Balkinization  

Saturday, January 02, 2010

Apparently, Senator Hatch has not read the text of the individual mandate (or else he's just fibbing)

JB

Orrin Hatch and his friends get the benefit of the pages of the Wall Street Journal to tell us things about the individual mandate that are not actually true.
First, the Constitution does not give Congress the power to require that Americans purchase health insurance. Congress must be able to point to at least one of its powers listed in the Constitution as the basis of any legislation it passes. None of those powers justifies the individual insurance mandate. Congress's powers to tax and spend do not apply because the mandate neither taxes nor spends. The only other option is Congress's power to regulate interstate commerce.
Is that so? Let's look at the House and Senate Bills.

Here's the House Bill:

‘‘PART VIII—HEALTH CARE RELATED TAXES
‘‘SUBPART A. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE
COVERAGE.
‘‘Subpart A—Tax on Individuals Without Acceptable Health Care Coverage
‘‘Sec. 59B. Tax on individuals without acceptable health care coverage.
‘‘SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE
HEALTH CARE COVERAGE.
‘‘(a) TAX IMPOSED.—In the case of any individual who does not meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed
a tax equal to 2.5 percent of the excess of—
‘‘(1) the taxpayer’s modified adjusted gross income for the taxable year, over
‘‘(2) the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.

Now let's look at the Senate Bill:

‘‘CHAPTER 48—MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE
‘‘Sec. 5000A. Requirement to maintain minimum essential coverage.
‘‘SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ES21
SENTIAL COVERAGE.
‘‘(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 an applicable individual fails to meet the requirement of subsection (a) for 1 or more months during any calendar year beginning after 2013, then, except as provided in subsection (d), there is hereby imposed a penalty with
respect to the individual in the amount determined under subsection (c).
‘‘(2) INCLUSION WITH RETURN.—Any penalty imposed by this section with respect to any month shall be included with a taxpayer’s return under chapter 1 for the taxable year which includes such month.
‘‘(3) PAYMENT OF PENALTY.—If an individual with respect to whom a penalty is imposed by this section for any month—
‘‘(A) is a dependent (as defined in section 152) of another taxpayer for the other taxpayer’s taxable year including such month, such other taxpayer shall be liable for such penalty, or
‘‘(B) files a joint return for the taxable year including such month, such individual and the spouse of such individual shall be jointly liable for such penalty.
‘‘(c) AMOUNT OF PENALTY.—
‘‘(1) IN GENERAL.—The penalty determined under this subsection for any month with respect to any individual is an amount equal to 1/12 of the applicable dollar amount for the calendar year.
‘‘(2) DOLLAR LIMITATION.—The amount of the penalty imposed by this section on any taxpayer for any taxable year with respect to all individuals for whom the taxpayer is liable under subsection (b)(3) shall not exceed an amount equal to 300 percent the
applicable dollar amount (determined without regard to paragraph (3)(C)) for the calendar year with or within which the taxable year ends.
‘‘(3) APPLICABLE DOLLAR AMOUNT.—For purposes of paragraph (1)—
‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the applicable dollar amount is $750.
‘‘(B) PHASE IN.—The applicable dollar amount is $95 for 2014 and $350 for 2015.

The House bill is a tax on adjusted gross income. You pay the tax if you don't purchase health insurance. Put another way, if you don't want to buy health insurance you can just pay the tax.

The Senate bill is a penalty tax. If you don't want to purchase health insurance, you pay the tax. The penalty is assessed for as long as you don't buy insurance. Such taxes are quite common-- think, for example, about the penalties imposed for failing to pay your income tax on time, or a tax on polluters who fail to purchase and install anti-pollution equipment. The Senate bill can also be classified as an excise tax on an event-- failure to pay premiums in a given month.

Congress's powers to impose an income tax, a penalty tax, or an excise tax are unproblematic. The House and Senate versions of the individual mandate are clearly within Congress's powers to tax and spend for the general welfare. Nor are they direct taxes that must be apportioned by state. Under the 16th Amendment taxes on income need not be apportioned no matter what the source of the income; excise and penalty taxes are not taxes on real estate and they are not capitation or "head" taxes, taxes that are levied on the population no matter what they do. Therefore they are not direct taxes within the meaning of the Constitution and existing precedents.

Either the House or the Senate version of the tax is clearly constitutional under existing law. It is not even a close question.

The reason why Senator Hatch does not tell you what is in the bill in his op-ed is because once you read it, you will see that what he says is not true. The individual mandate is structured as a tax. And the tax is perfectly constitutional under Congress's powers to tax and spend for the general welfare.


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