By Tom Watts

Part 2 in a series on National Federal of Independent Business v. Sebelius:

Roberts and the four liberals upheld the individual mandate as valid under the Taxing Clause. The majority noted, “The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects.” It pointed out that the “penalty” (a) “does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code,” (b) has an amount “determined by such familiar factors as taxable income, number of dependents, and joint filing status,” and (c) is described “in the Internal Revenue Code and enforced by the IRS.”

The majority, aware that it was describing the penalty as not a tax for the Anti-Injunction Act but a tax for the Taxing Clause, noted that this is not the first time that the Court has reached seemingly contradictory results construing these laws. In 1922, it decided that the Child Labor Tax was a tax under the Anti-Injunction Act in Bailey v. George but not under the Taxing Clause in Bailey v. Drexel Furniture. The majority also ran through a line of cases showing that the function, rather than the label, of the collection determined whether it was allowable under the Taxing Clause, including the apparently slam-dunk quote from United States v. Sotelo, “That the funds due are referred to as a ‘penalty’ . . . does not alter their essential character as taxes.”

The dissent disagreed. The Act called the collection a “penalty,” and the wording regarding purchasing coverage is phrased as mandatory (“requirement,” “shall,” etc.). The dissent, tellingly, said, “The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so.” While the dissent also noted that it would read the penalty as a tax if it could, it concluded (in contrast to Roberts’s opinion) that the penalty could not be construed this way.

In essence, the disagreement between the majority and the dissent was whether to focus on the effect of the Act or the wording of the Act. This is not an easy issue to decide, but if the goal is to find any plausible interpretation that would render a statute constitutional, the majority seems to have done so.

The other potential issue on the individual mandate was whether it was permissible under the Commerce Clause or the Necessary and Proper Clause. Since the case was disposed on other grounds, what the court said about the Commerce Clause appears to be dicta, but it is undeniably influential dicta. A majority consisting of Roberts and the four conservatives said that the Commerce Clause, even when combined with the Necessary and Proper Clause, does not give Congress the power to regulate inactivity, and that the decision not to purchase health insurance is inactivity. Congress can regulate commerce, but Congress cannot create commerce in order to regulate it. The four liberals argued that the “substantial effects” doctrine covers this situation: the decision not to buy health insurance has substantial effects on interstate commerce. While concurring with the five Justices who thought that this was not covered by the Commerce Clause, Thomas wrote separately solely to criticize the “substantial effects” doctrine as illicit.

The four-Justice minority’s approach seems more sensible here under existing precedent. There was considerable reference to Wickard v. Filburn, a 1942 case about wheat regulation, but the controversy was not really about that. The Court knows that if it took seriously the majority’s argument here, it would have to re-examine Gonzales v. Raich, a 2004 case regarding intrastate marijuana regulation. Federal drug laws, justified under the Commerce Clause, regulate even homegrown marijuana that never leaves a person’s house and is never involved in a commercial transaction. Raich found this regulation constitutional. It is not a large step from overturning the individual mandate back to overturning Raich.

The majority attempted to distinguish Raich on the grounds that previous cases were about activity whereas this case is about inactivity. This distinction is highly artificial. The Constitution does not allow Congress to regulate “activity.” It allows Congress to regulate “commerce.” If not engaging in a commercial transaction regarding your own home-grown marijuana qualifies as commerce under the Constitution, then surely notengaging in a commercial transaction regarding health insurance is also “commerce.”

It would have been more logical and honest for the conservative wing to say that it wanted to overturn Raich; Raich was not popular with conservatives when it was decided, although Scalia joined the opinion. Indeed, Raich manages to annoy conservatives who respect federalism, libertarians who value personal freedom, and liberals who prefer looser drug laws, all at the same time. Thus, overturning Raich would be a bombshell, but perhaps not an unwelcome one. Nevertheless, this Court did not attempt to do so, perhaps in part because there was no need, since the case was decided on Taxing Clause grounds.

In the last post, I will turn to severability and the Medicaid expansion.