Penalties, Taxes, and Rewriting Law

There's something happening here
What it is ain't exactly clear
--Buffalo Springfield

In the Affordable Care Act (ACA), the 'individual mandate' requires people to purchase health insurance. If they do not purchase health insurance, then they must pay a penalty. Failure to pay the fine results in criminal prosecution.

This is how the statute was written and presented to the American people. When asked repeatedly about whether the individual mandate was really a tax, DC Democrats repeatedly denied it. President Obama famously did so himself on national television.

However, when arguing before the Supreme Court, federal government lawyers asked the justices to consider the argument that, indeed, the individual mandate was indeed a tax. The government's brief states, "the minimum coverage provision is independently authorized under Congress's taxing power."

Previous cases argued before the Supreme Court have established clear lines between taxes and penalties (Scalia et al dissenting, 18). A tax is an enforced contribution to provide for the support of the government. Taxes 'raise revenue' for government programs. A penalty is an exaction imposed by statute as punishment for an unlawful act.

Because previous statutes have occaisionally blurred the two concepts, previous Courts have sought criteria that guides distinguishing a penalty from a tax. "When an act 'adopts the criteria of wrongdoing' and then imposes a monetary penalty as the 'principal consequence on those who transgress its standard,' it creates a regulatory penalty, not a tax." (Scalia et al dissenting, 18-19)

The simple question then, is whether the exaction imposed by individual mandate provision is a penalty or a tax. Clearly, as demonstrated by Scalia et al dissenting, 19-21, the statute itself imposes a penalty. The statute itself calls the exaction a penalty at least 18 times throughout the Act.

The dissenters observe that Congress may have developed the ACA on the basis of taxing but it chose not to do so in this case. From Scalia et al dissenting, 18:

"...we cannot rewrite the statute to be what it is not. 'Although this Court will often strain to construe legislation so as to save it against constitutional attack, it must not and will not carry this to the point of perverting the purpose of a statute...' or judicially rewriting it. In this case, there is no simple way, 'without doing violence to the fair meaning of the words used,' to escape what Congress has enacted: a mandate that individuals maintain minimum essential coverage, enforced by a penalty."

As we now know, Chief Justice Roberts labored to do otherwise (Roberts opinion, 31-44). By editing out the word 'penalty' and replacing it with the word 'tax,' the chief justice has rewritten law from the bench.

Roberts opined that judges should restrain from lawmaking since this is something that should be directly taken up between Congress and the people. However, by rewriting the statute in the form of a tax, he has done precisely this.

Most people understand that the primary reason why DC Dems did not slant the statute in the context of a tax is that taxes are politically unpopular with many Americans. A tax of the magnitude implied by the ACA may have made it generally unpalatable among the people during its development in 2009-2012. By waiting until after the law was passed and signed before declaring it a tax, Roberts has provided some measure of political cover for lawmakers.

Whether this political cover is effective or not remains to be seen. Plausibly, the American people will see through the process used here as one of gimmickry and subsequently reject its legitimacy. Moreover, Republican are already using the ruling to claim that Democrats duped people into supporting one of the largest tax increases on record. This could injure Democrats on the campaign trail.

In any event, it is hard to imagine a more straightforward example of judicial rewriting of law in the history of Supreme Court jurisprudence.