Health Law: SCOTUS Digs Into the Tax Penalty Box
Policy + Politics

Health Law: SCOTUS Digs Into the Tax Penalty Box


Day One of Supreme Court arguments about the Affordable Care Act focused not on the constitutionality of the law, but on whether the court should be ruling on it at all at this point. In other words, Monday’s arguments before a packed courtroom gave the high court the opportunity to postpone considering the central question in the case: the constitutionality of the individual mandate.

But based on the skeptical questioning by a majority of the justices on the first of three days of hearings, they will reject the notion of kicking the can down the road.

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That heightens the stakes for Tuesday’s deliberations, which will take on the core issue: whether the individual mandate is a valid use of the commerce clause of the U.S. constitution, which prevents state interference with interstate commerce. The argument for the mandate is that people without insurance ultimately have their health care bills paid by the rest of society, and therefore their behavior – whether or not they have insurance – can be regulated by the federal government. 

The issue on Monday revolved around the question of whether the penalty attached to failing to purchase insurance is a tax. If it is, then previous court decisions (with a few exceptions) have ruled that an obscure 1867 statute called the Anti-Injunction Act (AIA) requires that any court review of the tax’s constitutionality be postponed until it is collected – which, for the health care reform legislation, won’t be until 2015. The purpose of the AIA is to eliminate the ability of any disgruntled citizen to tie up new taxes in elongated court proceedings before they are collected.

Since neither the Obama administration nor the reform’s opponents say the AIA should apply to health care reform (both want clear court guidance on the mandate), the high court invited Robert A. Long of the Washington law firm Covington & Burling, an experienced Supreme Court litigator, to make the case. Most of the nine judges (Justice Clarence Thomas, as usual, remained silent) appeared dubious about Long’s core argument that the penalty represented a tax.

That the penalty “is  being collected in the same manner as a tax doesn’t automatically make it a tax, particularly since the reasons for the Anti-Injunction Act are to prevent interference with revenue sources,” said Justice Stephen Breyer, one of the high court’s four liberal justices. Pointing out how little would be collected from the penalties, he said that “an advance attack on this does not interfere with the collection of revenues.”

Chief Justice Roberts pointedly asked Long about Helvering v. Davis, the 1937 case that upheld the Social Security Act.   That case also involved a challenge to a then-controversial law with a tax that had yet to go into effect. “Are you asking us to overrule the Davis case?” Roberts asked.

One of the main concerns for both the conservative and liberal judges was whether the courts’ or the government’s discretion would be severely limited if the AIA is interpreted to mean all court challenges must be stopped until taxes are collected. “It seems to me there would be instances where the government would want to litigate the validity of a tax right away,” said Justice Anthony Kennedy, who was appointed by President Ronald Reagan.

Justice Sonia Sotomayor, an Obama appointee, noted that the government had on numerous occasions allowed tax challenges to go forward before taxes were collected. “What parade of horribles” would occur if the courts or government made exceptions in some cases," she asked.

Conservative Justice Antonin Scalia brought laughter to the packed chamber by noting that there would be no ill effects “because you have an intelligent federal court deciding whether you are going to have an exception.”

The high court on Tuesday will turn its intelligence to the individual mandate, where the questioning will no doubt reflect a far more divided court.