Is the Health Care Law’s “Mandate” Really a Tax?—Posner

I agree with Becker (and with the Supreme Court) that the “mandate” in the health care law—the requirement that people who can afford to buy health insurance must do so on pain of having to pay a “penalty” if they do not—is within Congress’s taxing power under Article I of the U.S. Constitution, the article establishing the legislative branch of the federal government. Article I among other things authorizes Congress "to lay and collect taxes, duties, imposts and excises." The fact that Congress called the mandate exaction a penalty rather than a tax is of no significance. It was done simply because “tax” has become a dirty word in American political discourse. 

It is true that the main reason for taxes is to generate revenue for the government, and the mandate exaction is not a revenue tax but a regulatory tax. But regulatory taxes—a tax on emission of pollutants, for example—are common; their aim is not to generate revenue but to discourage undesirable practices, though they generate some revenue because some of the taxpayers find the tax less onerous that discontinuing the taxed activity. The “duties, imposts, and excises” to which Article I refers would include tariffs, which are often intended to discourage imports rather than to raise revenue. It is true that from an economic standpoint a regulatory tax may not seem sharply different from a fine (for illegal parking, for example), which is not a tax within the meaning of Article I (if it were, Congress would have virtually unlimited regulatory power, rather than just the enumerated powers set forth in Article I). But there is a significant difference. Fines are imposed on activities that are forbidden, rather than merely sought to be discouraged or reduced. Even when the fine is light, as in the case of most parking tickets, repeated violations will result eventually in severe sanctions, so the violator really doesn’t have an option to pay rather than comply. Fees for specific services, such as for a passport or a driver’s license, are also distinguishable from regulatory taxes, because fees are in exchange for specific government services, whereas taxes are not usually paid in exchange for specific services. 

So the mandate exaction, though called a penalty, is in fact a regulatory tax and therefore within Congress’s power. Whether it’s set at a rate that will actually induce many people who currently lack health insurance to buy health insurance is a separate question, and still a third question is whether if so the result of adding to the number of Americans who have health insurance will be good for society as a whole. The idea behind the mandate that the tax is designed to enforce is that the uninsured are free riders. They tend to be young and therefore on average in good health, and by opting out of the insurance pool they increase the cost of insurance to the people who remain in the pool. In addition, when they do get sick, they tend to visit hospital emergency rooms for diagnosis and treatment, and emergency rooms tend to be very expensive. The hospitals send the uninsured whom they treat stiff bills, but often the bills are not paid. 

If the mandate succeeds in inducing many uninsured to buy health insurance, this should reduce the health insurance premiums paid (either directly or in the form of lower wages because their employer is paying the premiums) by those who already have health insurance. But this will just be a transfer of wealth from one group of people to another. More important from an overall economic standpoint, a reduction in the number of uninsured will increase aggregate health costs because uninsured people demand and receive less health care, on average, than the insured. The study by Hadley and coauthors that Becker cites estimates that providing health insurance (whether private or, in the form of Medicaid or Medicare, public) to all the currently uninsured would increase total health care expenditures in the United States by 5.1 percent a year, a substantial increase (given the size of the health care industry) equivalent to 0.8 percent of GDP. (Their study was conducted four years ago; I don’t know what the current best estimate would be.) 

It cannot be assumed that the cost increase would be offset by a reduction in medical expenses attributable to the better health that people who by virtue of having health insurance can expect to have because they don’t skimp on medical screening and treatment. Better health care will increase longevity, but that means more old people, who consume a disproportionate amount of medical care as it is.

Comments

[TANSTAAFL]

Well said, Dark. Misunderstood you the first time around.

[Noel G. Moore]

Judge Posner asserts that Congress calling the health care mandate a penalty rather than a tax is of no consequence because the word tax has become stigmatized in the public square. It appears that Judge Posner at least implicitly tolerates a kind of public cleverness or dissembling on the part of polticians while presumably reserving staight forward discourse to Supreme Court rulings.

