"I'm resting my claim on my statute." - Va. Solicitor General at oral argument on Commonwealth v. Sebelius, Record No. 11-1057, U.S. Court of Appeals for the Fourth Circuit, May 10, 2011.
This was a bad day for those challenging the individual mandate. For months we have known that two cases challenging the individual mandate of the PPACA (also known as Obamacare) would be argued back to back in the U.S. Court of Appeals for the Fourth Circuit.
The day begins with unfavorable news
The argument was to be heard before two President Obama nominees and a President Clinton nominee. The arguments are made before a three Judge panel. The parties do not know the makeup of the panel until the morning of the argument. The federal cases involving the individual mandate have been decided in favor of the party of the President that nominated the Judge, i.e. all Democratic nominees have found the individual mandate Constitutional, and all Republican nominees have found the individual mandate unconstitutional. Most observers readily state that the makeup of the panel has significant effect on the outcome.
A rocky time for Liberty U.
The matter of Liberty U. v. Geithner, Record No. 10-2347, a case where the individual mandate was upheld in the Western District of Virginia, went first. Based on reports, this portion was not very favorable to the parties challenging the individual mandate, but at least the three Judge panel acknowledged their right to reach the merits of the case.
Virginia - who are you to sue the federal government?
The panel did not allow Virginia to address the merits as the entire argument surrounded whether Virginia had a right to sue in the first place. A party that has a legal right to sue in a given case is said to have "standing." The three Judge panel did not appear at all to feel Virginia had standing to bring its case. I discuss standing here, and here, and here with regard to the individual mandate, and here with regard to redistricting. Up until today, Virginia has suggested that it has standing, in part, because Virginia passed Va. Code § 38.2-3430.1:1 stating that no citizen is required to buy health insurance. The states in the Florida case did not have such a statute (that I know of). Yet both the states in the Florida case and Virginia claim standing under a general theory of the right to sue on behalf of citizens . . . until today.
When pressed at oral argument about whether Virginia is only relying on Va. Code § 38.2-3430.1:1 or a claim of general jurisdiction, Virginia's Solicitor General said
"They [the states in the Florida case] claim there is a general jurisdiction. I'm not claiming that. I'm claim. I'm resting my claim on my statute."
All "standing" arguments for the Commonwealth of Virginia were boiled down to reliance on Va. Code § 38.2-3430.1:1. This must have been a strategic decision, and not one that is on its face incorrect. Nonetheless, I would have preferred Virginia leave the door open for other ways to establish standing. Although, Virginia may get a clean slate with the Supreme Court, if the full Fourth Circuit hears this case en banc (all of the Judges), Virginia is probably going to have to stick with that one argument.
What should we hope for . . .
Given the makeup of the Court and the perceived positions of the Judges, for those opposed to the individual mandate, the best thing we can hope for is a split decision (loss) that comes quickly, and a win in Atlanta for the appeal in the Florida case. The Supreme Court will then likely take the case, and we can fight it out there.
Sources
First hand account: Washington Examiner.
Primary sources: Recordings of oral arguments.
Click here. for my previous posts regarding the individual mandate.
Good argument, I am surprised to see that the Judges have already made up their minds to the constitutionality of VA case. I am very concerned that both parties are using the bench to legislate. The days when the courts were supposed to be our escape from politicians usurping their powers within the framework of the constitution is long gone.
ReplyDeleteOh I pray for the day when independence will be brought back to the bench, but that could only be a facade.
Although I am receptive to the argument that both parties are using the Courts to legislate, we would not be having a discussion at all if the PPACA involved a tax and entitlement for health care instead of an individual mandate to purchase.
ReplyDeletePres. Obama could get the individual mandate passed at the time, but felt it was too difficult to pass a tax and entitlement program.
I do not know the solution to the sometimes partisan nature of the bench. Our system of presidential appointment and lifetime tenure does not appear to produce consistently politically independent Judges.
