Tuesday, July 3, 2012

Bend over or just pay a tax?

This week the Supreme Court gave its ruling on Obamacare.  My main interest is in learning how the court was able to justify the individual mandate, and what implications this could have for future regulations in our private lives.


Since unversal health care in the United States seems to be as polarizing an issue as abortion or religion, and people may get carried away with hyperbole (the present author unexcepted) and ad hominem arguments when discussing it, before continuing this article, please do the following to get this negative energy out of your system:

Step 1
Select one of the insulting terms below which best identifies a group of people or ideology with which you disagree.  I do recognize that depending on your point of view, some of these terms may not be insults.

  • social darwinist
  • commie
  • capitalist pig
  • socialist pig
  • bleeding heart liberal
  • extreme fundamentalist religious zealot
  • extreme left environmentalist hippie
  • pot-smoking anarcho-libertarian
  • greedy 1%
  • entitlement-mentality occupiers
  • welfare-state leeches
  • illegals

Step 2
Go to your window and open it.

Step 3
Stick your head out the window.

Step 4
Now scream, at the top of your lungs:
"Fuck you, you motherfucking <insert term from step 1>!!!"

Step 4a
If you are particularly sensitive to profanity, politely, yet firmly, state the following instead:
"You gosh darn <insert term from step 1> are really not too nice."

There, now do you feel better?  Good.

(You don't feel better?  Perhaps at least one of your neighbors doesn't feel too good either, after feeling targeted by your attack.  Maybe you should think twice next time before following instructions from a random blog.)

Is Obamacare good?

As I said, I'm really just interested at this point in the implications of the court's decisions, not the general idea of universal health care, or whether Obamacare is good or not (aside from the Constitutional questions).

But, but, but, you just have to tell me:

All the civilized/developed/first world/spiffy/<insert positive adjective here> countries have universal health care. The USA is a joke without it.

Your argument is invalid.

All the cool kids have Nike shoes, so I should have some too!

With a lack of originality: if the cool kids jumped off the empire state building, would you too?

With a bit of realism: All the civilized/developed/first world/spiffy/<insert positive adjective here> countries are going deeper and deeper into debt each year.  The USA would be a joke if it didn't go into debt too.   Whew, at least we're not a joke in that department.

Seriously, the simple fact that other countries (or people for that matter) do or do not do something does not alone give merit to that something.

Is Obamacare the only solution for bringing down health care costs?  I doubt it.   Other alternatives could be tried, but haven't.

In his book "The ten things you can't say in America", Larry Elder states that one of these taboo statements is "There is no health-care 'crisis'."  The book is about 10 years old, but it does outline some ideas which I don't believe the USA tried before jumping into Obamacare:

  • Have more doctors.  "It seems that the American Medical Association, with the support of overzealous state lawmakers, have artificially and intentionally limited the number of doctors produced by medical schools. For every med school applicant who gets in, many qualified applicants get turned down."  He also mentions that there are about twice as many lawyers as doctors.  It only seems natural that with more doctors, the price of medical treatment would come down.
  • Doctors should do the hard stuff. Allow nurses and physician assistants to do things like "fix broken bones, prescribe drugs, conduct annual check-ups -- all at a much lower cost".  
Other ways to reduce health care costs are (not my ideas, just do some research to find more):
  • Ability to purchase insurance across state lines
  • Tort reform.

I won't go into detail on all the possible alternatives to bring down the cost of health care without an individual mandate.

I also won't deny that an individual mandate is the most obvious (as in, the first thing that comes to one's mind, but not necessarily the most effective) solution for bringing down the costs.

But alas, the point of this blog was to discuss the implications of the Court's justification for the individual mandate.

The Supreme Court's decision

I did not read the 193 pages of the decision in its entirety, just as I have not read the 2400+ pages (!!!!!) of the law itself.  However, I did read sections II and III, which describe why the court was even able to review the case, why the law did not pass under the Commerce Clause, and why it passed under Congress' authority to tax (pages 11-45)

The US Constitution 101: The constitution lists specific powers that the federal government has.  The 10th amendment states that any powers not specifically delegated to the United States (the federal government) in the Constitution are reserved to the states or the people.

Since the Constitution does not explicitly grant the federal government the specific power to require citizens to purchase health insurance, we must dig into the Constitution to see if one of the clauses there can be interpreted as granting this power.

The two main arguments presented to the Supreme Court to justify the individual mandate as constitutional were the "Commerce clause" and the "power to impose taxes".

