Over at Scotusblog, I present the legal rules of NFIB v. Sebelius, as they might appear in a bar review outline, or in a student study aid for a Constitutional Law I class.
Archive for the 'Taxing and Spending Clause' Category
In NFIB v. Sebelius, Chief Justice Roberts imagined a hypothetical federal tax on windows, in order to bolster his point that the Court should treat the individual mandate as a “tax,” even though the Obamacare statute calls it a “penalty.”
Suppose Congress enacted a statute providing that every taxpayer who owns a house without energy efficient windows must pay $50 to the IRS. The amount due is adjusted based on factors such as taxable income and joint filing status, and is paid along with the taxpayer’s income tax return. Those whose income is below the filing threshold need not pay. The required payment is not called a “tax,”a “penalty,” or anything else. No one would doubt that this law imposed a tax, and was within Congress’s power to tax. That conclusion should not change simply because Congress used the word “penalty” to describe the payment. Interpreting such a law to be a tax would hardly “[i]mpos[e] a tax through judicial legislation.” Post, at 25. Rather, it would give practical effect to the Legislature’s enactment.
The above language is a plausible argument for the Chief Justice’s tax/penalty analysis. But by discussing a window tax, the Roberts opinion provides one more reminder why the individual mandate, if it is a tax, is a direct tax, not an indirect tax. Direct taxes must be apportioned by state population. Art. I, sect. 9, cl. 4. If the individual mandate is a direct tax, then it is unconstitutional, because it is not apportioned by state population.
Pursuant to the 16th Amendment, direct taxes on income need not be apportioned, but neither the individual mandate nor the hypothetical window tax are taxes on income. Constitutionally, “income” subject to the federal income tax must be ”undeniable accessions to wealth.” Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955). A decision not to buy overpriced insurance from Congress’s Big Insurance pets, like the decision not to buy a particular type of window, is not an “accession to wealth.” The decision provides no additional income to the person.
So let’s accept Chief Justice Roberts’ theory that a window tax and the individual mandate are analytically comparable. On July 9, 1798, Congress enacted a direct tax statute, to pay for national defense preparations against France. “An Act to provide for the valuation of lands and dwelling-houses, and the enumeration of slaves, within the United States. On July 14, Congress passed the “Direct Tax Act,” to provide for collection of the July 9 taxes. Pursuant to the Direct Tax Act, federal assessors were to examine houses to assess them for purposes of the direct tax. In addition, the Direct Tax Act ordered the assessors make records of the number and sizes of windows in each house. The window data were to be gathered so that Congress could, in the future, decide to impose a direct tax on windows. Paul Douglas Newman, Fries’s Rebellion: The Enduring Struggle for the American Revolution 76-77 (2004).
It seems there was no dispute that a window tax was a direct tax. A fortiori, a tax on not having certain types of windows would be also be a direct tax. This is one more piece of evidence that Chief Justice Roberts was wrong in stating that the individual mandate “tax” is not a direct tax. Much more extensive discussion of the direct/indirect tax issue (but not of window taxes) can be found in Rob Natelson’s 27 minute podcast on the subject, for iVoices.org.
McCulloch v. Maryland had a very good day at the Supreme Court yesterday, with NFIB relying on and applying McCulloch‘s rules for when an enactment violates the Necessary and Proper Clause. What happened after the McCulloch decision also shows the next steps in battle over the individual mandate, as I suggest in an essay this morning for National Review Online.
In refusing to hold the Second Bank of the United States unconstitutional, the McCulloch Court gave Congress broad latitude in Congress’s own evaluation of whether the Bank was “necessary” in a constitutional sense. Relying on and quoting McCulloch, President Andrew Jackson made his own judgment of constitutional necessity when he vetoed the recharter of the Bank in 1832. After a titanic political struggle, the Bank was gone, and a new term created by Jackson, “equal protection,” had become part of what the American People were coming to believe the Constitution was supposed to mean.
