When it comes to the legislation itself, the key question actually comes down to semantics. It's broadly agreed that tax breaks are constitutional. The individual mandate could've been called the "personal responsibility tax." If you can show the IRS proof of insurance coverage, you then get a "personal responsibility tax credit" for exactly the same amount. This implies that what makes the mandate unconstitutional in the eyes of some conservatives is its wording: It's called a "penalty" rather than a "tax." As Judge Henry Hudson put it in his ruling, “In the final version of the [Affordable Care Act] enacted by the Senate on December 24th, 2009, the term 'penalty' was substituted for the term 'tax' in Section 1501(b)(1). A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress." And it was: Taxes are more politically toxic than penalties, or so the authors of the bill thought.
This is way too quick.
It’s not at all clear that Congress should be able to pass something under the rubric of a penalty and then later defend it as an exercise of its taxation policy. That kind of switcheroo is not just semantics—as Klein is arguing, it has actual constitutional implications.
Although the Supreme Court has not often been sound on this issue, there are strong reasons to think that for a law to pass constitutional muster as a tax Congress should be forced to call it a tax when it is passed. To allow otherwise is to allow Congress to covertly exercise its power to tax—which flies in the face of the structure of our legislative process. We don’t want a legislative system that allows lawmakers to escape political accountability for creating new taxes while they also escape constitutional scrutiny by having the executive branch defend the law as a tax.
What’s more, the individual mandate is not a tax. It could be structured like a tax. But as it happens, it has not been structured like a tax. There is no provision for collecting a tax and then a credit for the insured. That just doesn’t exist in the law. Instead, it is structured as a penalty. Just because it could have been structured otherwise, doesn’t mean courts should read it as it might have hypothetically been structured.
Both of these points circle around the same central idea: for constitutional purposes, it matters what Congress actually passes, rather than what it might have passed. In this case, Congress shied away from creating a tax. Defenders of the law shouldn’t be allowed to convert it into a tax after the fact.
The framers of the constitution were well aware that imposition of taxes could be politically unpopular. The unpopularity of taxes creates a kind of check on the ability of Congress to impose taxes. Allowing for secret taxation circumvents that check. If this is how defenders of the individual mandate intend to proceed, they'll deserve to lose in court.
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