Affordable Health Care Act: Let the Ex-Post Games Begin!

Today on June 28th of 2012, the Supreme Court rendered their ruling on Natio nal Federation of Independent Businesses v. Sebelius. For those who are vehemently, or even not so vehemently but simply opposed to the so called "individual mandate" portion of the legislation, perhaps the SCOTUS ruling seems like loss. However, it should first be considered, as it was addressed by the Court, that the "individual mandate" does not take place until 2014 which makes the ruling an ex-ante (before the fact) as opposed to an ex-post (after the fact) ruling.

Because the Supreme Court has rendered an ex ante ruling regarding the so called "individual mandate" portion of the Affordable Health Care Act this does not preclude Constitutional challenges of the legislation once the "individual mandate" is in effect. However, it is important to understand what precisely was ruled by the Supreme Court and that by their ruling they have effectively made many ex-post arguments regarding the "mandate" moot. This is because the SCOTUS held that the "mandate" was a "tax" and correctly ruled that Congress does indeed have the complete and plenary power of taxation.

The Act provides that this “penalty” will be paid to the Internal Revenue Service with an individual’s tax- es, and “shall be assessed and collected in the same manner” as tax penalties. §§5000A(c), (g)(1)

~National Federation of Independent Business v. Sebelius~

Consider what 26 USC § 5000A - Requirement to maintain minimum essential coverage actually states:

(a) Requirement to maintain minimum essential coverage An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month. (b) Shared responsibility payment (1) In general If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is liable under paragraph (3), fails to meet the requirement of subsection (a) for 1 or more months, then, except as provided in subsection (e), there is hereby imposed on the taxpayer a penalty with respect to such failures in the amount determined under subsection (c).

Subsection (c) offers:

(c) Amount of penalty (1) In general The amount of the penalty imposed by this section on any taxpayer for any taxable year with respect to failures described in subsection (b)(1) shall be equal to the lesser of—

It should be noted, and in deference to those wascally wabbits we call Congwess, and likely why subsection (g) is also pointed to in the ruling, that:

(A) Waiver of criminal penalties In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure. (B) Limitations on liens and levies The Secretary shall not— (i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or (ii) levy on any such property with respect to such failure.

While a "penalty" has been placed on a failure to comply with the "individual mandate", or "shared responsibility payment", this "penalty comes with no criminal prosecution, nor any lien on any property. Why?

The short answer is because this "tax" is not a direct tax in the form of a capitation tax, and it is certainly not any tax on property, it is instead an indirect tax on some specific taxed activity. Of course, since the "penalty" would be effectively imposed upon a lack of compliance that lack cannot fairly constitute any activity because that would mean you would have to actually do something as opposed to doing nothing:

But the distinction between doing something and doing nothing would not have been lost on the Framers, who were “practical statesmen,” not meta- physical philosophers.

~National Federation of Independent Business v. Sebelius~

This statement made is actually in regards to Congress' power to regulate commerce, correctly pointing out that Congress can regulate it not compel it, but the principle behind this statement is every bit as much applicable to "income" taxation as it is the regulation of commerce. Unless the "income" tax is a direct tax - of which it is not - Congress cannot tax indirectly on the activity of doing nothing, and Congress hasn't. Congress has placed the "shared responsibility payment" upon the taxpayer:

(14) Taxpayer The term "taxpayer" means any person subject to any internal revenue tax.

But the "taxpayer" is not statutorily defined just once, but twice:

(b) Taxpayer Notwithstanding section 7701 (a)(14), the term “taxpayer” means any person subject to a tax under theapplicable revenue law.

(Emphasis added)

~26 USC § 5000A~

(a) Requirement to maintain minimum essential coverage An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

(Emphasis added)

Oh! You might say: "JPZ, there you go again, playing games of semantics. word games", and I would say to that: "Indeed, someone is playing games of semantics, but it isn't I".

