Skip to main content

At balkinization, Jack Balkin points to his Atlantic article in which he discusses a 1950 taxing power case that seems clinching to me with regard to whether the individual mandate penalty is constitutional as a valid exercise of Congress' taxing power. I'm surprised it was not discussed more (and feel remiss in not having discussed it myself.) Balkin writes:

It also doesn't matter that the real purpose of the tax is to regulate behavior. Lots of taxes are designed to do just that -- think about taxes on polluters as an example -- and federal taxes on drugs are designed to keep people from buying or selling them. In 1950, the Court upheld a tax on marijuana, explaining that "a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The principle applies even though the revenue obtained is obviously negligible . . . or the revenue purpose of the tax may be secondary." "Nor does a tax statute necessarily fall," the Court added, "because it touches on activities which Congress might not otherwise regulate" under its other enumerated powers. So even if the mandate is beyond the commerce power, it can still be a constitutional exercise of the power to tax and spend for the general welfare.
The 1950 case Balkin is referring to is U.S. v. Sanchez:
In their motion to dismiss, which was granted without opinion, defendants attacked the constitutionality of this subsection on the ground that it levied a penalty, not a tax. The validity of this levy is the issue here. In enacting the Marihuana Tax Act, the Congress had two objectives: "First, the development of a plan of taxation which will raise revenue and at the same time render extremely difficult the acquisition of marihuana by persons who desire it for illicit uses and, second, the development of an adequate means of publicizing dealings in marihuana in order to tax and control the traffic effectively." S. Rep. No. 900, 75th Cong., 1st Sess. 3. To the same effect, see H. R. Rep. No. 792, 75th Cong., 1st Sess. 2.

[...] It is obvious that 2590, by imposing a severe burden on transfers to unregistered persons, implements the congressional purpose of restricting traffic in marihuana to accepted industrial and medicinal channels. Hence the attack here rests on the regulatory character and prohibitive burden of the section as well as the penal nature of the imposition. But despite the regulatory effect and the close resemblance to a penalty, it does not follow that the levy is invalid.

First. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. Sonzinsky v. United States, 300 U.S. 506, 513 -514 (1937). The principle applies even though the revenue obtained is obviously negligible, Sonzinsky v. United States, supra, or the revenue purpose of the tax may be secondary, Hampton & Co. v. United States, 276 U.S. 394 (1928). Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate. As was pointed out in Magnano Co. v. Hamilton, 292 U.S. 40, 47 (1934):

From the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment."
These principles are controlling here. The tax in question is a legitimate exercise of the taxing power despite its collateral regulatory purpose and effect.
(Emphasis supplied.) My understanding is that Sanchez continues to be good law (but see Leary v. US..) Why was this argument not emphasized by the government? It's a good question (I never understood why the Anti Injunction Act argument was abandoned.) Balkin offers these thoughts on that point:
The government's position was more complicated, and evolved over time. The Justice Department always included the tax power argument in its briefs, but rarely devoted much attention to it. At first the government argued that lawsuits challenging the mandate were barred by the Tax Anti-Injunction Act, which says that taxpayers cannot seek injunctions against taxes but must first pay the tax and then sue for a refund. That would mean that constitutional challenges could not begin in earnest until after 2014, when the mandate takes effect. But it also meant that if courts wanted to uphold the mandate on the merits, they would have to find a way to get around the Tax Anti-Injunction Act. This gave them reasons not to treat the mandate as a tax.

After two district courts struck down the mandate, the government's litigation strategy changed. It worried that states would begin to delay implementation and it sought a quick resolution of the constitutionality of the ACA. To that end, the government began to argue that the Tax Anti-Injunction Act did not apply because the mandate was not a "tax" for purposes of the act. This made it harder to push the tax power theory. As Justice Samuel Alito remarked in the oral argument, "General Verrilli, today you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax." Technically, the the two positions are consistent: The tax power, which includes taxes, duties, imposts, excises and other devices for raising revenue, could be and probably is far broader than the definition of a "tax" in a particular statute. Still, Alito's comment showed the government's rhetorical difficulty.

From my perspective, that dog won't hunt. WINNING the case was by far the most important thing. Sacrificing a compelling argument over concerns in delay in implementation simply can not be justified against the potential catastrophe of losing the case. Speaking as a practicing litigator, I could not disagree more strongly with the rationale Balkin offers for the government (I doubt Balkin endorses the strategy.)  Who made the call? Probably not Donald Verrilli, who has taken much heat for his performance at oral argument. But Verrilli could end up being a fall guy. We'll see.

Originally posted to Armando on Mon May 07, 2012 at 07:47 AM PDT.

Also republished by Discussing The Law: TalkLeft's View On Law and Politics.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site