NFIB 1B — Taxing Power

NFIB v. Sebelius — Taxing Power issue

Issue about whether the individual mandate can be upheld under Congress’s taxing power even if it fails under the Commerce Clause.

Who wrote the Taxing Power part

Chief Justice Roberts wrote the controlling opinion on this issue.

Vote on the Taxing Power issue

Five justices said the mandate could be upheld as a tax: Roberts, Ginsburg, Breyer, Sotomayor, and Kagan.

Main issue in NFIB Taxing

Whether the shared responsibility payment for going without health insurance is a constitutional tax or an unconstitutional penalty.

Holding in NFIB Taxing

The Court said the payment can reasonably be read as a tax, so it is constitutional under Congress’s taxing power.

Why this issue matters

NFIB saves the ACA even though Roberts rejects the Commerce Clause argument.

Roberts’ main question

Is the shared responsibility payment really a tax or is it actually a penalty for violating a command Congress had no power to impose directly?

Roberts’ tax rule

If something functions like a tax, it may be upheld as a tax even if Congress called it a penalty.

What makes something a tax for Roberts

A valid tax here is not exceedingly heavy, has no scienter requirement, and is paid to the IRS rather than a regulatory agency.

Tax features in NFIB

Must not be an exceedingly heavy burden, must have no scienter requirement, and must be paid to the IRS, not the Department of Health and Human Services.

Why the payment qualified as a tax

The payment was collected by the IRS, was not extremely punitive, and people could lawfully choose to pay it instead of buying insurance.

Lawful choice idea in NFIB

People may lawfully forgo insurance and pay the tax, or buy insurance and avoid the tax.

Roberts on labels

The fact that Congress called it a penalty is not controlling for the constitutional tax question.

Functional approach quote in NFIB

The Court uses a functional approach, “disregarding the designation of the exaction, and viewing its substance and application.” — Chief Justice Roberts quoting United States v. Constantine.

Why Roberts rejected the penalty view

A true penalty would look more like punishment for unlawful conduct, which would risk becoming an indirect police-power regulation.

Roberts and Butler

Roberts uses the concern from Butler that Congress cannot do indirectly through taxing and spending what it cannot do directly under another power.

Butler quote idea in NFIB

“[I]t must follow that it may not indirectly accomplish those ends by taxing and spending to purchase compliance.” — Justice Roberts in Butler, relied on in the NFIB slides.

Why Butler matters here

Roberts had just said Congress cannot force people into commerce under the Commerce Clause, so he had to decide whether the ACA was trying to do the same thing indirectly.

Why Roberts still upheld it

He concluded the payment was mild enough and tax-like enough that it could be read as a tax rather than a punishment.

Scalia’s view on the payment

Scalia said the payment was a penalty, not a tax, because Congress called it a penalty and placed it in the operative core of the Act.

Scalia quote in NFIB

“The fact that Congress… ‘imposed…a penalty,’ for failure to buy insurance is alone sufficient…” — Justice Scalia dissenting.

Scalia’s second point

The mandate and penalty were located in Title I, the Act’s operative core, rather than in Title IX’s Revenue Provisions.

Why Scalia thought it was not a tax

He focused on the statutory text, structure, and Congress’s own label.

Ginsburg on the taxing issue

Ginsburg agreed with Roberts that the payment could be upheld as a tax, even though she also thought the mandate was valid under the Commerce Clause.

NFIB Taxing study question 1

Roberts says something looks like a tax if it is not exceedingly heavy, has no scienter requirement, and is paid to the IRS; he thinks the mandate payment fits those features.

NFIB Taxing study question 2

Scalia says it is not a tax because Congress called it a penalty and placed it in Title I, not in the Revenue Provisions section.

Best Taxing Power takeaway

Roberts rejects the mandate as a Commerce Clause command but saves it by construing the payment as a tax.