President Jackson dealt the Bank a fatal blow by withdrawing federal deposits from the Bank, and moving them to state banks. President Romney can follow Jackson’s lead on his first day in office, instructing the Acting Secretary of Health and Human Services to use the waiver powers in the ACA statute to issue waivers to everyone for the individual mandate. Because the individual mandate is (supposedly) a tax, it can then be repealed through the budget reconciliation process, which cannot be filibustered.
I predict that the individual mandate will never mandate anyone. Yet the mandate will be long remembered as one of the most consequential laws enacted by a Congress. The result of the “bank battle” was that even though a central bank was judicially permissible, central banking was politically toxic for the rest of the century. The “mandate battle” may have the same effect in deterring any future thoughts of congressionally-imposed mandates. (Putting aside the obvious exception for mandates that have a solid basis in the constitutional text, such as jury service.)
The enactment of the mandate has also significantly increased the probability that the next Supreme Court appointments will be made by a President and confirmed by a Senate which denounces the mandate as unconstitutional, and that the new Justices will be the kind who are inclined to vigorously enforce the many strong constitutional limits on congressional over-reaching which are articulated in NFIB v. Sebelius.
I would have preferred that the mandate had met its end yesterday morning, but the fact that the mandate will have to be finished off by the People in November and their elected officials in January may lead to even better long-term results for advocates of a constitutionally limited federal government.
Absolutely not. Rob Natelson explains why in this 27 minute podcast from iVoices.org.
My article yesterday for Scotusblog discussed the tremendous importance of the Court’s 7-2 use of the non-coercion rule to limit Spending Clause violations of State sovereignty and independence. The rule has been around ever since Steward Machine Company v. Davis (1937), but NFIB v. Sebelius is the first decision by any federal court to find that a conditional congressional grant violates the rule.
The folks who think that the “evolving Constitution” completed its evolution in 1937-42, and that everything the Court did during those years must be applied today with the broadest possible reading, should be especially pleased with the NFIB Court’s vigorous enforcement of a very important New Deal precedent.
My essay argues that the application of the non-coercion rule, as well as the application of the doctrine of incidental powers for the Necessary and Proper Clause, are among the many elements of the Roberts opinion whose significance approaches that of some of the most important opinions by Chief Justice Marshall.
Although we do not know Chief Justice Roberts’ motives, I suggestion a comparison of NFIB to Marbury v. Madison: adroitly escaping from a partisan assault on the Court itself, the opinion moves constitutional law very far in the opposite of the direction favored by partisan assaulters–and does so in a way that leaves the partisan assaulters unable to use the case in their attacks on the Court.
In July 1798, Congress enacted a direct tax to raise revenue for national defense against France. The “House Tax” imposed taxes on land, houses, and slaves. As required by Article I, section 9, clause 4 of the Constitution, this direct tax was apportioned by state population. Fries’s Rebellion, which was eventually suppressed by President Adams, involved violent resistance to this tax, based on the claim that the tax was unconstitutional. Because the direct tax was properly apportioned, it seems perfectly constitutional to me. Does anyone know the specifics of the constitutional objection to the House Tax?
Held at Denver University, Sturm College of Law, on April 11. Debaters were University of Colorado Prof. Scott Moss and me. Moderator is DU Prof. Ann Scales. WMV, via ftp.
