ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Today at FoxNews.com they are running my piece about the ObamaCare ruling, which focuses on the definition of a tax.
Surprisingly, in a 199 page opinion that holds "this is a tax," nowhere in the opinion is there a generic definition of what must necessarily be present for something to be declared a tax.
Before this ruling, every "tax" was preceded by a transfer of money or value; the transfer itself is what was taxed. That easy definition is what every law school professor taught for decades. Thanks to Chief Justice Roberts, Congress now has the power to tax you for refusing to make a transfer of your money at their request. If not transfers, what is the defining element of a tax for law school professors to teach now?
Likely the most troubling quote in the whole opinion is Roberts' admission that he is not concerning himself with whether Congress is allowed to do this:
“Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can.” [Emphasis in the original]
Good grief.
If we can't get the Supreme Court to tell us whether Congress "can" do this, what branch of government may we ask to check on whether they can?
I hope you enjoy the rest of the colum, found here.
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Oct '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
While I share your frustration with the outcome, here I interpret Roberts merely to be saying that there is no question whether Congress can exercise its taxing power; that much is clearly stated in the text of the Constitution of the United States of America.
Now, we can (and I believe should) debate exactly your original question: how is "a tax" defined, and does the mandate fit that definition? My understanding is that Originalists (of which I consider myself an example) and logical Constructivists (which I most definitely am) will find disturbing the notion that seems to be implicit here, which is that, merely because the mandate was found not to be "a penalty," it is understood to be "a tax" by default, while a third choice—unconstitutionality—is excluded from consideration.
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
I see what you're saying Paul and perhaps it makes more sense that in the column I accuse Roberts of circuity. I focus on the word properly.
Roberts asks: Did they properly exercise taxing power? He says he did not ask whether they "can." Can what? Properly exercise taxing power. Round and round it goes. If you find that this is not a tax, then Congress both can not and did not exercise taxing power.
Edited on June 29, 2012 at 8:18pmJun '12
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
page 144 of the ruling, from the joint dissent.
Our cases establish a clear line between a tax and a penalty: “‘[A] tax is an enforced contribution to provide forthe support of government; a penalty . . . is an exaction imposed by statute as punishment for an unlawful act.’” United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 224 (1996) (quoting United States v. La Franca, 282 U. S. 568, 572 (1931)). In a few cases, this Court has held that a “tax” imposed upon private conduct was so onerous as to be in effect a penalty. But we have never held—never—that a penalty imposed for violation of the law was so trivial as to be in effect a tax. We have never held that any exaction imposed for violation of the law is an exercise of Congress’ taxing power—evenwhen the statute calls it a tax, much less when (as here)the statute repeatedly calls it a penalty. When an act “adopt[s] the criteria of wrongdoing” and then imposes amonetary penalty as the “principal consequence on thosewho transgress its standard,” it creates a regulatory penalty, not a tax.
There's more.
Edited on June 29, 2012 at 8:21pmRe: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Blackadder,
My favorite part there isthat while they have ruled a tax is so large that it is a penalty, they have never ruled that a penalty is so small it is merely a tax.
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Tommy De Seno:
Before this ruling, every "tax" was preceded by a transfer of money or value; the transfer itself is what was taxed.
By that definition, a head tax isn't actually a "tax".
Jun '12
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Understandable.
Until I was directed to this bit -- it's not like I found this myself -- I thought Roberts was being very clever. Now I just hope his action is a cunning plan that doesn't backfire on us all.
Jul '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Good piece, Tommy. The mental hopscotch Roberts is playing in that opinion leaves me baffled and frustrated, largely because it was all so unnecessary.
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Tommy De Seno:
“Sustaining the mandate as a tax depends only on whether Congresshasproperly exercised its taxing power to encourage purchasing health insurance, not whether itcan.” [Emphasis in the original]
If Congress has "properly" exercised a power, then it logically follows that is can exercise that power. If Congress cannot exercise a power at all then it clearly cannot exercise that power "properly".
Apr '11
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
E. Blackadder: page 144 of the ruling, from the joint dissent.
...When an act “adopt[s] the criteria of wrongdoing” and then imposes amonetary penalty as the “principal consequence on thosewho transgress its standard,” it creates a regulatory penalty, not a tax...
What happens when an act adopts the criteria (heretofore unimagined) of "wrongnotdoing?"
I guess we're in the process of finding out, eh?
Hey, what's THIS button do?
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Misthiocracy
Tommy De Seno:
“Sustaining the mandate as a tax depends only on whether Congresshasproperly exercised its taxing power to encourage purchasing health insurance, not whether itcan.” [Emphasis in the original]
If Congress has "properly" exercised a power, then it logically follows that is can exercise that power. If Congress cannot exercise a power at allthen it clearly cannot exercise that power "properly". · 20 minutes ago
Exactly. What needed to be decided first was whether this was a tax at all, for Congress to "properly" exercise the taxing power.