Given that there's no functional difference between requiring people pay a penalty (on their tax returns!) for not having health insurance, and giving them a credit for having health insurance, why should we consider the former unconstitutional but the latter constitutional? I know a lot of courts have rejected the "tax" claim on the basis that they struck the "tax" language from a late version of the bill, but why should this matter when dealing the proper scope of Federal power?
ReplyDeleteAlthough I am by no means an expert on income tax law, there is a functional difference between a tax credit, a tax penalty (and a tax deduction which you did not mention). For people who do not pay or file taxes presumably no penalty would apply, or they would be forced to file if only to not pay the penalty. For a credit, you would have people seeking a negative tax liability for obtaining health insurance regardless of the source of that insurance.
ReplyDeleteAs for one being Constitutional and the other being unconstitutional: A credit is Constitutional, because you could do what was necessary to become entitled to the benefit, or not involve yourself in the health insurance system and reap no government entitlement (just like a home energy credit). A penalty is unconstitutional because it is not styled as a tax, but essentially as a civil punishment that can be avoided by taking an affirmative commercial action, i.e. purchasing health insurance. A civil punishment for not engaging in commerce is not allowable under the commerce clause. If it had been called a tax, and was coupled with a credit for those obtaining health insurance, then it likely would be Constitutional. The Democrats and Pres. Obama did not have the political capital necessary to pass the mandate as a tax and spend entitlement, so we have this bizarre unconstitutional hybrid.
If the Federal Government can punish its citizens for not purchasing or entering into a private contract that it deems necessary, what's going to stop them from punishing us for not buying a certain brand of car, or for not buying the required amount of vegetables every month? Should the government be allowed to fine me or put me jail because I don't like broccoli?
ReplyDeleteAnyone who thinks the Federal government is allowed to punish us for not buying something they want us to has a seriously flawed understanding of freedom and the limits the Constitution puts on our government. Non activity is not economic activity.
On May 12-13 there was a malfunction with Blogger. This has resulted in the deletion of a comment be me on May 11, 2011 at 8:31 PM:
ReplyDeleteAlthough I am by no means an expert on income tax law, there is a functional difference between a tax credit, a tax penalty (and a tax deduction which you did not mention). For people who do not pay or file taxes presumably no penalty would apply, or they would be forced to file if only to not pay the penalty. For a credit, you would have people seeking a negative tax liability for obtaining health insurance regardless of the source of that insurance.
As for one being Constitutional and the other being unconstitutional: A credit is Constitutional, because you could do what was necessary to become entitled to the benefit, or not involve yourself in the health insurance system and reap no government entitlement (just like a home energy credit). A penalty is unconstitutional because it is not styled as a tax, but essentially as a civil punishment that can be avoided by taking an affirmative commercial action, i.e. purchasing health insurance. A civil punishment for not engaging in commerce is not allowable under the commerce clause. If it had been called a tax, and was coupled with a credit for those obtaining health insurance, then it likely would be Constitutional. The Democrats and Pres. Obama did not have the political capital necessary to pass the mandate as a tax and spend entitlement, so we have this bizarre unconstitutional hybrid.
On May 12-13 there was a malfunction with Blogger. This has resulted in the deletion of an anonymous comment on May 11, 2011 at 11:29 PM:
ReplyDeleteIf the Federal Government can punish its citizens for not purchasing or entering into a private contract that it deems necessary, what's going to stop them from punishing us for not buying a certain brand of car, or for not buying the required amount of vegetables every month? Should the government be allowed to fine me or put me jail because I don't like broccoli?
Anyone who thinks the Federal government is allowed to punish us for not buying something they want us to has a seriously flawed understanding of freedom and the limits the Constitution puts on our government. Non activity is not economic activity.
I don't think that's really persuasive. Consider:
ReplyDelete1) Raise taxes for everyone by $500. Provide refundable tax credit for of $500 for having health insurance; and
2) Create a tax penalty of $500 for not having health insurance.