That’s the title of a new article by Gary Lawson and me, forthcoming in a symposium issue of Boston University’s American Journal of Law & Medicine. The Journal has a large readership among medical professionals who are interested in legal issues relating to medicine. Accordingly, if you have been following the VC’s debate on the ACA over the past couple years, most of what is in the article will already be familiar to you. Here is the abstract:
The question whether the Patient Protection and Affordable Care Act (“PPACA”) is “unconstitutional” is thorny, not simply because it presents intriguing issues of interpretation but also because it starkly illustrates the ambiguity that often accompanies the word “unconstitutional.” The term can be, and often is, used to mean a wide range of things, from inconsistency with the Constitution’s text to inconsistency with a set of policy preferences. In this article, we briefly explore the range of meanings that attach to the term “unconstitutional,” as well as the problem of determining the “constitutionality” of a lengthy statute when only some portions of the statute are challenged. We then, using “unconstitutional” to mean” inconsistent with an original social understanding of the Constitution’s text (with a bit of a nod to judicial precedents),” show that the individual mandate in the PPACA is not authorized by the federal taxing power, the federal commerce power, or the Necessary and Proper Clause and is therefore unconstitutional.
Supreme Court: “Obviously, direct control of medical practice in the states is beyond the power of the federal government.”
So said the unanimous Supreme Court in United States v. Linder, 268 U.S. 5 (1925). The opinion was written by McReynolds, and joined by the progressive Justices Brandeis and Holmes, along with the rest of the Court.
At issue was the federal Harrison Anti-Narcotic Law, which taxed opium and coca leaves, and their derivatives. Ostensibly as part of the tax scheme, the Act also required registration of those drugs. A physician lawfully dispensed one tablet of morphine and three tablets of cocaine to a female patient who was an addict. The trial court instructed the jury that Dr. Linder’s actions would be lawful if the drugs were dispensed as painkillers for stomach cancer or an ulcer, but not simply because the patient was an addict. As the Supreme Court observed, the indictment “does not question the doctor’s good faith nor the wisdom or propriety of his action according to medical standards. It does not allege that he dispensed the drugs otherwise than to a patient in the course of his professional practice or for other than medical purposes. The facts disclosed indicate no conscious design to violate the law, no cause to suspect that the recipient intended to sell or otherwise dispose of the drugs, and no real probability that she would not consume them.”
The Court pointed out that “Congress cannot, under the pretext of executing delegated power [here, the Tax Power], pass laws for the accomplishment of objects not intrusted to the federal government. And we accept as established doctrine that any provision of an act of Congress ostensibly enacted under power granted by the Constitution, not naturally and reasonably adapted to the effective exercise of such power, but solely to the achievement of something plainly within power reserved to the states, is invalid and cannot be enforced.” This was supported by a string cite starting with McCulloch v. Maryland.
In the instant case, the power to tax cocaine and morphine carried with it incidental powers to effectuate that tax, and the effectuation of the tax was the sole legitimate use of incidental powers. Incidental powers could not be construed to control a physician’s decision about properly taxed and registered products:
“Obviously, direct control of medical practice in the states is beyond the power of the federal government. Incidental regulation of such practice by Congress through a taxing act cannot extend to matters plainly inappropriate and unnecessary to reasonable enforcement of a revenue measure. The enactment under consideration levies a tax, upheld by this court, upon every person who imports, manufactures, produces, compounds, sells, deals in, dispenses or gives away opium or coca leaves or derivatives therefrom, and may regulate medical practice in the states only so far as reasonably appropriate for or merely incidental to its enforcement. It says nothing of ‘addicts’ and does not undertake to prescribe methods for their medical treatment. They are diseased and proper subjects for such treatment, and we cannot possibly conclude that a physician acted improperly or unwisely or for other than medical purposes solely because he has dispensed to one of them in the ordinary course and in good faith, four small tablets of morphine or cocaine for relief of conditions incident to addiction. What constitutes bona fide medical practice must be determined upon consideration of evidence and attending circumstances. Mere pretense of such practice, of course, cannot legalize forbidden sales, or otherwise nullify valid provisions of the statute, or defeat such regulations as may be fairly appropriate to its enforcement within the proper limitations of a revenue measure.”
Thus, said the Court, Linder was different from previous cases in which the Court had upheld the prosecution of physicians whose prescription of large quantities of drugs was obviously a sham, for no medical purpose, and simply to serve as a conduit for drugs to the general public.
