Supreme Court’s Health Care Tax Verdict Flawed

June 28, 2012

Individual Mandate Does Not Meet Established Definition of a Tax

Washington, D.C., June 28, 2012—The individual mandate in the Patient Protection and Affordable Care Act should be considered a penalty and not a tax for purposes of the U.S. Constitution’s taxing power. Today’s verdict by the U.S. Supreme Court holding otherwise jeopardizes a widely-used and long-standing precedent and has severe implications for taxpayer protections and across the country, according to the Tax Foundation.

“The Court was incorrect to reject the widely-accepted definition of ‘tax’ as an exaction imposed for the primary purpose of raising revenue for general spending. There has been no development in law that necessitates such a far-reaching change,” said Tax Foundation Vice President for Legal Projects Joseph Henchman.

Federal and state courts have articulated a definition of “tax” that is widely accepted today. A tax is an exaction imposed for the primary purpose of raising revenue for general spending, while a penalty is an exaction imposed for the primary purpose of punishing an individual for an unlawful act. No evidence exists that the primary purpose of the individual mandate is to raise revenue. Of the various individuals and organizations opining on the purpose of the individual mandate, none have cited its ability to raise revenue.

A meaningful distinction between “tax” and “penalty” is vital to many federal and state provisions relating to tax policy. Under this ruling, government revenue collection efforts across the country could be imperiled, as many revenue sources are not subjected to the heightened restrictions that “taxes” are. To collect fees or impose criminal fines, states for the first time could see these charges subjected to supermajority, multiple reading, and other requirements.

The Tax Foundation’s amicus curiae brief by Joseph Henchman and Laura Lieberman, “The Health Care Individual Mandate is Beyond Congress's Taxing Power,” is available online.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or

View this page for additional Tax Foundation updates on the health care ruling.

The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.