Wouldn't transparency in the public square have produced a more just result for a bill affecting nearly 20 percent of the economy? I believe sending the bill back to be re-writtne by the legislature rather than the justices would have been the more robust,democratic and dare I say, contitutionally sound solution. I expect the Chief Justice, in his own words, to stick with calling balls and strikes rather than emerging as a late inning reliever.

[Gene Woo Lee]

In their dissent, Scalia, Kennedy, et al. write regarding the mandate that "With the present statute, by contrast, there are many ways other than this unprecedented Individual Mandate by which the regulatory scheme’s goals of reducing insurance premiums and ensuring the profitability of insurers could be achieved. For instance, those who did not purchase insurance could be subjected to a surcharge when they do enter the health insurance system. Or they could be denied a full income tax credit given to those who do purchase the insurance."

It seems to me that the Justices here betray a faulty understanding of basic economics. They suggest that a tax credit or a surcharge would be constitutionally acceptable methods for Congress to achieve the same goals as the mandate. But the only real teeth behind the mandate is the tax penalty, which from an economic point of view is not distinguishable from a tax credit, and only slightly distinguishable from a surcharge (due to the difference in the time of payment, which would seem to be a difference of degree and not substance).

[NEH]

Noel & Gene, perhaps you ought to read the majority opinion. Which implies and states, it's not the responsibility of the Court to establish the details of policy or policy itself. That's Congress's job. The Court's job is to rule on whether or not the policy falls within the allowable confines of the Constitution and Precedent. As for Precedent, it establishes that the Court must and has given a wide or broad interpretation to the Powers granted Congress and limits regarding State Sovereignty and the principle of "Nullification"...

And so, the Affordable Health Care Act is Constitutional. Although, it's efficacy may be questionable (but once again, that's Congress's problem).

[Gene Woo Lee]

NEH, I think you need to actually read my post, before deigning to lecture anyone on the need for reading comprehension.

My post was actually questioning the logical consistency of the dissenting opinion of Scalia, Kennedy, Thomas, and Alito. I am interested to know if anyone with a background in law & economics has better insight into the passage I cite, and whether it indeed reveals an inconsistency, as I read it.

To repeat, it seems that the dissenting Justices suggest that a tax credit or a surcharge would be constitutionally acceptable methods for Congress to achieve the same goals as the mandate. But the only real teeth behind the mandate is the tax penalty, which from an economic point of view is not distinguishable from a tax credit, and only slightly distinguishable from a surcharge. Therefore, the view of the dissenting Justices would appear to be logically inconsistent. If a tax credit or surcharge would be acceptable, then so should a tax penalty of the kind found in the ACA.

Unfortunately, it appears that too often in today's environment, if one fails to come out 'guns blazing' criticizing one side or another, people are so jaded that they fail to recognize an attempt at rational argument.

[Gene Woo Lee]

BTW, I realize that the section I cite is technically addressing the necessary and proper clause. But it still appears to contain a logical inconsistency in my view.

[NEH]

Gene, Once again, the details of policy are "Congress's problem" not the Court's. The dissenting Opinions are delving into details of policy and the workings of policy that are beyond the Court's jurisdiction and was recognized as such by Roberts. Whose change of stance, pulled the Court back into it's proper sphere by not allowing itself to be manipulated into becoming another Legislator along with the Congress and the Executive Office.

To wit, the balance of Powers as articulated in the Constitution between the three Estates; Congress, the Executive, and the Court have been reestablished.

Now the hot potato is back where it bleongs - in Congress and the Executive Office...

[TANSTAAFL]

Gene -- distractions by NEH aside, you correctly note that the ObamaCare dissenters suggest an inconsistency. The inconsistency implies that Congress had an economically equivalent and constitutional way of getting where we stand today with ObamaCare, but instead enacted the legislation in its present woeful state.

That said, the point is rather pedestrian, not profound. Try harder.

[cheap Sunglasses]

Thank you.
The Court is supposed to help defend it, right?

[Terry Bennett]

Disclosure: I consider health care (not health insurance) a necessity, not unlike food, clothing and shelter, and quite unlike higher education, and while this latest Obomination misses the mark by light-years, it would not necessarily be a bad thing for us to solve at least some of this problem collectively.

