Tuesday, July 20, 2010

If we call it a fee, maybe no one will notice it is a tax.

When Governor Pawlenty said that an increase in the cigarette tax wasn't a tax but a fee, I wondered if anyone actually believed him. Given that President Obama's adminstration tried the same line, I assume that the fee/tax distinction is more plausible than I originally thought.

Certainly taxing someone for not doing something seems like an unprecedented use of the power to tax. My first thought was that it really isn't so different from the situation where the property taxes of childless homeowners are used to pay for schools that the homeowners won't use. However, the analogy breaks down when one considers that everyone pays property taxes and not everyone will be paying the health insurance tax.

In the Times' article you cite, Jack Balkin says that the tax argument is the "strongest argument for upholding" the individual mandate. This may be true as a matter of constitutional law theory. However, I doubt any judge will adopt that argument. Who wants to become known as the judge that said people could be taxed for doing nothing?

I think this mandate is really a fairly straightforward application of Wickard v. Filburn. You will recall that as the case about farmer who grew more wheat than he was allowed under restrictions on farm production in effect at the time. The farmer argued that since the extra wheat was used to feed his chickens, and thus not in interstate commerce, that Congress couldn't regulate his wheat production.

The Supreme Court, in an opinion by Robert Jackson, rejected that notion 8-0 (although perhaps Linda Greenhouse would find a way to make that a 5-4 decision). Essentially the Court said that the farmer’s decision to use his own wheat had an affect on the amount of wheat purchased in his area. The effect on wheat production locally indirectly effects the effect on interstate commerce because some wheat is in interstate commerce. Just as the farmer’s dropping out of the program affected interstate commerce, people refusing the to purchase health insurance affects interstate commerce. This may not be the "strongest" argument, but I bet it is the winning one.

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