I found this paragraph in an NPR article very helpful:
Roberts said that the government, using its taxing power, could require people to have insurance or pay a penalty. True, he acknowledged, Congress labeled the fee a penalty, not a tax, but it is paid to the Internal Revenue Service and is based on the individual's income.
Why are some people calling the Mandate and/or the Mandate penalty a tax rather than what Congress calls it in the law (ie a penalty)? As it turns out, it's not that complicated and it's very misleading:
1. Because it's paid to the IRS
2. Because the penalty amount depends on your income level
The IRS, short for the Internal Revenue Service, is a U.S. tax law organization that controls and collects taxes. One problem the IRS deals with is the refusal of some individuals to pay their income taxes, or to even file a tax return. To help combat this issue and encourage "voluntary compliance," the IRS has instituted a set of penalties imposed on those who incorrectly file their taxes to hide their true income and assets, and for those who flat-out refuse to file a tax return at all.
The penalty you pay if you don't buy insurance is a penalty, not a tax. Just because it's paid to the IRS like other penalties doesn't make it a tax.
Some penalties even used to be tax deductible.
you can list any back state taxes owed as an itemized deduction on your federal tax return for the year they were paid.
The IRS has around 56 different penalties for not paying your income taxes. All of them depend on your tax obligation and therefore your income, just like the penalty if you don't buy health insurance.
The penalty for not abiding by the mandate is not a tax, it's a penalty. And clearly, the mandate is not a tax either, because your insurance premiums obviously don't go to the IRS, they go to the insurance companies.
Some conservatives are confused (or pretending to be) by the fact that some government penalties are collected by the IRS because of government's taxing authority. But that doesn't turn penalties into taxes. They're penalties - they're fines like parking tickets or other fines we pay for not abiding by the law. They just happen to be collected by the branch of government that deals with income rather than automobiles and public safety.
Roberts said that government uses it's taxing power to force people to pay penalties, but that doesn't make a penalty a tax. If it were a tax, it wouldn't be called a penalty when you don't pay your taxes and you get a fine, that penalty would be called a tax by the IRS, and it's not.
Admittedly, this is where Roberts uses a semantic trick to help out his Republican buddies, by taking advantage of this confusion to label the penalty a "tax." Evidently the more liberal justices were held hostage by Roberts and so he dictated this confusion be further cemented in the court's written decision. But by his own logic, the mandate penalty is no more a tax than the penalty you pay for not filing your return and getting caught.
And despite all his semantics, all Roberts really did was uphold Congress's right to penalize and for the IRS to collect that penalty like they collect many other penalties.
Anybody can say a penalty is "like a tax." But not that "it IS a tax." I can go outside and breathe in the pollution, go buy an inhaler, and I'm paying something like a tax so that polluting companies don't have to. But it's not a tax, it's just a form of penalty I don't like paying and don't think it's fair to have to pay.
When your neighbor complains about getting fined because he didn't pay his taxes, he doesn't say I just got taxed for not paying my taxes. That doesn't make sense. He says he got fined. He got penalized.
They'll never admit it, but they know the Mandate penalty is just that.