Monday, July 2, 2012

I'm Shocked, Shocked to Find That Taxation Is Going on in Obamacare!

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a sigh is just a sigh
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There are a couple of things worth considering in the dissent to NFIB v. Sebelius by Justice Scalia, Justice Kennedy, Justice Thomas, and Justice Alito:
"[T]o say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it. Judicial tax-writing is particularly troubling. Taxes have never been popular, see, e.g., Stamp Act of 1765, and in part for that reason, the Constitution requires tax increases to originate in the House of Representatives. See Art. I, §7, cl. 1. That is to say, they must originate in the legislative body most accountable to the people, where legislators must weigh the need for the tax against the terrible price they might pay at their next election, which is never more than two years off."
Here is the individual mandate as written in section 5000A of the Internal Revenue Code (bolding added):
(a) Requirement To Maintain Minimum Essential Coverage.

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

(b) Shared Responsibility Payment.

(1) In general. If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is liable under paragraph (3), fails to meet the requirement of subsection (a) for 1 or more months, then, except as provided in subsection (e), there is hereby imposed on the taxpayer a penalty with respect to such failures in the amount determined under subsection (c).

(2) Inclusion with return. Any penalty imposed by this section with respect to any month shall be included with a taxpayer's return under chapter 1 for the taxable year which includes such month.
The Form 1040 federal income tax return is the "taxpayer's return under chapter 1" and the amount of the tax, subject to various complicated income and affordability limits, will be $695 a year for average middle class taxpayers who don't have health insurance meeting the minimum essential coverage requirements.

Should the constitutionality of that provision hang on whether the word "penalty" is used instead of "tax". The amount of the "shared responsibility payment" (there's a euphemism for tax if I've ever heard one!) would be the same either way. You can call the shared responsibility payment whatever you want, but you can't convince me that it is not a tax.

I don't think that any judicial rewriting is necessary to find that this an exercise of the taxing power. It would be bad precedent to allow Congress to play around with words rather than look at the substance of what they are doing.

For example, if the current tax were increased from $695 to $100,000, that would be punitive and not merely a tax. The $695 amount is certainly designed to influence your behavior, but it is still a free choice compared to the expense of insurance. A $100,000 tax or penalty would not give you a realistic choice.

Admittedly, there is a wrinkle in what I just wrote. If in 2016 you have income of $4,000,000 or over but don't have health insurance, your tax is 2.5% which works out to $100,000 or more. That makes buying health insurance a no-brainer for people earning over a certain amount. The rest of us taxpayers should hope some of them aren't smart enough to figure that out.

Further, does an unconstitutional law become constitutional by a simple amendment changing the word "penalty" to "tax"? Congress could come back and pass such an amendment to Section 5000A in one year, five years, or twenty years. That would be a flimsy Constitutional ruling.

Nonetheless, there is more to the dissent than a constitutional law question. The Tea Party has officially arrived in the reference to the Stamp Act of 1765. That's the first of the taxes imposed on the American colonists that led to the tea being dumped into Boston Harbor and the American Revolution. The four Republican Justices (dare we now call them the Tea Party Justices?) have called out the Tea Party for the November election.

The reaction last week was swift. The Wall Street Journal laid out the tax numbers ("if it quacks like a duck"):

Megyn Kelly and Laura Ingraham accused Democrats of committing fraud by not representing Obamacare as a tax:

Sarah Palin sounded vindicated on the IPAB death panels and health care rationing:

Sarah Palin called Nancy Pelosi the perfect dingbat spokesperson for the agenda of the far left:

Michele Bachmann introduced legislation to repeal Obamacare. On the taxing power decision she said, "It was like a knife was stuck in and twisted.":

House Budget Chairman Paul Ryan declared Obamacare will blow a hole through the deficit:

The Republican National Committee dug up ABC's George Stephanopoulos to beat the tax drum:

Candidate Mitt Romney proclaimed, "What the Court did not do in its last day in session I will do on my first day if elected President of the United States, that is, I will act to repeal Obamacare.":

Meanwhile, President Barack Obama admitted, "Well, it should be pretty clear by now that I didn't do this because it was good politics.":

Obamacare was certainly bad politics for the Democrats in the 2010 mid-term elections, although one could make the argument that after seeing Nancy Pelosi's incompetence during the passage of Obamacare, the American people decided she wasn't fit to help oversee its implementation. One could also make the argument that the American people wanted a bipartisan deal, and not getting that in the passage now want bipartisan implementation.
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That phrase "I will act to repeal Obamacare" in Mitt Romney's statement may be a roundabout way of ordering, "Round up the usual suspects." "Hey, I acted to repeal but I just couldn't quite muster the votes" is his out.

Update: Two things have been pointed out to me:

First, the penalty tax for a person with $4 million in income is limited to the lesser of $100,000 (2.5% of income) or the national average premium for qualified health plans which have a bronze level of coverage (presumably less than $100,000).

Second, Section 5000(g) contains a rather curious provision on assessment and collection:
(1) In general.— The penalty provided by this section shall be paid upon notice and demand by the Secretary, and except as provided in paragraph (2), shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.

(2) Special rules.— Notwithstanding any other provision of law—

(A) Waiver of criminal penalties.— In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.

(B) Limitations on liens and levies.— The Secretary shall not—

(i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or

(ii) levy on any such property with respect to such failure.
So how exactly will this penalty tax be collected after it is assessed, if the IRS can't file liens or make levies? Maybe the individual mandate is just a suggestion and not a tax or a penalty after all.

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