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The Power to Tax Is The Power
July 1, 2012, 7:33 am
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The Power to Tax Is The Power:

Author’s Note: In light of Thursday’s Supreme
Court decision to uphold the Affordable Care Act’s insurance
mandate on the basis of Congress’s taxing power rather than the
Commerce Clause, a slightly modified reprise of this

27, 2009, column
seems appropriate. Note the part about the
Supreme Court’s long-standing position that Congress may regulate
conduct through the tax system.

Ruth Marcus, Washington Post op-ed
writer, tried
to make
a constitutional case  for the individual health
insurance mandate that Congress will surely pass before the year is
over. She offered two grounds, the Commerce Clause, which is
specified in Senate Majority Leader Harry Reid’s bill, and the
taxing power.
On the first she writes:

Spending on health care consumes 16 percent–and growing–of the
gross domestic product. There is hardly an individual activity with
greater effect on commerce than the consumption of health care.

If you arrive uninsured at an emergency room, that has ripple
effects through the national economy–driving up costs and premiums
for everyone. If you go without insurance, that limits the size of
the pool of insured individuals and–assuming you are young and
healthy–drives up premium costs.

. . . [S]ince the New Deal, the Supreme Court has interpreted
this authority to cover local activities with national

 Narrow Power?
I won’t repeat what I wrote previously about this strained
argument. I don’t agree with the constitutionalists who insist that
the Commerce Clause was meant to be a narrow power intended only to
create a free-trade zone among the states. In the Federalist
Alexander Hamilton complained that tariffs were
too low under the Articles of Confederation, and
in fact the states did
not block one another’s products
. Historian William Crosskey
makes a powerful case that the clause was intended by the leading
framers as a general power to regulate economic activity, intra-
and interstate. Moreover, the Antifederalists warned us (and James
Madison later agreed) that the Constitution did not really
establish a government of “few and defined” powers. (See
my “The
Constitution or Liberty”
 and “Was
the Constitution Really Meant to Constrain the Government?”

Nevertheless, there is a distinction between regulating commerce
and compelling everyone to buy a product offered commercially. It’s
a stretch to say such compulsion is permitted if it is connected to
a congressional effort with respect to interstate commerce. Even
Marcus seems to sense the stretch:

Granted, there is a difference between regulating an activity
that an individual chooses to engage in and requiring an individual
to purchase a good or service. . . .

But the individual mandate is central to the larger effort to
reform the insurance market. Congress may not be empowered to order
everyone to go shopping to boost the economy. Yet health insurance
is so central to health care, and the individual mandate so
entwined with the effort to reform the system, that this seems like
a different, perhaps unique, case.

So why can’t Congress order us to shop for
the sake of “the economy”? Health insurance seems different to her,
but it doesn’t seem different to me. How will it seem to the nine
Supreme Court justices?
Let’s not forget, by the way, that Congress could reform the
medical and medical-insurance without imposing a mandate by simply
removing all barriers to competition. It would be nice if we could
count on the court, at the very least, to forbid Congress from
achieving a goal by means that violate freedom if means are
available that do not. But let’s hold our breath.
The Taxing Power
On to the justification for the mandate via taxing power. Marcus

The individual mandate is to be administered through the tax
code: On their forms, taxpayers will have to submit evidence of
adequate insurance or, unless they qualify for a hardship
exemption, pay a penalty.

Yale Law School professor Jack Balkin likens this to Congress
raising money for environmental programs by taxing polluters.
“Congress is entitled to raise revenues from persons whose actions
specifically contribute to a social problem that Congress seeks to
remedy through new government programs,” he concludes.

Just because the IRS will police the mandate does not make this
an issue of taxation. As written, the bill would impose a fine for
not having insurance. How’s that a tax? In fact, President Obama
insisted to ABC’s George Stephanopoulos that a fine for flouting
the mandate is not a tax. “No, but—but, George, you—you can’t just
make up that language and decide that that’s called a tax
increase,” Obama
. Guys, let’s get our stories straight.
Missing the Mark
Balkin’s example misses the mark. Since a polluter aggresses
against innocents, a “tax” on him could be construed as restitution
(if the money went to those damaged). There’s no analogy with a
fine for not having insurance. Obama would say the uninsured cost
the rest of us money, but that’s certainly not true of anyone
who pays
for medical care out of savings
. Besides, the uninsured get an
unfair rap. It is the insured, not the uninsured, who bid up the
real price of medical services: Under the current interventionist
system those services appear cheap and even free to those with
insurance. The uninsured are the victims not the perpetrators.
I realize that these arguments are futile. As Balkin points out,
the Supreme Court has long held that the government may use the tax
system to regulate conduct—even if regulation, and not revenue, is
the primary motive. As the Court said in U.S.
v. Sanchez
(1950), citing precedents from the 1930s:

It is beyond serious question that a tax does not cease to be
valid merely because it regulates, discourages, or even definitely
deters the activities taxed. . . . The principle applies even
though the revenue obtained is obviously negligible . . . or the
revenue purpose of the tax may be secondary. . . . Nor does a tax
statute necessarily fall because it touches on activities
which Congress might not otherwise regulate
. [Emphasis

Let that last phrase sink in. To amplify it the Court quoted an
earlier case, Magnano Co. v.

From the beginning of our government, the courts have sustained
taxes although imposed with the collateral intent of effecting
ulterior ends which, considered apart, were beyond the
constitutional power 
of the lawmakers to realize by
legislation directly addressed to their accomplishment. [Emphasis

Congress may do via the taxing power even things it may not do
Don’t Blame the New Deal
It may be tempting to blame this all on the New Deal courts. But
that temptation should fade as one reads the warnings issued by the
Antifederalists while the ink was still wet on the constitutional
parchment. As one Antifederalist said, “By virtue of their power of
taxation, Congress may command the whole, or any part of the
property of the people.” And another: “[T]his power therefore is
neither more nor less, than a power to lay and collect taxes,
imposts, and excises at their pleasure; not only [is] the power to
lay taxes unlimited, as to the amount they may require, but it is
perfect and absolute to raise them in any mode they please.”
Too bad they weren’t listened to.
Sheldon Richman is editor of The Freeman, where this article

originally appeared


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