The Commerce Clause: Nice try, but not this time

Reading through the decision, I was pleased with the arguments laid out against the justification via the Commerce Clause, given the crazy ways this power has been stretched in the past.

The commerce clause has a really interesting history.  The actual clause is as follows:
The congress shall have power to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.

This literally means that Congress can pass laws to regulate buying and selling with other countries or across state lines.

Crazy Commerce Clause Cases

This clause has been very widely interpreted in some cases in ways that make you wonder what the Supreme Court justices were smoking, and if they could share some of it with you.  Here are my favorites (no doubtedly the most well-known cases):

Wickard vs Filburn (1942).  All your wheat are belong to us. 
Congress passed a law limiting the amount of wheat farmers could grow, in an attempt to stabilize the prices of wheat.  Farmer Filburn decided to grow a separate patch of wheat just for his own private consumption.   The Feds ordered him to destroy his wheat and pay a fine, for having surpassed the quota.  Farmer Filburn naturally thought, "WTF, this is my own fucking wheat, that only I'm going to use.  I'm not even planning to sell it to anybody.  So you can take your interstate commerce clause and shove it!".  The Supreme Court, however, decided that by not buying wheat, he was potentially impacting interstate commerce.  If he didn't have his own wheat, he might potentially be inclined to buy wheat from another state.  Therefore, his personal wheat patch impacted interstate commerce.


Daniel vs Paul (1969).  What's in those snacks anyway? 
Congress passed the Civil Rights act in 1964.  Despite this law, in the 60s, many people and businesses still did not like blacks. (Thank goodness we have no more racism today!).  In this case, a particular recreational facility (with swimming, boating, dancing, and snacks - the snacks are very important), Lake Nixon Club, didn't want to serve blacks.  The club argued that it was a private facility which did not do business with residents of any other states, so the federal government did not have the power under the Commerce Clause to force them to not discriminate.  The court ruled that the federal government did indeed have the power, indeed under the Commerce Clause, to force this business to not discriminate. Why?  Because they might have customers from out of state?  Perhaps, but more importantly: because the snacks at the bar might contain ingredients which were made in another state! The fact that this facility sold snacks was the key to allowing blacks to come and swim, dance, and boat.  Read the text from the decision:

A "substantial portion of the food" served at the snack bar has moved in interstate commerce."
The snack bar's status as a covered establishment automatically brings the entire Lake Nixon Club facility within the coverage of Title II of the Act by virtue of §§ 201(b)(4) and 201(c)(4).

Now, I'm not saying that this facility was morally right in discriminating.  But what I am saying is: WTF?  Where the ingredients of the snacks at the bar came from is a primary justification for regulating discrimination?  I've got to give the justices credit for being creative.

Gonzales vs Raich (2005).  All your weed are belong to us.
Crazy interpretations of the Commerce Clause were not limited to the previous century. In this case, California legalized medical marijuana in 1996.  Angel Raich legally (under California law) grew her own medical marijuana, declared as essential by her physician.  The Feds destroyed the marijuana.  The Supreme Court ruled in favor of the Feds, citing our famous Wickard wheat case as a precedent. If you can't come up with a new crazy justification, build upon a previously crazy precedent. Somehow, by growing her own personal marijuana for her medical use, there was an increased probability of some of this weed finding its way across state lines

The individual mandate is too much even for the Commerce Clause

Given that the Commerce Clause has historically been interpreted so widely to justify or extend powers to Congress that don't really deal with interstate commerce in any obvious way, it is no surprise that the government was trying hard to use the Commerce Clause to justify the individual mandate.  The main argument from the government was (my paraphrasing):

Individuals will at some point in their lives need medical care. Therefore, they are actively in the market for medical care.  Therefore they are participating in an activity impacting interstate commerce.

What does this mean? That there is no time limitation on the commerce clause. That the government may regulate your behavior today because of something you might buy across state lines in the future.  Fortunately the court found that even with all the past crazy interpretations of the Commerce Clause, there was no precedent to justify this one:

Everyone will likely participate in the markets for food, clothing, transportation, shelter, or energy; that does not authorize Congress to direct them to purchase particular products in those or other markets today. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions.

