There’s an argument that’s circulating among liberals that the challenge to the constitutionality of the health care law hinges on mere semantics. “Despite the overheated rhetoric that's been tossed around in this debate, I don't believe our forefathers risked their lives to make sure the word ‘penalty’ was eschewed in favor of the word ‘tax,’” Ezra Klein remarked. I think it’s worth addressing this point, because doing so clarifies what’s actually at stake in these court cases.
In defending the law against legal challenges, the Obama administration first argued that the mandate was justifiable under the Commerce Clause, but it later advanced the fallback argument that it’s also constitutional because of the federal government’s power to tax to provide for the “general welfare.” While judges who have ruled on the merits of these arguments so far have split 2-2 on the Commerce Clause question, they have unanimously rejected the taxing power argument.
It’s true that Democrats went out of their way to call the fine a “penalty” in the legislation to avoid the more politically toxic term “tax” – and that has figured into these decisions – but there’s a much more important reason why the taxing power argument has been thrown out. The reason is that the fine serves a primarily regulatory function, whereas to be justified under the government’s taxing power its primary purpose must be to raise revenue. This has figured into the opinions of the judges who have already ruled on the case.
“Although purportedly grounded in the General Welfare Clause, the notion that the generation of revenue was a significant legislative objective is a transparent afterthought,” Judge Henry Hudson wrote. “The legislative purpose underlying this provision was purely regulation of what Congress misperceived to be economic activity. The only revenue generated under the Provision is incidental to a citizen’s failure to obey the law by requiring the minimum level of insurance coverage.”
Judge Norman Moon of Michigan, who upheld the mandate on Commerce Clause grounds, rejected the taxation power argument along similar lines. While Moon did note the fact that the legislation used the word “penalty,” he went on to write (PDF), “Even more importantly, the assessments function as regulatory penalties – they encourage compliance with the Act by imposing a punitive expense on conduct that offends the Act.” He goes on to write, “the statutory fees were enacted in aid of Congress’ regulatory powers under the Commerce Clause… Although the penalties are expected to raise revenue… they were not included among the ‘Revenue Provisions’ of Title IX of the Act, which indicates that generating revenue was not their main purpose. Indeed, Defendants do not seek to deny the regulatory purpose of the penalties.”
Whatever name you choose to give it, the fine is merely a means of punishing those who don’t comply with the mandate. As Georgetown law professor Randy Barnett noted in an email exchange on this matter, “the MANDATE that everyone buy insurance cannot possibly be characterized as a tax. So if IT is not within the power of Congress to enact under its regulatory powers then there is nothing for the penalty OR tax to enforce.”
If it were merely a matter of semantics, then Congress would have unlimited power to regulate anything – even if otherwise forbidden under the Constitution – by simply slapping the word “tax” on it and collecting a small amount of revenue. This is why the constitutionality of ObamaCare, one way or another, will ultimately be decided on Commerce Clause grounds.