In pressing its taxing power argument, the Government asks the Court to view the man- date as imposing a tax on those who do not buy that product. Be- cause “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality,” Hooper v. California, 155 U. S. 648, 657, the question is whether it is “fairly possible” to interpret the mandate as imposing such a tax, Crowell v. Benson, 285

~National Federation of Independent Business v. Sebelius~

The Supreme Court has, in an ex ante ruling, agreed with the government that this "penalty" is a tax imposed. The question of whom or what this tax is imposed is only vaguely answered, either expecting you to all ready know prior rulings regarding the nature of "income" taxation, or at the very least, now going back and boning up on this case law. The ex post problem with this legislation and "penalty" is that it can only apply to "taxpayers". The individual who does not authorize their employer to "withhold" taxes can easily defeat this tax by simply not complying with no fear of criminal prosecution or lien on property, the sad sack employee cannot.

thankyou for this explanation.....very interesting and the best summary I have seen yet.....But, they'd better get a move on and offer us some reasonably priced options.....especially for those of us in the no longer living "middle class"....

An excellent view upon the ruling JPZ. I believe the more we promote the critical thought into these rulings the better off we all will be. May we agree upon or disagree upon matters not. Expanding our understanding of the ruling(s) will only better equip ourselves.

I find it interesting that Justice Ginsburg submitted her own dissenting opinion on the matter and it was all aimed at Chief Justice Roberts' logic upon all three points argued: The Commerce Clause, the Necessary and Proper Clause and the Power to Lay and Collect Taxes clause.

Of course, much of her dissent is regards to Roberts breaking rank and reigning in the first two clauses and the precedent set in 1937. She also argues from the point that Congress would have the power to take over the Healthcare industry (as they did with the investment industry with Social Security) and enact a "tax and spend" scheme.

Here she succumbs that she cannot even answer the question:

THE CHIEF JUSTICE’s Commerce Clause essay all the more puzzling. Why should THE CHIEF JUSTICE strive so mightily to hem in Congress’ capacity to meet the new problems arising constantly in our ever­
developing modern economy? I find no satisfying response to that question in his opinion

I contend it is because the Chief Justice saw the opportunity, based on poor Governmental arguments to do just that; reign in the Commerce and Necessary and Proper Clauses.

-----------

Slightly off-topic though to your overall point so forgive the digression.

I refuse to purchase health insurance because I can't afford it. Halfway decent health insurance here is 150-200 dollars a month for a kid my age, where the average income for a 4 person household is like 40-50k a year. 200 dollars a month is gas to work and most of my meals.

Like I said, I simply refuse to comply.

I also still maintain this was to put the ball right back into the Legislative and Executive's hands and let them explain to the People why they will be taxed for not engaging in commerce or being inactive in a market.

The oft occurring argument that people enjoy bringing up had to do with car insurance. While many understood that car insurance was only required if you participated in the activity of operating an automobile upon public roads, it was because you were actively engaging in the act.

This law, based on the tax argument could give States the ability to tax those who do not engage in the activity of driving an automobile to have a "shared responsibility" and thus should be taxed even for their non-participation of the activity.

That is the down fall to the argument made in this ruling.

reply to post by ownbestenemy


If Justice Ginsberg wants this legislation to stand as Constitutional she should show a little gratitude to Chief Justice Roberts for practically ensuring that by ruling out any valid consideration of the Commerce Clause as making it Constitutional. By doing this, as I alluded to in my O.P., Roberts has prevented any ex post challenges of the Commerce Clause argument. It is one thing to rule, as Ginsberg presumably wanted to, that the Affordable Health Care Act is Constitutional based upon the Commerce Clause as a policy argument, that is to say an ex ante argument, another thing entirely when an individual challenges it showing demonstrable harm and violation of right in an ex post challenge.

reply to post by ownbestenemy

The oft occurring argument that people enjoy bringing up had to do with car insurance. While many understood that car insurance was only required if you participated in the activity of operating an automobile upon public roads, it was because you were actively engaging in the act.

I would suggest that you've overgeneralized the car insurance schemes set forth by the states, and the compulsory insurance schemes for automobiles could not work without an effective licensing scheme and registration scheme all ready in place...Hey! Wait a minute!! The states do have an effective licensing scheme and registration scheme in place!

This is an important principle of law to understand the Affordable Healthcare Act as well. The government could not effectively impose a "penalty" ("tax) on this even if it were an activity, such as the activity of hiring a doctor without health insurance. Going to the doctor is an activity. However, imposing a tax on such an activity, if indeed that is what has been done, could only work if there was some effective contractual agreement like drivers license and registration contractual agreements...Hey! Wait just a cotton pickin' minute, here! The federal government does have an effective contractual agreement and it is with "taxpayers".

reply to post by Jean Paul Zodeaux


Bless you JPZ. You've managed to turn off the stuck on high blender in my brain. Heck, I may even get to the point where I can sort this out.

