Opinion: Justices take on healthcare reform law’s 1st issue: What’s a tax?


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This post has been updated, as indicated below.

The Supreme Court devoted 90 minutes Monday to arguments on a question about the 2010 healthcare reform law that is deceptively simple: Does the Anti-Injunction Act bar courts from reviewing the legality of the individual mandate before it takes effect?


The Anti-Injunction Act is a federal law from 1867 that forbids courts to consider lawsuits that try to prevent a tax from going into effect. The point was to postpone any challenge to a new tax until after people started paying it.

The deceptively simple reading of the issue before the Supreme Court is whether the individual mandate in the Patient Protection and Affordable Care Act -- the requirement that all adult Americans obtain health insurance policies -- is a tax. To the extent that the mandate bears even a passing resemblance to a tax, it’s because the Internal Revenue Service imposes a penalty on those who don’t maintain insurance coverage for at least nine months of the year. The penalty is phased in over the first three years, starting with tax returns for 2014, and is based on the taxpayer’s income.

Unlike excise taxes, income taxes, estate taxes and any other form of tax you can think of, however, the penalty isn’t intended to raise money to support government programs. Washington isn’t counting on that money to help pay for the insurance subsidies in the healthcare law; it’s counting on compliance with the mandate to help keep down the cost of insurance. Indeed, the less money the IRS collects, the more successful the mandate and the healthcare reform law will be. The clear inference is that the mandate isn’t a ‘tax’ in the sense that Congress meant in the Anti-Injunction Act.

At least two factors, however, complicate the question. The first are Supreme Court precedents that take a broad view of what constitutes a tax -- precedents that led the Fourth Circuit Court of Appeals to throw out one anti-healthcare reform lawsuit as premature. As Judge Diana Gribbon Motz of the Fourth Circuit wrote, ‘An exaction qualifies as a tax even when the exaction raises ‘obviously negligible’ revenue and furthers a revenue purpose ‘secondary’ to the primary goal of regulation. Thus, the term ‘tax’ can describe a wide variety of exactions.’ (citations omitted)

The second is the contorted argument by the Obama administration that the courts shouldn’t consider the mandate a tax for the purposes of the Anti-Injunction Act, but that they should consider it an exercise of Congress’ power to levy taxes when evaluating its constitutionality. (Let’s just pause for a moment on that dizzying thought.) Rather than trying to sort that out myself, I’m going to refer you to the nicely clarifying analysis done by Lyle Denniston at Scotusblog.

[Updated, 1:30 p.m. March 26: Justice Samuel A. Alito invited the Obama administration’s solicitor general, Donald B. Verrilli Jr., to explain that apparent contradiction Monday. Here’s their exchange:


Alito: 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.

Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?

Verrilli: No, Justice Alito, but the Court has held in a license tax cases that something can be a constitutional exercise of the taxing power whether or not it is called a tax. And that’s because the nature of the inquiry that we will conduct tomorrow is different from the nature of the inquiry that we will conduct today. Tomorrow the question is whether Congress has the authority under the taxing power to enact it and the form of words doesn’t have a dispositive effect on that analysis. Today we are construing statutory text where the precise choice of words does have a dispositive effect on the analysis.]

Denniston and my colleague David Savage sat in on Monday’s arguments, and they both reported that the court seems ready to rule that the Anti-Injunction Act doesn’t apply. If the justices are so inclined because they don’t believe the mandate is a tax, that could make it easier for them to rule that Congress overstepped its bounds when it enacted the mandate. Another possibility, though, is that the court will carve out an exception to the Anti-Injunction Act that allows judges to consider some challenges to a tax before it takes effect.


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-- Jon Healey