The Supreme Court’s narrow decision to uphold the Affordable Care Act’s insurance mandate as a valid exercise of Congress’ taxing power has reignited a spin war over whether Democrats broke their pledge not to raise middle-class taxes, and whether they misled the public by insisting the mandate was not a tax during the contentious health care reform debate.
After all, back in September 2009, President Obama insisted to ABC News, “for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase. … I absolutely reject that notion.”
Within moments of the ruling Republicans pounced.
“The bill was sold to the American people on a deception,” said Senate Minority Leader Mitch McConnell.
“To our Democratic colleagues, stand by your tax increase or stand with us to Repeal and Replace Obamacare,” said Sen. Lindsey Graham (R-SC) in an emailed statement. “During the entire congressional debate over Obamacare, Democrats vehemently denied this was a tax on the American people. The Obama Administration also denied it was a tax. However, when the case went to Court, they argued, for constitutional purposes, it was a tax.”
Did the Supreme Court essentially expose Democrats’ big lie? The answer — well, there are two of them, and they’re both somewhat complicated. But irrespective of the truth, the Court’s ruling will presumably make the already difficult politics of the mandate even harder.
So is the mandate a tax? There’s a technical and a subjective answer. The technical answer is yes. The Court found that, by requiring people to either buy insurance or pay money to the IRS, the mandate functions like a tax, and is thus a valid exercise of the taxing power.
“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health
insurance may reasonably be characterized as a tax,” the controlling opinion reads. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
But the taxing power also justifies other Obama-era measures like his 2009 cigarette tax — an incentive for people to quit smoking — and only the most fervent anti-tax activists characterize that as a “tax increase on the American people” or the middle class.
The mandate is even less direct than the cigarette, and both the Court and Democrats have been clear that the intent is not to raise revenue by raising people’s taxes, but to provide people an incentive to buy subsidized health insurance. In other words, unlike income and payroll taxes, it’s a penalty.
And indeed, the Court relied on this more subjective understanding of the mandate’s intent in deciding to rule on the merits of the case at all. A 19th century law called the Anti-Injunction Act protects the government from challenges to taxes that have yet to be assessed. But even though the mandate doesn’t take effect until 2014 — and even though the majority declared it a valid use of the taxing power — they held that the Anti-Injunction Act did not apply.
“The Anti-Injunction Act applies to suits “for the purpose of restraining the assessment or collection of any tax,” the Court determined. “Congress, however, chose to describe the ‘[s]hared responsibility payment’ imposed on those who forgo health insurance not as a ‘tax,’ but as a ‘penalty.’ … There is no immediate reason to think that a statute applying to ‘any tax’ would apply to a ‘penalty.’ Congress’s decision to label this exaction a ‘penalty’ rather than a ‘tax’ is significant because the Affordable Care Act describes many other exactions it creates as taxes.”
Intent matters. And the Court essentially held that the law’s authors created something that functions like a tax, but serves the purposes of a penalty.
But the GOP is weighing various repeal bills, including legislation to strip the mandate. The fact that the Court upheld the mandate on taxing power grounds will make it harder than it already would have been for vulnerable Democrats to vote against that measure.
Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight, and the debt limit fight. He can be reached at email@example.com.