I would have hoped to see Chief Justice Roberts conclude Section III-B of his opinion by noting, "...but no matter how much it may look like a tax, we know it is not and cannot be a tax, for the President has repeatedly and emphatically told the American people that it is not a tax..." Of course, the Framers in their infinite wisdom provided no such constraint. (I argued at the time that “lying to the American people” was not a proper impeachment charge against President Clinton.) The President can constitutionally look into the camera and lie to the American people all he wants, meanwhile arguing to the SCOTUS the exact opposite of what he is telling us, and continuing to lie even after it’s a done deal. He agrees that the Court has held it constitutional so it is constitutional, but simultaneously refuses to admit that the Court has held it a tax so it is a tax – even though it is only constitutional because it is a tax.

A long time ago, there were kings, and they had absolute power. They could have your head cut off for no particular reason. When our Constitution came into effect, a small sliver of the total powers available was carved off and given to the people in the form of individual rights - against unreasonable search and seizure, suppression of speech, etc. The federal government carved off another slice for itself. The remaining powers, however, were still presumed to accrue to the remaining sovereign - the several States. Suppose under the Constitution the people got 5% of the powers. That still means the federal plus State government holds 95% of a king's power over the individual, even today. This notion that we are free has all been a grand illusion.

The income tax is only assessed on people who perform the affirmative act of producing income. We may be forced to buy car insurance, but only if we choose to drive. The Roberts opinion stands for the proposition that we can be taxed for our mere existence. Even if he is correct – and I would like to think he is not – that the Constitution gives the federal government the power to tax you just for being you, we have never before seated a government with the combined bad taste and hubris to invoke this power, for it fundamentally changes what it means to be an American, for the infinitely worse.

[NEH]

another freakin free loader?, A distraction? Au Contraire... Now we have various Republican Governors raising the specter of "Nullification" based on the archaic idea of State Sovereignty.

"That said, what is the point, try too put those little grey cells through a workout". If there are any... ;)

[Josh R.]

"It was done simply because “tax” has become a dirty word in American political discourse."

Yes, and that distinction is critical. If Congress wants to pass a "tax," they have to own up to it and be accountable. That is why all taxes must originate in the House -- the very organ of the federal government closest to and most accountable to the people. What the Court did was allow Congress to have its cake and eat it too -- deny having enacted a tax, but allow the law to operate as a tax. This surely could not have been the intent of the framers.

[TANSTAAFL]

Bennett -- the Constitution granted the people no individual rights. Rather, the people already possessed their individual rights (at least those who had earned the ability to exercise rights), and gave a slice thereof to the federal government. It is no illusion that the people are free; we all exercise free will, intelligently or otherwise. As a practical matter, however, no one can exercise individual freedom these days unless they are very wealthy or, alternatively, willing to forgo creature comforts.

And why is NEH so hellbent on evicting the present occupant of Lenin's Tomb and taking up residence there?

[Terry Bennett]

Yes, as Reagan once famously and wisely pointed out, the Constitution begins "We, the People" and the people proceed to tell the federal government what it can do. On the down side, the presumption at the time was still that the same amount of State power existed over the people; it was simply being divided between the two newly fashioned sovereigns, instead of vested in a king.

The point is, regardless of who or what holds sovereignty over me, sovereignty itself is far too large and too pervasive for my sensibilities. I never thought about it before, but I guess that means I'm more libertarian than the current consensus.

I expect at some point not too distant, land ownership will become undesirable. Each time a zoning board acts, sovereignty rights become larger and property rights become smaller. We thus get less and less for our money nowadays when we buy property rights.

Now we are going to be taxed just for breathing. This dormant sovereignty right has apparently always been there. According to Roberts, Obama has indeed inherited from kings of old the power to say off with my head, and I think I'm being objectively reasonable in feeling uncomfortable about it.

