Administration Argues Individual Mandate is Both Not a Tax and a Tax

October 24, 2011

The health care law’s requirement that individuals purchase health insurance (“individual mandate”) beginning in 2014 is a key point in court challenges to the law. When it was enacted, President Obama argued that the individual mandate should not be considered a tax:

STEPHANOPOULOS: Under this mandate, the government is forcing people to spend money, fining you if you don’t. How is that not a tax?

OBAMA: Well, hold on a second, George. Here – here’s what’s happening. You and I are both paying $900, on average – our families – in higher premiums because of uncompensated care. Now what I’ve said is that if you can’t afford health insurance, you certainly shouldn’t be punished for that. That’s just piling on. If, on the other hand, we’re giving tax credits, we’ve set up an exchange, you are now part of a big pool, we’ve driven down the costs, we’ve done everything we can and you actually can afford health insurance, but you’ve just decided, you know what, I want to take my chances. And then you get hit by a bus and you and I have to pay for the emergency room care, that’s…

STEPHANOPOULOS: That may be, but it’s still a tax increase.

OBAMA: No. That’s not true, George. The – for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase. What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that if you hit my car, that I’m not covering all the costs.

STEPHANOPOULOS: But it may be fair, it may be good public policy…

OBAMA: No, but – but, George, you – you can’t just make up that language and decide that that’s called a tax increase. Any…


OBAMA: What – what – if I – if I say that right now your premiums are going to be going up by 5 or 8 or 10 percent next year and you say well, that’s not a tax increase; but, on the other hand, if I say that I don’t want to have to pay for you not carrying coverage even after I give you tax credits that make it affordable, then…

STEPHANOPOULOS: I – I don’t think I’m making it up. Merriam Webster’s Dictionary: Tax – “a charge, usually of money, imposed by authority on persons or property for public purposes.”

OBAMA: George, the fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now. Otherwise, you wouldn’t have gone to the dictionary to check on the definition. I mean what…

STEPHANOPOULOS: Well, no, but…

OBAMA: …what you’re saying is…

STEPHANOPOULOS: I wanted to check for myself. But your critics say it is a tax increase.

OBAMA: My critics say everything is a tax increase. My critics say that I’m taking over every sector of the economy. You know that. Look, we can have a legitimate debate about whether or not we’re going to have an individual mandate or not, but…

STEPHANOPOULOS: But you reject that it’s a tax increase?

OBAMA: I absolutely reject that notion.

In court cases since then, the Administration has insisted that the individual mandate is a tax, as they seek to justify its imposition under Congress’s constitutional power to impose taxes. (Admittedly they are putting more effort into relying on the other possible source of authority, the Commerce Clause.)

Enter the Tax Anti-Injunction Act, a federal law that says courts cannot consider a lawsuit against a tax before the tax is assessed or collected. (We don’t want governments’ revenue sources crippled by frivolous lawsuits, the thinking went.) Because the individual mandate does not take effect until 2014, courts therefore cannot hear a legal challenge to it unless they first determine that it is not a tax. But to make that determination is to hear the case and violate the Tax Anti-Injunction Act, if it is indeed a tax. It’s a circular situation.

The Administration isn’t helping the confusion: eager for a court ruling on the individual mandate, they are arguing that it is not a tax for purposes of the Tax Anti-Injunction Act, but that it is a tax for the purposes of the Taxing Power:

The two arguments are “transparently contradictory,” said Tim Jost, a law professor at Washington and Lee University, who supports the healthcare law.

“They can’t have it both ways,” he said.

Jost said there are ways for the Supreme Court to get around the Anti-Injunction Act and avoid pushing the case back to 2014. But they can’t avoid it altogether, even though neither side wants a ruling on those grounds. If they don’t find a way around the tax law, he said, “that could be the end of the litigation right there.”

Greg Katsas, who represents NFIB in the lawsuit, said he’s not especially worried about the tax technicalities. NFIB and the states have consistently said that the fine for remaining uninsured is not a tax, for any reason.

He’s right: it’s a penalty and not a tax, legally speaking. But this shows the inherent problems in stripping courts of jurisdiction to consider tax cases: sometimes you’re not sure whether it’s a tax or not. If any law is deserving of Supreme Court review before it takes effect, it’s this one. Jurisdictional rules that could prevent that from happening should be questioned.


Related Articles

A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.