Friday, October 29, 2010

Democrats’ Taxing Two-Step

The New York Times published an editorial yesterday defending the constitutionality of the individual mandate.  Of particular note was a passage regarding whether or not the mandate constitutes a tax.  Despite claims by President Obama absolutely rejecting the notion that the mandate was a tax, the Times believes “a penalty to prod people into taking out health insurance seems little different [from a tax], whatever label it is called.”  The editorial also asserted that people shouldn’t spend time “getting hung up on labels adopted in the heat of political battle.”

That last passage raises two key questions:

  1. As the federal judge in the Virginia lawsuit asked of the Justice Department, does the Times believe President Obama was “trying to deceive the people?”
  2. Does the Times believe that such deception is permissible “in the heat of political battle?”

The fact of the matter is that Judge Vinson’s ruling on the motion to dismiss in the Florida multi-state lawsuit spent about 20 pages analyzing the bill text to determine that Congress did not intend for the mandate to be a tax.  From page 16 of the ruling:

The defendants are wrong to contend that what Congress called it “doesn’t matter.”  To the extent that the label used is not just a label, but is actually indicative of legislative purpose and intent, it very much does matter.  By deliberately changing the characterization of the exaction from a “tax” to a “penalty,” but at the same time including many other “taxes” in the Act, it is manifestly clear that Congress intended it to be a penalty and not a tax.

Judge Vinson provided five different justifications for his determination that the mandate was not a tax, based on the text of the legislation; page 22 of the ruling notes that Congress:

(i)  Specifically changed the term in previous incarnations of the statute from “tax” to “penalty;”

(ii)  Used the term “tax” in describing the several other exactions provided for in the Act;

(iii)  Specifically relied on and identified its Commerce Clause power and not its taxing power;

(iv)  Eliminated traditional IRS enforcement methods for the failure to pay the “tax;” and

(v)  Failed to identify in the legislation any revenue that would be raised from it, notwithstanding that at least seventeen other revenue-generating provisions were specifically so identified.

Of late, Democrats have come to cite the taxing power as justification for the mandate’s constitutionality.  While some may welcome Democrats finally acknowledging the health care law does in fact represent a massive tax increase on the middle class, a retrospective attempt to re-frame the law that was passed will not resolve the significant questions about its constitutionality.