Now You See It, Now You Don't: The ObamaCare Penalty Morphs Back into A Tax
The most highly publicized portion of the complex Patient Protection and Affordable Care Act (which is better called by PPACA since it is really neither) is the individual mandate that imposes a financial exaction on those who do not take out health care. I purposely used the term “exaction” to avoid answering the question of whether this exaction is either a tax or a penalty, because it turns out that a great deal is at stake in the choice of the word. Call this a tax and it has to go through certain Congressional committees. Call it a tax and it upsets the no new tax pledge. So call it a penalty and you can get it through Congress. But once you get into court, and you call it just a penalty, it is less clear that Congress has the power to impose penalties but much clearer that it has the power to “tax and spend” for the general welfare of the United States,” which under a suitably broad interpretation provides some additional cover for the legislation.
The best of both worlds for the President is to let this exaction lead a dual existence, so that the Court sees "tax" when the Congress speaks "penalty". The problem is that each side can hear the other. The courts thus far have not allowed the administration to speak out of both sides of its mouth. It is probable that the Supreme Court will not let it do so in the future either. But occasionally a government slips, as did Jeffrey Zients, the President’s Acting Budget Director, in testimony before Congress. It is a small but telling episode in the longer battle over legislation that should have never passed at all. The betting here is that it will soon be forgotten. I have done my share in writing briefs to overturn the PPACA. The tax/penalty issues were not part of that discussion.