credit. But thanks to insistence on "no new taxes on the middle class" from the President and many Democrats, and "no sane or rational tax policy whatsoever - but maybe we can pay for everything with tax cuts" philosophy coming from the Republican Party, there was no room here to be sensible. So we instead got this game of "hide the ball" or, if you prefer, "hide the tax".

One reason I don't recoil in horror at the idea that this is a command for action, as opposed to inaction, is that it's largely a distinction without a difference. Which isn't to say that I don't sometimes recoil in horror at the breadth and scope of the federal government, but if you can study the Commerce Clause without choking on the grain Congress can prohibit you from growing for your personal use... let's just say, after a while it's hard to muster the outrage. And however this process started, conservative justices have been happy to allow massive federal intrusion that is consistent with their own political ideology.

Since Perez v. United States, 402 U.S. 146 (1971), our cases have mechanically recited that the Commerce Clause permits congressional regulation of three categories: (1) the channels of interstate commerce; (2) the instrumentalities of interstate commerce, and persons or things in interstate commerce; and (3) activities that “substantially affect” interstate commerce. Id., at 150; see United States v. Morrison, 529 U.S. 598, 608—609 (2000); United States v. Lopez, 514 U.S. 549, 558—559 (1995); Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U.S. 264, 276—277 (1981).

Yes, Congress could have been honest that it was creating a tax. Would that have resolved the issue? If so, there's no constitutional problem - the courts can simply recognize that, whatever term Congress used, the penalty is in fact a tax that Congress is authorized to pass. Yes, you can rail, "Congress should have been more honest about what it was doing," but if we required strict honesty from Congress for legislation to be constitutional.... libertarians would be very happy about the little that was left of the U.S. Code?

That brings us back to the distinction without a difference. Nobody is disputing that the government can tax people and use the money to buy them insurance. That's called Medicare. Nobody's disputing that the government can tax people and give them a tax credit to use toward the purchase of insurance. Tax credits happen all the time. But we've supposedly crossed a bright line for the government to tell people that, if they cannot document that they've purchased health insurance, they must pay a tax. For some reason, right-wingers like to talk about people being forced to buy broccoli - perhaps out of respect for George H.W. Bush?

The idea is that it would be unconstitutional for the federal government to mandate that consumers buy broccoli, and to tax them if they did not. The reductio ad absurdem meets the slippery slope. But the thing is, if that is such a constitutional horror story, why is it constitutional under their reasoning for the government to pass a broccoli tax and apply it to subsidize broccoli purchases? It's the exact same outcome - if one approach is unconstitutional because it could potentially lead to an absurd horror (What's next - asparagus?) then the other should be as well. But it's not.

I do not mean to belittle the policy argument, although I agree with Oren Kerr on this one: There is nothing in Supreme Court precedent that supports the conceit that it's unconstitutional to structure a tax as the sole penalty for choosing not to follow a government mandate, and there is instruction that "in determining whether the Necessary and Proper Clause grants Congress the legislative authority to enact a particular federal statute, we look to see whether the statute constitutes a means that is rationally related to the implementation of a constitutionally enumerated power." A tax penalty for the failure to follow an insurance mandate is rationally related to the goals of Congress in relation to the burdens created by providing medical care to the uninsured and, as everybody admits, in relation to creating a context in which insurance companies can no longer deny coverage based upon preexisting medical conditions. Were there other possible approaches? Many of them better and more consistent with historic practice? Sure, but that doesn't mean that this approach can't pass a rational basis test.

Kuznicki presents another policy argument, that "taxes should be applied generally, and according to some standard of justice". But to the extent that those policy goals can be seen in our tax code it's often in the breach. Kuznicki's non-broccoli-related reductio ad absurdem is also problematic:

As a thought experiment: Suppose we levy a tax on everyone. You can get out of it by spending two days a week breaking rocks in a quarry, in leg irons. The beneficiary is a multinational mining corporation.

It’s just a tax, I’m sure you’ll have to admit — not a penalty in any sense at all. And it’s certainly within the federal government’s power to regulate the mining industry. No one doubts that, do they? So the whole thing gets a pass, constitutionally. Right?

With due respect to Michelle Bachmann, the Founding Fathers wouldn't have been shocked by the concept of involuntary servitude. Sure, they were concerned enough about debtors prisons that they created a constitutional right to bankruptcy (really - it's in there), but it was not until 1865 that the Constitution prohibited slavery and involuntary servitude.

But leaving history aside, as with the broccoli argument Kuznicki's focus is on the ends. "If we slide all the way down the slippery slope, Congress would have the power to do something that nobody would find acceptable." The problem with that argument is that the objectionable outcomes are not dependent on the means. Would Kuznicki find it acceptable for Congress to raise everybody's income taxes by 40% then offer a tax deduction or credit valued at two weeks' wages to those who could document having spent "two days a week breaking rocks in a quarry, in leg irons"? Of course not, because the end is unacceptable (and unconstitutional). If the constitutional problem were merely that the means could conceivably lead to the end, then the means should be unconstitutional in both contexts.

Another leading objection raised is that the "legislation commands us to transfer our wealth to certain private corporations in return for their products". But if the focus remains on "activity vs. inactivity", I don't see how that changes the analysis. Would "wealth transfer" be a problem if, instead of saying "You must buy insurance or pay the tax," the government said, "You must buy insurance or we will tax you and provide insurance for you?" At least that way you end up getting insured, right? If that's okay, would the government be able to contract for the coverage through private insurance companies - serving as an intermediary such that it's "government money" being directed to those private companies, even if it's dollar-for-dollar the same as you would have paid directly? It's constitutional if the government acts as a nominal middleman, but unconstitutional if the government doesn't insert itself into the middle of the transaction?

Would the mandate be constitutional if it were possible for taxpayers to keep their funds out of private hands - such as if Congress offered a public option alongside private health insurance plans? Would it be constitutional if the only choice were a government plan? If so, once again the focus is on the ends, not the means.
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Kuznicki offers some "preemptive rejoinders":

• If being insured really is that important, there must be other ways to do it - Sure, there are a lot of other ways.

• The fact that Republicans didn’t come up with any alternatives doesn’t make what we’ve gotten even a tiny bit better - Agreed.

• No, I didn’t particularly like the status quo. There were sensible ways of fixing it. We should try them. - Please identify the means that have any reasonable chance of both fixing the problem and getting through Congress, and we'll start there.

• Would a universal single-payer system be more constitutional? Just possibly, though I have my doubts. At the very least, it wouldn’t suffer the particular defects I’ve outlined here. Much could depend on the system’s design, I think. - That one isn't going to pass Congress, so the discussion is purely academic. In a comment, you stated in relation to single-payer, "One problem is that it would involve forbidding private insurance entirely. I have my doubts about whether this is either necessary or proper to the regulation of the industry." Single payer would not actually have to forbid private insurance, any more than Medicare prevents people from buying supplemental (Medigap) insurance. As an alternative to making the government the insurer it's also possible to regulate health insurers in the manner of public utilities - they remain private but they are more heavily regulated in terms of the coverage they provide, when they can deny coverage, and their profits.