How can #1 be constitutional and #2 be unconstitutional?
The Federal Government already penalizes people for failing to buy a lot of products. People without mortgages (a financial product) pay higher taxes. People in a specific income range pay higher taxes for not purchasing child care. For a few years, people who failed to purchase energy efficiency products -- windows, tankless water heaters, etc. -- paid higher taxes than those who did. Are you prepared to declare these policies unconstitutional?
FWIW, the failure to understand that these amount to the same exercise of federal power stems from a well-known cognitive bias: loss aversion (see also Prospect Theory). Tax credits (refundable or otherwise) are seen as gains, penalties (means tested or not) are seen as losses. In reality, a tax credit is a loss for everyone not getting the credit--a penalty for failing to, in the cases above, engage in a private contract.
I suspect that the government could issue a tax "credit" (whether revenue-neutral or not) for purchasing broccoli. I suspect it would, by the same token, be constitutional for it to issue a tax "penalty" for failing to purchase broccoli. I doubt federal jail time would survive 8th amendment scrutiny, however. And I seriously doubt such a policy would survive the political process very long, so I don't worry very much about those sorts of slippery slope claims. Particularly since the tax code had, until very recently, penalties for anyone who did not buy particular kinds of cars (e.g., hybrid vehicles), that meant, de facto, a penalty for anyone wanting to buy certain brands (Subaru, Volkswagen, Suzuki, Hyundai, Kia, etc.) .
Dan,
ReplyDeleteFor the car tax penalty, this is one of the easier items to dismiss. The penalty (additional taxes) in that instance only applies if an individual decides to purchase a vehicle. If someone decides not to purchase any vehicle there is no penalty (or benefit for purchasing a hybrid).
It would be Constitutional to issue a tax credit for people purchasing broccoli just as there is a credit for purchasing energy efficient windows.
As for your question:
"How can #1 be constitutional and #2 be unconstitutional?"
Imposing a penalty for failing to purchase a product (broccoli) is not Constitutional unless issued as a per capita tax (your example #1). The reason being is that a per capita tax is a tax on people for waking up in the morning (being alive), and is specifically allowed under Article 1 Section 9 of the Constitution. A tax on not purchasing is a regulation of economic inactivity, because it is not under the specifically enumerated power of the Constitution.
The U.S. Congress and Pres. Obama specifically disclaimed that the penalty in this instance is a tax. They were adamant about how this is not a tax.
Ultimately, this boils down to a simple question: is the decision to not purchase health insurance commerce sufficient to be regulated under the commerce clause?
For those in favor of the law: it boils down to: is the decision to not purchase health insurance, and yet still partake in the health care system, commerce sufficient to be regulated under the commerce clause?
Paul: "For the car tax penalty, this is one of the easier items to dismiss. The penalty (additional taxes) in that instance only applies if an individual decides to purchase a vehicle. If someone decides not to purchase any vehicle there is no penalty (or benefit for purchasing a hybrid).
ReplyDeleteIt would be Constitutional to issue a tax credit for people purchasing broccoli just as there is a credit for purchasing energy efficient windows."
I don't see how this answers my basic point: there is no difference. I pay more in taxes if I don't purchase a Hybrid vehicle than if I do. "Credit" vs. "penalty" is a semantic, not a substantive distinction.
Indeed, as I noted, failing to see these as equivalent is a well-known cognitive bias that's been long understood as important in psychology, behavioral economics, and political science.
As for the tax issue, this is why I'm confused. Yes, they struck the word "tax" from one version of the bill. Yes, they insisted it wasn't. But this was done for political reasons. Nothing in the bill changed with the removal of the word tax! Why should this matter one whit for the question of whether or not the action falls within the scope of appropriate Federal power? If we start referring to existing tax penalties as "petunias" do they suddenly become unconstitutional? I think not.