It is not surprising that Linder was relied in several cases finding that Congress had exceeded tax power. U.S. v. Butler (1936); Hopkins Federal Savings & Loan Ass’n v. Cleary (1935); U.S. v. Constantine (1935); Trusler v. Crooks (1926).
Significantly, after 1937, the Court continued to rely on Linder, and in upholding other statutes, to distinguish them from the mis-application of the statute in Linder. “While there has long been recognition of the authority of Congress to obtain incidental social, health or economic advantages from the exercise of constitutional powers, it has been said that such collateral results must be obtained from statutory provisions reasonably adapted to the constitutional objects of the legislation. Linder v. United States.” Cloverleaf Butter v. Patterson (1942).
Linder appears the very first paragraph of a case familiar to many VC readers, United States v. Miller (1939). Citing, inter alia, Linder, the Miller opinion says that the federal tax and tax registration system for certain firearms does not “usurp police power reserved to the States.”
In U.S. v. Kahriger (1953), Linder is a “But see” footnote for this sentence: “Unless there are provisions, extraneous to any tax need, courts are without authority to limit the exercise of the taxing power.” I think that’s a misreading of Linder. The Court’s point in Linder was that micro-managing a physician’s decision about when to write a prescription was in fact “extraneous to any tax need.” So Linder and Kahriger are not inconsistent.
In a case decided after Kahriger, the Court upheld a gambling device tax, expressly distinguishing it from Linder, because the gambling tax is “certainly not a mere ruse designed to invade areas of control reserved to the states.” U.S. v. Five Gambling Devices (1953).
The most important case which relies on Linder is Ashwander v. Tennessee Valley Authority (1936) (upholding the TVA). There, the majority opinion by Chief Justice Hughes affirms that “The Congress may not, ‘under the pretext of executing its powers, pass laws for the accomplishment of objects not intrusted to the government.’ Chief Justice Marshall, in McCulloch v. Maryland, 4 Wheat. 316, 423; Linder v. United States, 268 U.S. 5, 15, 17.”
Justice Brandeis’s concurrence in Ashwander is, to this day, regarded as the most important guidance for the judicial principles of abstention. Number 7 of the “Ashwander principles” is that a court should attempt to construe a statute so as to avoid a constitutional problem, and for this proposition, Justice Brandeis cited Linder, among other cases.
In short, even if one takes the view that cases upholding certain aspects of the New Deal and the Fair Deal enjoy some sort of supra-precedential status that earlier cases do not, Linder is part of the fabric of those privileged cases.
Constitutional scholar and Senior Fellow in Constitutional Jurisprudence Rob Natelson released a fantastic book last year called The Original Constitution: What It Actually Said and Meant. The book was and is a huge hit. What the book did was fill a gap that was left by constitutional scholars who never got around to writing a comprehensive look at our nation’s founding document aimed at the lay person. Sure there are a lot of books out there on particular parts of the Constitution, but none that cover the whole shebang and none of them were written with your average Joe (or Jane) in mind. Rob Natelson stepped up and filled that gap.
Turns out however that Rob was not satisfied the first time around. He went back and re-worked his first edition and created and even bigger and better second edition to his book. You can find the second edition both on Amazon.com and the Tenth Amendment Center’s store. So how is this second edition different than the already fantastic first edition? Rob explains all that in this iVoices.org podcast with one of my minions Justin Longo. You can also go to Rob’s blog – constitution.i2i.org – to see what Rob has to say about his second edition.
It’s difficult to improve upon a great thing. But somehow Rob did it with this new book. Thank you for all your hard work Rob. You are doing an incredible job educating us mere mortals on our nation’s founding era history.
Speaking of education… don’t forget that THIS FRIDAY is our huge Constitution event down in Colorado Springs at the Antlers Hilton. There are a few spots remaining, so please RSVP as soon as you can. Do not miss this opportunity to see constitution scholars Rob Natelson and Dave Kopel in action!