[NEH]

affl, A little "Red Baiting" this time? I thought "Red Scare Tactics" went out with the likes of Joe McCarthy (due to Alcoholism and a pickled brain). Oh! BTW. Another Republican Governor has jumped on the Bandwagon by going Public and comparing and calling the IRS as the "Gestapo". I wonder how that State manages it's Budget without "Taxes" at either the State or Local level?

Communists and Fascists! My My! Do you people really understand the difference? Now, about those little "grey cells"...

[Anne Roberts]

One of the great things about this blog is despite the varying opinions of Becker and Posner, they have valid points. They may not necessarily agree with each other but what they say is highly credible.

[nike free run tilbud]

Gold also sits below, taking care of the SB Dunk sole below. Anthracite suede handles the Swoosh, completing yet another great release from Nike Skateboarding.The Anthracite/Gold SB Dunk High is expected to release soon at authorized Nike SB retailers.

[New Adidas Shoes]

Efter megen forventning og en pause på over 15 år, endelig Jordan Brand behandlede os til 'Bordeaux' Air Jordan VII denne sidste weekend.

[pan]

Short, sweet and right on point. ACA is constitutional under the taxing power. The only other thing to add is that the entire discussion of the commerce clause is dicta, that is, unnecessary to the decision. Therefore, it lacks the weight of precedent for future cases.www.diesel-generatorset.com

[Aich]

You may deduct quifelaid medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a Multiple Support Agreement. You can also deduct medical expenses you paid for someone who would have quifelaid as your dependent for the purpose of taking personal exemptions except that the person did not meet the gross income or joint return test. You deduct medical expenses on Form 1040, Schedule A (PDF), Itemized Deductions. The total of all allowable medical expenses must be reduced by 7.5% of your Adjusted Gross Income. For more information, refer to Publication 502, Medical and Dental Expenses.

[Sean]

The Arizona law mirrors einitsxg Federal law, so this numbnuts was apologizing for decades of exisiting United States federal law. The Supreme Court has upheld the Federal law and will uphold this law as well.This adminstration is filled with idiots.Reply

[Rodrigo]

Dr. Brin: I'm afraid we're btiurcafing. Perhaps, this time, we should just let the Confederacy go its own way.Too late. This could have been done in 1860, when the Confederacy was geographically and economically isolated from the North. The North made the choice that The Union Must Be Preserved. And I still think that was the right choice, for the reason the Founders thought it was: the USA and CSA could have been played against each other to their mutual detriment. See Turtledove's Southern Victory (aka Timeline 191) series. While I don't agree with every extrapolation made by Mr. Harry, I do think that the USA and CSA would almost certainly have been on opposite sides of the First World War... and America would have been as devastated as Europe. Instead we stood solid through the twentieth century: because of the foresight of the Founders and Lincoln. Better the ACW than the horrors that came after, in Europe and Asia.But! The price we paid for this was to reknit a country that had already chosen two different visions of what civilization meant and stood for. The Confederate dream qua Confederate dream smoldered with Jim Crow but was slain by Kennedy, Johnson, and King; the South will not rise again. But having lost the bid to separate, the neo-Confederate belief system now seeks to replace that of the Union: to banish the attitude that all men (including the poor, "eggheads", immigrants, non-Christians, gays, and generally people who think differently) are created equal.They can dream this because they are geographically distributed. The same "US out of the UN!" banner I have seen in Birmingham, Alabama, can also be seen in Yakima, Washington. There are precious few among the Fifty States where one attitude reigns supreme over the other. Alaska and Hawaii, for their newness and remoteness; Rhode Island and Vermont, for their small size. That's about it. Even Texas has its Austin and Utah its progressive neighborhoods.Try to separate the neo-Confederacy... or let them separate... and you have not one civil war but fifty. Instead of an orderly choice of states lining up on sides, every state goes into tumult. Washington and Oregon divide along the Cascades. Texas besieges its own capital. New York City stands against upstate and parts of Long Island. Illinois divorces its own southern third. Boston's suburbs take sides. And what happens to Pennsylvania, Florida, and California doesn't even bear thinking about.No, we're stuck with this. There must be a narrative that brings the neo-Confederates back into the Union while defeating their pathological attitudes, as there was (no matter how detrimental it was) in Reconstruction. To attempt separation now would be as destructive as letting the madmen take over.hysity: the state of hissy fit that Republicans are throwing in their attempts to deliberately delay economic recovery until they can claim credit for it.

