While the constitutionality of the Affordable Care Act's minimum coverage provision (the "individual mandate") and shared responsibility payment were pending before the U.S. Supreme Court, Robert Cooter of UC Berkeley Law School and I developed a theory of Congress's taxing power that anticipated, and may have influenced, the Court's taxing power analysis in NFIB v. Sebelius. (Several commentators, including Neal Katyal, Randy Barnett, and Jeffrey Rosen, noticed close similarities in the analysis, citations, and rhetoric between our article and the majority opinion of Chief Justice Roberts.) According to our theory, the difference between a permissible tax and an impermissible penalty for purposes of the Taxing Clause turns on the likely effects of a federal exaction on human behavior. Whereas a tax characteristically dampens the conduct subject to the tax and thereby raises revenue, a penalty prevents the conduct subject to the penalty and thereby does not raise revenue.
Turning to the individual mandate and the shared responsibility payment, we read the ACA as giving Americans subject to both provisions the choice between them: either obtain the minimum level of health insurance required by the ACA, or else make the shared responsibility payment. In other words, just as Congress can spend conditionally, so Congress in the ACA had imposed a conditional exaction: the mandate was the condition attached to the shared responsibility payment, which was the exaction. We concluded that this exaction was a tax, not a penalty, because the amount of the exaction was low relative to the cost of insurance; because the condition lacked a scienter requirement; and because the exaction lacked enhancements for repeatedly going without insurance. The Court for the most part read these ACA provisions in the same way, albeit as a matter of constitutional avoidance, which we did not think was necessary.
In 2017, Congress did not repeal the ACA provision containing the individual mandate. Nor did Congress repeal the provision creating the shared responsibility payment. Instead, Congress amended a third provision of the ACA -- the one that sets the amount of the shared responsibility payment. Specifically, Congress reduced it to $0. So, given how the ACA was construed by the Supreme Court in NFIB, Americans still retain a choice, but now the choice is between obtaining a certain level of health insurance and paying nothing.
What sort of exaction is the individual mandate attached to now? The exaction is clearly not a penalty, because penalties are more coercive than taxes, and a $0 exaction is not coercive at all. Perhaps the exaction is a tax because it is noncoercive, or perhaps not for the same reason: it is so noncoercive that it will not raise revenue. Economically, the question does not make a whole lot of sense to ask, because taxes and penalties are differentiated by their material characteristics, which impose different effects on individual behavior, and a $0 exaction can be expected to have no effect on behavior.
Constitutionally, the question also does not make much sense because constitutional limits on Congress's enumerated powers exist to constrain the extent to which Congress can coerce people, and Congress is not coercing anyone by giving them a choice between obtaining health insurance and paying nothing. To put it bluntly, Congress does not require an enumerated power to declare that Americans must either do X or else not do X and suffer no consequences. After the 2017 statutory amendment to the ACA, that is what the individual mandate and shared responsibility payment provisions provide. [UPDATE: Here is Marty Lederman making the same point.]
Even though the relevant ACA provisions now require no one to do anything, Judge O'Connor concluded in his opinion that the individual mandate is unconstitutional as beyond the scope of Congress's taxing power. He reasoned that the mandate is no longer a condition attached to a tax because there is not any tax payment that must be paid by people who do not obtain insurance. Judge O'Connor did not pause to consider how it could be the case that a condition attached to a roughly $700 tax is constitutionally permissible because non-coercive but a condition attached to a $0 exaction is beyond the scope of Congress's enumerated powers.
In Judaism, there is a technical term of art used to describe a judge who would issue such a ruling: chutzpah.
The only close question I can think of is whether Judge O'Connor's enumerated powers analysis required more or less chutzpah than his severability analysis. In that portion of his opinion, he ignored what the relevant Congress -- the 2017 Congress -- did (that is, zero out the shared responsibility payment and leave the rest of the ACA in place), and he instead went on and on about what the irrelevant Congress -- the 2010 Congress -- said about the importance of the individual mandate to the ACA as a whole. Judge O'Connor was apparently unimpressed by the bipartisan crew of prominent law professors who clearly and cogently presented this point to him.
Americans should be grateful to Judge O'Connor for one thing. In difficult, polarized times, when the distinction between law and politics can often seem to be in the eye of the partisan beholder, Judge O'Connor has written a judicial opinion whose extraordinary interpretive irresponsibility ironically underscores that there is such a thing as constitutional law.