Legal Commentary

When last we met, I argued that the newly-minted "individual responsibility" requirement ("IRR") that individuals purchase health insurance or be subjected to a penalty tax is within Congress' power under a combination of the Commerce Clause + the Necessary & Proper Clause.  But maybe you don't think so.  What about the taxing power?  The Constitution gives Congress (in Art. I sec. 8) the power to "lay and collect taxes...for...the general welfare."  The IRR (when fully phased in, which is not until 2016...start saving) is designed as an income tax with a floor; folks who don't buy insurance pay 2% of household income or $695, whichever is greater.  Lots of modern taxes have conditions attached to them; you can pay a lower tax by buying a wastewater treatment plant or investing in "closed-loop" biomass (i.e., fuel made out of chicken poop).  No one thinks those are unconstitutional, so why not the IRR?

There are two big questions, actually.  One was raised by Randy Barnett and his co-authors in a Heritage white-paper back in December.  Another was raised by the Supreme Court in 1922.  Both, though, are now out of date.

Barnett et al. argue that the IRR can't work because it's not "apportioned."  See, as part of the three-fifths compromise, the constitutional conventioneers agreed that "direct" taxes could only be imposed on state citizens if the total liability of all the state's residents bears the same proportion of national liability as the state has of the national population.  Huh?  Ok, say California has 1/10th the U.S. population.  That means a "direct" tax has to impose 1/10th of all its nationwide burden on folks in California -- no more, no less.  Basically, apportionment is impossible for most kinds of taxes.  So, um, what's a direct tax?  Well, no one really knows.  But we do know that income taxes aren't subject to apportionment, whether they're direct or not, because of the 16th Amendment.   

So, fortunately, you don't really have to understand any of the last paragraph, because the IRR is an income tax.  Perhaps this was not the case when Barnett et al. wrote their white paper?  In any event, as I mentioned, the IRR now is clearly a tax based on the household income of the payer, and so clearly not subject to apportionment.

What about the Supreme Court?  Well, in 1922 they said that Congress couldn't impose a tax on busineses that used child labor (in the aptly named "Child Labor Tax Case"). The court had just held (in Hammer v. Dagenhart, as you would remember if you hadn't slept through that day in con law) that Congress couldn't use the Commerce power to bar child labor, and they said in the Child Labor Tax Case that it was obvious Congress couldn't just use the taxing power instead.  Then in 1953 they said, "geez, sorry about all those little kids whose childhood was cruelly ripped from them because of our boneheaded decisions," and, without quite overruling the Child Labor Tax Case, they held that any tax that raises money is constitutionally within the taxing power.  Really, "any."  Including a $3,000 tax on "adulterated butter," which I couldn't find a picture of on google images, but which--trust me-- is gross.    

So, long story slightly shorter, looks like the IRR is constitutional.  Obviously, one can critique on normative grounds the current state of the law.  I have a very short essay on that question coming soon in the Yale Law Journal On-line; I'll post a link here when it's ready for public eyes.