[Eduardo]

(From the last thread)Robert,Re: anne.ominous is a troll.Not nesrscaeily. Monomaniacal, maybe. Shouty, won't back down, can't see the forest for the trees. Disruptive, annoying, but not nesrscaeily a troll.Trolls are doing it for the Lulz, purely to disrupt. Monos are doing it because SOMEONE IS WRONG ON THE INTERNET.Corey & Robert,Re: Never Feed The Trolls.Trolls are looking for a reaction. To piss people off. They present a parody of an extreme view in order to make people either shout or leave the thread.Responding to Trolls calmly, taking the claims at face value and correcting them (at least once per false claim), is IMO productive.Not because it changes the Troll's behaviour (although it may reduce the Lulz), but because there are likely lurkers who have a softer version of the Troll's pretended opinion.By calmly correcting the error, you may convince some of those lurkers that your opinion is correct, you may even convince them to join in, knowing they won't be shouted down. Meanwhile the Troll is making them feel uncomfortable about their own views.OTOH, calling a Mono a Troll (hell, even calling a Troll a Troll), may reinforce the lurkers opinion that "the mainstream won't even engage outside views". Example: "Climategate" emails. Mainstream journal publishes bogus research, climate researchers go mental at each other, "burn the witch, burn the witch". And that is used to support the Deniers' claim of a conspiracy.Had they simply responded calmly in Letters and Notes to the journal, eviscerating the claims of original paper (which many did), they wouldn't have given years worth of aid and comfort to the enemy.tl;dr - Sometimes you feed the trolls by refusing to Feed The Trolls.(goosip: Inaccurate gossip.)

[Tonia]

If I did not specifically say so berofe, thanks ReWinn for the heads up. It is never good to be ill informed and I have done a bit of reading on the ACORN/O'Keefe/Brietbart story to correct that deficiency.So I am prepared to modify my opinions. Slightly.Back in the 80s when I was peripherally involved with them I came to the opinion that ACORN was basically a bunch of hucksters whose philosophy sounded progressive but whose real ethos was the transmutation of media attention to political clout to block grants and other monetary gain. So I was predisposed, or if you will, prejudiced to believe ill of them. Even allowing for the unfair editing I think their staffers showed a willingness to flount rules and conventions. That it was another opportunistic grifter that hoisted them with their own petard seems ironic.I concur with Robert, you needed no chicanery to make these guys look bad. Heck, highlighting the appropriate actions of some of them would make the rest look worse. And Breitbart's assertion that he was somehow misled by O'Keefe rings hollow. This from a guy who claims to know every trick of the (liberal) media establishment.All in all a good seminar on the topic of video and political thought. We have been learning ever since the 1960 campaign. Just think...history might have changed a lot if someone told Dick Nixon to shave ten minutes berofe air time.Tacitus

[Ruben]

Sociotard: "Ron Paul Wasn't Joking About Letting Uninsured People Die -- His Uninsured Staffer Died of Pneumonia"- Except, of course, that he didn't say that, jiolngky or otherwise.He did say that the hypothetical person should have gotten insurance, and did say that the responsibility to do so should lie with that young man, and he did answer "No" when Blitzer asked if the man should simply be allowed to die, and he did point other alternatives than government intervention for dealing with the financial consequences of that person's irresponsibility.- And except that his staffer didn't die because he was denied health care due to lack of insurance, as you imply.- And except that the staffer had a pre-existing condition that made medical insurance premiums very expensive, unlike in Blitzer's example of a young man who deliberately and irresponsibly chose not to spend a small amount on health insurance. IMO it was use of an example of clearly and intentionally irresponsible choices, that got a few in the audience to answer "Yeah" in response to the "should society simply let such a person die" question.