That was skipped over by Roberts. His ruling is "the tax man is collecting it, therefore this is a tax," despite the case law on the tax man collecting penalties to the contrary.
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Misthiocracy
Tommy De Seno:
Before this ruling, every "tax" was preceded by a transfer of money or value; the transfer itself is what was taxed.
By that definition, a head tax isn't actually a "tax". · 50 minutes ago
That's probably why we don't have any in the US.
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Where would the Supreme Court turn to find the definition of the word "tax", since there is no definition (AFAIK) in the Constitution?
For example, why isn't a fine simply a tax on one's failure to obey the law?
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Tommy De Seno
Misthiocracy
Tommy De Seno:
Before this ruling, every "tax" was preceded by a transfer of money or value; the transfer itself is what was taxed.
By that definition, a head tax isn't actually a "tax". · 50 minutes ago
That's probably why we don't have any in the US. · 3 minutes ago
I think you don't have a head tax because it would be politically unpopular, not because the Constitution forbids it.
Furthermore, I think the Supreme Court just ruled that you do have a head tax. It's called the health care mandate.
Edited on June 29, 2012 at 9:27pmRe: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Misthiocracy
Tommy De Seno
Misthiocracy
Tommy De Seno:
Before this ruling, every "tax" was preceded by a transfer of money or value; the transfer itself is what was taxed.
By that definition, a head tax isn't actually a "tax". · 50 minutes ago
That's probably why we don't have any in the US. · 3 minutes ago
I think you don't have a head tax because it would be politically unpopular, not because the Constitution forbids it.
Furthermore, I think the Supreme Court just ruled that you dohave a head tax. It's called the health care mandate. · 5 minutes ago
Edited 4 minutes ago
Touche.
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
I'm wrong.
Article I of the Constitution does forbid a head tax.
As such, I now believe that Justice Roberts erred. Congress cannot impose a fixed tax on all Americans. In order for the mandate to be legal, the penalty has to be proportionate to the individual's income.
One could also argue that if fines are merely taxes on failure to obey the law, fines must also be proportionate to the individual's income.
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Misthiocracy: I'm wrong.
Article I of the Constitution does forbid a head tax.
Umm... With that "unless" in there, it sounds to me like Congress can impose a capitation tax if certain conditions are met.
What are the conditions? (For example, what does "in proportion to the census" mean?) Also, what did the 16th Amendment do to change this clause?
Aug '10
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Midget Faded Rattlesnake
Umm... With that "unless" in there, it sounds to me like Congress can impose a capitation tax if certain conditions are met.
What are the conditions? (For example, what does "in proportion to the census" mean?) Also, what did the 16th Amendment do to change this clause?
Then the government needs to prove that those conditions have been met. So far, nobody has made that case. I'd love to hear a government lawyer explain to the Supreme Court how the health care penalty is "in proportion to the census", whatever that means.
The 16th Amendment made income tax legal, but it did not make capitation taxes legal. Income tax is a percentage of one's income. Capitation tax is a fixed amount.
Edited on June 29, 2012 at 11:08pmMar '11
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
I think Tommy and Misthios are on to something here.
Until now I had often heard, including on Law Talk, that the taxation powers extended much further than the power to regulate commerce, yet there was never much talk about where the limit might be. Now it seems that the limit to taxable events may have been well and truly overstepped, yet no one (except on Ricochet, of course) seems to be talking about it directly.
I will pose the same question I asked in Misthiocracy's thread: does Roberts' decision now make a tax on inactivity de facto constitutional, or is it possible to re-litigate this question despite the ruling yesterday?
Mar '11
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Another quote from Roberts' decision:
From the comments above, I understand that there are possible exceptions to the prohibition on a head tax. But equating the phrase "[is] contemplated by the Constitution" with the phrase "is constitutional," as Roberts seems to do here, just creeps me out.
Re: ObamaCare Ruling Ruins A Perfectly Good Teaching Tool For Tax Professors
Mendel: I think Tommy and Misthios are on to something here.
Until now I had often heard, including on Law Talk, that the taxation powers extended much further than the power to regulate commerce, yet there was never much talk about where the limit might be. Now it seems that the limit to taxable events may have been well and truly overstepped, yet no one (except on Ricochet, of course) seems to be talking about it directly.
I will pose the same question I asked in Misthiocracy's thread: does Roberts' decision now make a tax on inactivity de facto constitutional, or is it possible to re-litigate this question despite the ruling yesterday? · 11 minutes ago
Wish I knew.
I called some accountants today. They don't know how this "tax" will be handled. For instance, if I am a business and pay the penalty/tax instead of providing insurance, will that be a buisness expense? If it is a penalty then no, but if it is a tax, it might be.
What if I'm a w2 wage earner and paying 28% in income tax? Can the $2000 be applied to lower me into another tax bracket?