Valuable information you are providing Dear. Do you mind if I forward your OP to some friends?

Des

Originally posted by Jean Paul Zodeaux
I would suggest that you've overgeneralized the car insurance schemes set forth by the states, and the compulsory insurance schemes for automobiles could not work without an effective licensing scheme and registration scheme all ready in place...Hey! Wait a minute!! The states do have an effective licensing scheme and registration scheme in place!

Bingo! So the compulsory scheme is implemented via the fact that we participate willingly to the state's regulatory structure. But what of here, in the case of ACA? Is the scheme we now are forced to be involved in because we are......taxpayers? Is this what you are saying JPZ? That the government doesn't see us as citizens, but merely pockets in which they can dip their hands into?

The ex post issues that might arise are that this legislation's "shared responsibility payment" is unevenly applied, and those people who do not file valid tax returns are just one obvious source of people who would not be affected by this toothless "penalty" if they chose not comply, and if they're not filing valid tax returns, it is arguable that many would not be concerned with compliance of legislation that is seemingly not in regards to them anyway.

Here's the deal with indirect taxes, they can be shifted or passed on, where a direct tax cannot:

It is usually said that a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be.

A tax where the burden can be shifted is a tax that can be defeated. If a tax is imposed upon the manufacture of thingamajigs and the manufacture passes that tax on to the supplier who then passes that tax on to the buyer, the buyer can defeat the tax by simply not purchasing thingamajigs. In regards to the Affordable Healthcare Acts "shared responsibility payment" it is obvious that the "penalty" is being shifted on to the "taxpayer", but what is not obvious is whether all "taxpayers" can escape the tax by themselves shifting the burden or simply just defeating the tax by simply declining to purchase health insurance, and declining to pay any fine.

For the employee who as a signed an Employee Withholding Allowance Certificate (Forms W-4/MW507), there will be no shifting of the burden in any way, and the IRS will have no problem at all in collecting any "penalties" imposed by the Affordable Healthcare Act, but for the individual who has not signed any Forms W4, but files as a "taxpayer" earning adjusted gross income, it is unclear precisely how the IRS expects to "collect" on this "penalty", particularly since there is no threat of criminal conviction or lien on any property.

The ex post issue is still in play, and while those in favor of the Affordable Healthcare Act may see this ruling as a huge victory, since the "individual mandate" issue remains far from "settled" and because of how the Supreme Court ruled, this issue just very well may well shed some necessary contemporary light on "income taxation" and a whole lot of people just might start asking how it was they became a "taxpayer" to begin with.

Post Script: Des; feel free to forward this to whomever you want.

reply to post by Jean Paul Zodeaux



Lots of legal blah blah. I am sorry, but I am not sure I understand. Are you saying that Roberts has affirmed it is Constitutional and written the judgement in a way that it guarantees a challenge ex-post which will overturn this abhorrent "law"

Originally posted by Bakatono
reply to post by Jean Paul Zodeaux

 

Lots of legal blah blah. I am sorry, but I am not sure I understand. Are you saying that Roberts has affirmed it is Constitutional and written the judgement in a way that it guarantees a challenge ex-post which will overturn this abhorrent "law"

No, the ex post challenges were a given regardless of what Chief Justice Roberts said. What I am saying is that because Roberts eliminated the Commerce Clause as a valid justification for the "shared responsibility payment", Roberts effectively limited the amount of valid ex post challenges. It was a prudent moment of jurisprudence. Had they upheld the Commerce Clause arguments the lower courts would be inundated with individual challenges...not that they still will not be, only that Roberts limited the valid challenges down to "tax" arguments.

Originally posted by Bakatono
reply to post by Jean Paul Zodeaux

 

Lots of legal blah blah. I am sorry, but I am not sure I understand. Are you saying that Roberts has affirmed it is Constitutional and written the judgement in a way that it guarantees a challenge ex-post which will overturn this abhorrent "law"

The ruling limited them (the ex post challenges). If it were held under the Commerce Clause can you imagine how many "Ninth Amendment" issues would arise; the amendment I believe would be invoked in this case. That argument would read something like this:

There is no enumerated power given to Congress to compel an Individual to engage in Commerce or a market and I therefore retain that it is my enumerated Right, as held by the Ninth Amendment, that I will only engage in commerce and a market as I see fit.