The court decided, and I'm glad they decided this way, that the government cannot regulate inactivity, even if such inactivity could have an impact on interstate commerce (or specifically on medical care costs):

Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Government’’s theory, Congress could address the diet problem by ordering everyone to buy vegetables.... People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures——joined with the similar failures of others——can readily have a substantial effect on interstate commerce. Under the Government’’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act….While Congress’’s authority under the Commerce Clause has of course expanded with the growth of the national economy, our cases have “"always recognized that the power to regulate commerce, though broad indeed, has limits.”" Maryland v. Wirtz

Finally a court decision that sees limits to how the Commerce Clause may be interpreted, and which seems to disagree with the notion of a Nanny State.

However, the individual mandate was indeed upheld by the court as constitutional, under the power of Congress to impose taxes (Article 1 section 8).

The Tax Clause is the new Commerce Clause

Splitting-hairs vocabulary: "tax" or "penalty"?

Before even being able to evaluate Obamacare, the Supreme Court had to determine whether the Anti-Injuction Act applied.  This act basically states that the government cannot be sued for a tax matter until the tax has been collected.  If you don't believe a tax is just, you must pay it, and only after you pay it can you sue the government for a refund.

The Court's evaluation of whether the Anti-Injunction Act applies gets into hair splitting analysis of the terms "tax" versus "penalty".  I admit having a headache when reading this paragraph:

Section 5000A(g)(1) specifies that the penalty for not complying with the mandate ““shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.”” Assessable penalties in subchapter 68B, in turn, ““shall be assessed and collected in the same manner as taxes.”” §6671(a). According to amicus, by directing that the penalty be ““assessed and collected in the same manner as taxes,”” §5000A(g)(1) made the Anti-Injunction Act applicable to this penalty
As a great man once said: "Yo dawg we herd you don't like taxes. So we double penaltied your taxes in a non tax penalty tax."

The Court decided that the individual mandate was not a tax (but a penalty) for the purpose of the Anti-Injunction Act, meaning that the Court could make a decision on its constitutionality.

While it seems that the whole decision of the Supreme Court really just relied on a question of vocabulary, this was only to determine whether the Court could even hear the case.  Fortunately the justices try to reassure us that the Constitutionality of the individual mandate was based on an evaluation of what the mandate really is in practicality, not just on the way the writer of the law decided to use his thesaurus:

It is of course true that the Act describes the payment as a ““penalty,”” not a ““tax.”” But while that label is fatal to the application of the Anti-Injunction Act, supra, at 12––13, it does not determine whether the payment may be viewed as an exercise of Congress’’s taxing power. It is up to Congress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress’’s choice of label on that question. That choice does not, however, control whether an exaction is within Congress’’s constitutional power to tax.

In passing on the constitutionality of a tax law, we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it”.

It's not about what Obamacare says or actually means, it's about what it COULD mean

The justification of the individual mandate as a tax is tricky.  The text of Obamacare uses language such as "shall": "individuals shall maintain health insurance", and describes the tax for those who do not buy insurance as a "penalty."   This indicates that the intent of the law is to require individuals to purchase insurance.  Under the Commerce Clause, and even under the tax clause, Congress does not have the power to require individuals to buy anything.  The obvious decision at this point is that therefore, the individual mandate is not Constitutional.

However, the justice does not stop at this point.  He argues that even though this may be the first, obvious interpretation of the law, there could perhaps be another interpretation that could be considered constitutional.  If there are various interpretations of a law, if at least one of them is constitutional, then the Court will not strike down the law as unconstitutional.

The justice then tries to find a more Constitution-friendly interpretation of the law: Perhaps, instead of reading the law as requiring individuals to purchase insurance ("a legal command"), we could read it as a simple choice, which:

can be regarded as establishing a condition - not owning health insurance - that triggers a tax - the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’’s constitutional power to tax.
The question is not whether that is the most natural interpretation of the mandate, but only whether it is a ““fairly possible”” one.

Even the justice seems to indicate he's stretching his interpretation of the law, trying really hard to find a way to read it that would render it constitutional, even if it's a stretch.  In the end, this is the interpretation he accepts.

Scary decision?  Don't worry, because... well... actually, do worry

As I read this, I thought:  Great.  So the government can't abuse the commerce clause to no limit, but they can now essentially force me to do anything by "taxing" me if I choose not to do it.  This is even worse than the Commerce Clause.  At least with the Commerce Clause, they would be required to find creative interpretations as to how some activity I was participating in was impacting interstate commerce.  Now they can just say: "Bend over!  If you don't want to, fine, just pay a $1000 tax".

The justice seems to have anticipated these concerns, but fails to alleviate them, even though he tries pretty hard.

