On Friday December 14, 2018 a federal judge ruled that the Affordable Care Act (ACA, also known as Obamacare) was unconstitutional. The ruling came almost exactly 245 years after another famous American dispute over taxes. On December 16, 1773, a group of colonists boarded 3 East India Company ships in Boston harbor and dumped their loads of tea overboard. The British government had passed a law granting the failing East India company a monopoly over the colonial tea trade which amounted to an import duty or “tax.” The colonists felt they deserved all the rights of Englishmen to vote on tax laws. The rallying cry of the Boston Tea Party became, “No Taxation Without Representation.” You may be asking, what has that got to do with Obamacare? More than you might think, because Obamacare is fundamentally an argument over what constitutes a tax, and whether it is possible to tax what a person did NOT do.
Here’s a link to the Complaint, which is very interesting reading:
After the American Revolutionary War, the Founding Fathers, worried that they might create another tyrannical government just like the one they had fought a war to be free from, drafted a U.S. Constitution which gave limited power to the federal government. The U.S. Constitution is one of enumerated powers only. If “We the People” didn’t grant the federal government a power, then the federal government doesn’t have it. In fact, the 10th Amendment of the Constitution specifies that any power not expressly given to the federal government belongs to the people or the states. There are some powers that are clearly the responsibility of the states alone, and a few are shared by both. For example, only the federal government can declare war, maintain the armed forces, coin money and regulate commerce between the states. Only the states can establish schools and local governments and make marriage laws (well, forget about only the states making marriage laws since the Supreme Court ignored the Constitution on that one).
Obamacare’s provisions included a monetary penalty for people who did NOT purchase healthcare. When President Obama publicly argued for this plan, he specifically stated that it was a “penalty” and NOT a tax. As the campaign heated up during his bid for a second term, President Obama did not want to say he had imposed any new TAXES. However, months later, when his lawyers argued the case in the Supreme Court, they prudently argued that the ACA “mandate” was, in fact, a TAX and therefore was constitutional under the commerce provision. They had to argue it this way, because it is unconstitutional to compel anyone to behave a certain way, or compel them to buy something. Chief Justice Roberts agreed, calling the failure to obtain insurance an “omission,” which made going without insurance another thing the government could tax. It was the first time in U.S. history that the government could tax what an individual did NOT do.*
As a tax, Obamacare gave the Internal Revenue Service unprecedented responsibility to collect information and enforce compliance. It authorized the IRS to disclose taxpayer information to Health and Human Services (HHS) including the income of the taxpayer, and report that information to the healthcare exchanges. It is understandable why a modern “Tea Party” movement began in reaction to the imposition of this tax and the increasing power of the IRS, just as evidence surfaced that the IRS had been weaponized by the White House and Congressional Democrats to target conservative groups. Are you with me so far? Obamacare’s “individual mandate” which assessed a monetary fine for failing to purchase insurance, became law because of a narrow Supreme Court decision upholding it as a tax on an “omission.”
What you might have missed is that in 2017, Congress eliminated the financial penalties associated with failing to comply with the mandate, effective in 2019. In other words, in a few weeks, the “tax” will become “$0.” A tax that is zero dollars is not a tax. Thus, the ACA is no longer a TAX. If it is no longer a TAX, then it is simply a law that forces individuals to buy insurance. A law that compels people to buy something is unconstitutional. That is why 20 Republican state attorneys general requested an injunction against the ACA and asked a federal judge to declare that without the mandate, the ACA is unconstitutional. Persuaded by the states’ argument that the ACA violates the 5th Amendment’s due process clause as well as the 10th Amendment, a Texas federal judge struck down the Affordable Care Act last Friday night (almost exactly 245 years after the Boston Tea Party). Without a monetary penalty, you can now understand why Judge Reed O’Connor ruled that President Obama’s signature domestic legislation fell down “like a losing game of Jenga.” Not surprisingly, 17 Democratic attorneys general filed a motion the following Monday, December 17, 2018 to challenge Judge O’Connor’s decision, pending a decision by the U.S. Court of Appeals for the 5th Circuit in New Orleans.
Whatever you think about “Medicare for all” or the ACA, it is an interesting question whether the federal government can compel you to buy something, or penalize you for not doing so, no matter what they call it.
*Note: The individual mandate was phased-in over a three-year period which finished in 2016. It had two components:
- A requirement to hold minimum essential health insurance coverage, and
- A “shared-responsibility” payment (i.e., penalty) for those who failed to comply with the requirement. Anyone who didn’t have coverage that health insurance that qualified was required to pay a penalty based on either a percentage of their income or an inflation-adjusted dollar value – whichever was larger. Individual mandate penalties are assessed during the annual tax filing process; payments are made the year after the coverage lapse occurred. Per the Tax Cut and Jobs Act of 2017, the penalty will be eliminated beginning in 2019. However, the Tax Cut and Jobs Act did not change the legal requirement to hold minimum essential health insurance coverage. It also left other components of the ACA, including regulations in the individual market, in place.