The ruling takes those arguments out of the picture and we are left with the taxation argument. One that JPZ has surely made a point that could be made if people actually choose to do so.

reply to post by Jean Paul Zodeaux


So are you saying that this is a valid case where the commerce clause applies and Roberts was correct in ruling the way he did; or are you saying that it isn't a valid application of the commerce clause, or a questionable one, and he did this to prevent lawsuits for whatever reason he would want to prevent them. Laziness, corruption, whatever.

I will move out of the USA before I am forced to pay for health insurance!

It was a freaking scam to make insurance mandatory for cars and this is a scam as well. Why is it a scam?

Lets get on the logic train for a minute shall we? I go to play Blackjack in a casino and the dealer turns up an Ace on his first card he offers the players "Insurance". Purchasing this insurance requires you double your bet. Should the dealer get a Blackjack you don't lose your money.
No player is forced to buy insurance, as insurance is something you buy when you can afford it and when you don't want to risk your initial bet.

Cars; insurance should be for those that wish to cover a potential loss. Take a risk and you may lose, or you may never have a loss with the insured car and lose ALL of the money spent.

Homes, How many people lost their credit and homes when it flooded and they had no flood insurance? Insurance is something you buy when you can't afford to lose money if and when you take a loss. Until that point it is simply money spent.

I am 47 years old, in amazing shape and condition and have never been sick, needed antibiotics and other than a few broken bones (that I paid for out of pocket) I have never needed a doctor.

Insurance is no longer insurance when it is forced upon you. It is a TURKEY TAX. If I can't afford health care and I get really sick then it should be on me to man up and die politely.

I have grown to hate a Country I should be in love with, what a fraking shame.

Originally posted by Bakatono
reply to post by Jean Paul Zodeaux

 

So are you saying that this is a valid case where the commerce clause applies and Roberts was correct in ruling the way he did; or are you saying that it isn't a valid application of the commerce clause, or a questionable one, and he did this to prevent lawsuits for whatever reason he would want to prevent them. Laziness, corruption, whatever.

No, I did not even come close to saying that. It is quite clear that the Commerce Clause does not apply, and with Roberts making this perfectly clear, he has made any ex post challenges regarding the Commerce Clause moot. Anyone foolish to challenge the bill on that issue would likely never get past a first court, and most assuredly would never make it to any final court of appeals.

The issue is a tax issue, plain and simple, which is to say, as complex as it can get, because it involves the so called "Personal Income Tax".

Originally posted by Bakatono
reply to post by Jean Paul Zodeaux

 

So are you saying that this is a valid case where the commerce clause applies and Roberts was correct in ruling the way he did; or are you saying that it isn't a valid application of the commerce clause, or a questionable one, and he did this to prevent lawsuits for whatever reason he would want to prevent them. Laziness, corruption, whatever.

I know you address JP on this but Robert's opinion on the matter, as highlighted in Ginsburg's dissent was that he effectively reigned in the Commerce Clause (even if only a little bit). He repeatedly cited the known fact that previous Courts and Congress' have expanded the nature of the Commerce Clause.

Given its expansive scope, it is no surprise that Congress has employed the commerce power in a wide variety of ways to address the pressing needs of the time.

Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching “activity.”

Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are
doing nothing would open a new and potentially vast domain to congressional authority

He limited the Clause and closed the door on Congress having the power to regulate or force us to engage in an activity solely because the Government feels they can compel us; via the Commerce Clause. It was an opportunity to reign in the standing precedent "(that) has recognized Congress' large authority to set the Nation’s course in the economic and social welfare realm." - Justice Ginsburg.

This is why when you read Ginsburg dissent, it is wholly devoted towards the Commerce Clause.

reply to post by Jean Paul Zodeaux


So, are you in essence, saying that this ACA only applies to "Taxpayers"?

Thus if your "NOT" a "Taxpayer" the ACA does not apply?

Also opens the door, in my opinion, to open the can of worms known as "Personal Income Tax".

Very interesting article, JPZ!

-Cyg

reply to post by Cygnis


Yes, in essence, this appears to be the case. It is only "taxpayers" that can be affected by the legislation, as the IRS only has jurisdiction over "taxpayers" and has no lawful authority over any "non-taxpayer".

Very interesting times to come.

reply to post by Jean Paul Zodeaux


Interesting indeed...for us non-taxpayers. I've wanted to call myself that for a long, long time. This concept could go viral.

Des