Obamacare isn't too bad

First, he tries to explain how in practicality (regardless of the actual terms used in the law), the individual mandate is really just a "tax" and not a "penalty" (a "penalty" would imply you did something wrong and are being punished):

  • The amount of the tax is not unreasonably high: it can never be more than the price of insurance anyway.  It's therefore not a punitive tax.
  • There is no "scienter" requirement.  Yes, I had to look this up in the dictionary too.  My understanding is that this means the non-purchase of insurance is not considered as "illegal" or "violation of any law".  It is a perfectly valid legal choice (which happens to trigger a tax).
  • The IRS collects the tax "through the normal means of taxation - except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as a criminal prosecution".

Slippery slope?

Ok, so perhaps the individual mandate itself isn't too bad. But what about the slippery slope? Does this decision set a precedent for the government trying to force us to do anything by just simply offering us a "choice" between doing said activity or paying a "tax"?  Seeing how the Supreme Court relies heavily on previous decisions to decide the constitutionality of new cases, the "slippery slope" effect is a perfectly valid aspect to consider.

The justice echos my concern:

If it is troubling to interpret the Commerce Clause as authorizing Congress to regulate those who abstain from commerce, perhaps it should be similarly troubling to permit Congress to impose a tax for not doing something.

Right on, he understands my concern exactly (unlike the generic stock responses I get from senators and representatives when I send them e-mails with specific questions).

Let's see if he can reassure me:

Reassurance attempt #1: Nothing new here?

First, and most importantly, it is abundantly clear the Constitution does not guarantee that individuals may avoid taxation through inactivity…Congress’’s use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote, for example, purchasing homes and professional educations….Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.

So this is supposedly nothing new: the government already tries to control our behavior with taxation.  Somehow this doesn't exactly bring reassurance.  The examples he gives about purchasing homes or professional education are really different from an individual mandate.  Nobody is required to purchase a home or education.  Choosing to not purchase a home will not result in a tax.  Purchasing a home might result in tax deductions, but this is not the same thing!  I'm afraid we have a logic #fail for point 1.  Although he says this is nothing new, he fails to cite any precedent for the government essentially requiring an individual to actively partake in some activity (or purchase a product) or face a tax.

Reassurance attempt #2: Obamacare ain't so bad... really

Second, Congress’’s ability to use its taxing power to influence conduct is not without limits…We have nonetheless maintained that ““‘‘there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.’’ ”…We have already explained that the shared responsibility payment’’s practical characteristics pass muster as a tax under our narrowest interpretations of the taxing power. Supra, at 35––36. Because the tax at hand is within even those strict limits, we need not here decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it.

This point basically says that the specific instance of the individual mandate for Obamacare is obviously not a severe penalty, and so the court does not at this point need to determine how far the government should be limited in their taxing power.  In other words, open door for a slippery slope.  Let's just let the government decide at their convenience when and how they'd like to control our behavior via more taxes like the individual mandate, and we'll look at the constitutionality of the cases as they arrive.  Wait, weren't you trying to assure us that this decision was not "troubling"?

Reassurance attempt #3: Just pay the tax and you'll be fine!

Third, although the breadth of Congress’’s power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior…Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the at- tendant consequences of being branded a criminal: depri- vation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment op- portunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes.

By contrast, Congress’’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the se- vere burden that taxation——especially taxation motivated by a regulatory purpose——can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.

Point three says that if the law had been upheld under the Commerce Clause, that would be even more fucking troubling, because failure to comply could land you in jail and strip you of your rights.   Since the law is only upheld under the "taxing power" clause, you have nothing to fear as long as you pay your tax!


So, in conclusion, yes, the government can make you bend over, or ride a unicycle, or play Russian Roulette, as long as they offer you an alternative which is a tax.  The tax might be exorbitant (like your life savings), since no limits were defined at this point.  Don't worry, just pay the tax and you have nothing to fear, or take the government to court if you think they're out of line.  Easy.

Note: the images in this blog are memes I ripped off the Net.  Since they are memes, it's really quite impossible to cite the original author.  Please don't sue me.


  1. Wow, great breakdown of the decision. I was still on the fence about Obamacare, but after reading all of this, I'm thinking this was perhaps not a good idea.

    The sad part is, I live in the U.S. and even I didn't break down this decision as well as you did. Thanks!

  2. I'm just shocked that somebody actually read my blog :) Thanks for posting a comment :)