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It was never a tax

Reading Chief Justice Roberts’s opinion for the Court upholding Obamacare last week, I was struck by what I thought was the cursory and half-hearted nature of Roberts’s analysis of the mandate (referred to as section 5000a below) as a tax. Indeed, Randy Barnett has described Roberts’s analysis as “transparently lame.” The “lame” nature of Roberts’s analysis siding with Obama on this point made me think, as others have speculated, that Roberts had something else on his mind, though I may be wrong and would concede that reasonable people can disagree.

Obama’s denial that the mandate is a tax, in the political rather than the legal arena, may be the strongest reaason for concluding that it is; he has said nothing important about the Obamacare law that is true. Over at NRO’s Bench Memos Matthew Franck pursues related points in defense of Chief Justice Roberts that are worthy of consideration in this context.

Yesterday John posted the relevant portion of the Obama administration’s brief making the argument that the mandate is a tax. The dissent is worth reading on the tax issue. I thought it was more persuasive by far than Obama’s argument or Roberts’s opinion. Here, in any event, is the relevant portion of the joint dissent of Justices Scalia, Kennedy, Thomas and Alito (footnotes and italices omitted):

As far as §5000A is concerned, we would stop there. Congress has attempted to regulate beyond the scope of its Commerce Clause authority, and §5000A is therefore invalid. The Government contends, however, as expressed in the caption to Part II of its brief, that “THE MINIMUM COVERAGE PROVISION IS INDEPENDENTLY AUTHORIZED BY CONGRESS’S TAXING POWER.” Petitioners’ Minimum Coverage Brief 52. The phrase “independently authorized” suggests the existence of a creature never hitherto seen in the United States Reports [i.e., Supreme Court opinions]: A penalty for constitutional purposes that is also a tax for constitutional purposes. In all our cases the two are mutually exclusive. The provision challenged under the Constitution is either a penalty or else a tax. Of course in many cases what was a regulatory mandate enforced by a penalty could have been imposed as a tax upon permissible action; or what was imposed as a tax upon permissible action could have been a regulatory mandate enforced by a penalty. But we know of no case, and the Government cites none, in which the imposition was, for constitutional purposes, both. The two are mutually exclusive. Thus, what the Government’s caption should have read was “ALTERNATIVELY, THE MINIMUM COVERAGE PROVISION IS NOT A MANDATE-WITH-PENALTY BUT A TAX.” It is important to bear this in mind in evaluating the tax argument of the Government and of those who support it: The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so.

In answering that question we must, if “fairly possible,” Crowell v. Benson, 285 U. S. 22, 62 (1932), construe the provision to be a tax rather than a mandate-with-penalty, since that would render it constitutional rather than unconstitutional (ut res magis valeat quam pereat). But we cannot rewrite the statute to be what it is not. “‘“[A]lthough this Court will often strain to construe legis- lation so as to save it against constitutional attack, it must not and will not carry this to the point of perverting the purpose of a statute . . .” or judicially rewriting it.’” Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833, 841 (1986) (quoting Aptheker v. Secretary of State, 378 U. S. 500, 515 (1964), in turn quoting Scales v. United States, 367 U. S. 203, 211 (1961)). In this case, there is simply no way, “without doing violence to the fair meaning of the words used,” Grenada County Supervisors v. Brogden, 112 U. S. 261, 269 (1884), to escape what Congress enacted: a mandate that individuals maintain minimum essential coverage, enforced by a penalty.

Our cases establish a clear line between a tax and a penalty: “‘[A] tax is an enforced contribution to provide forthe support of government; a penalty . . . is an exaction imposed by statute as punishment for an unlawful act.’” United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 224 (1996) (quoting United States v. La Franca, 282 U. S. 568, 572 (1931)). In a few cases, this Court has held that a “tax” imposed upon private conduct was so onerous as to be in effect a penalty. But we have never held—never—that a penalty imposed for violation of the law was so trivial as to be in effect a tax. We have never held that any exaction imposed for violation of the law is an exercise of Congress’ taxing power—evenwhen the statute calls it a tax, much less when (as here)the statute repeatedly calls it a penalty. When an act “adopt[s] the criteria of wrongdoing” and then imposes amonetary penalty as the “principal consequence on thosewho transgress its standard,” it creates a regulatory penalty, not a tax. Child Labor Tax Case, 259 U. S. 20, 38 (1922).

So the question is, quite simply, whether the exaction here is imposed for violation of the law. It unquestionably is. The minimum-coverage provision is found in 26 U. S. C. §5000A, entitled “Requirement to maintain minimum essential coverage.” (Emphasis added.) It commands that every “applicable individual shall . . . ensure that the individual . . . is covered under minimum essential coverage.” Ibid. (emphasis added). And the immediately following provision states that, “[i]f . . . an applicable individual . . . fails to meet the requirement of subsection (a) . . . there is hereby imposed . . . a penalty.” §5000A(b)(emphasis added). And several of Congress’ legislative “findings” with regard to §5000A confirm that it sets forth a legal requirement and constitutes the assertion of regulatory power, not mere taxing power. See 42 U. S. C. §18091(2)(A) (“The requirement regulates activity . . .”);§18091(2)(C) (“The requirement . . . will add millions of new consumers to the health insurance market . . .”); §18091(2)(D) (“The requirement achieves near-universal coverage”); §18091(2)(H) (“The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market”); §18091(3) (“[T]he Supreme Court of the United States ruled that insuranceis interstate commerce subject to Federal regulation”).

The Government and those who support its view on the tax point rely on New York v. United States, 505 U. S. 144, to justify reading “shall” to mean “may.” The “shall” in that case was contained in an introductory provision—arecital that provided for no legal consequences—which said that “[e]ach State shall be responsible for providing. . . for the disposal of . . . low-level radioactive waste.” 42 U. S. C. §2021c(a)(1)(A). The Court did not hold that “shall” could be construed to mean “may,” but rather thatthis preliminary provision could not impose upon the oper- ative provisions of the Act a mandate that they did not contain: “We . . . decline petitioners’ invitation to con- strue §2021c(a)(1)(A), alone and in isolation, as a command to the States independent of the remainder of theAct.” New York, 505 U. S., at 170. Our opinion thenproceeded to “consider each [of the three operative provisions] in turn.” Ibid. Here the mandate—the “shall”—is contained not in an inoperative preliminary recital, but inthe dispositive operative provision itself. New York provides no support for reading it to be permissive.

Quite separately, the fact that Congress (in its ownwords) “imposed . . . a penalty,” 26 U. S. C. §5000A(b)(1),for failure to buy insurance is alone sufficient to renderthat failure unlawful. It is one of the canons of interpretation that a statute that penalizes an act makes it unlawful: “[W]here the statute inflicts a penalty for doing an act, although the act itself is not expressly prohibited, yet to dothe act is unlawful, because it cannot be supposed that theLegislature intended that a penalty should be inflicted for a lawful act.” Powhatan Steamboat Co. v. Appomattox R. Co., 24 How. 247, 252 (1861). Or in the words of Chancellor Kent: “If a statute inflicts a penalty for doing an act,the penalty implies a prohibition, and the thing is unlawful, though there be no prohibitory words in the statute.” 1 J. Kent, Commentaries on American Law 436 (1826).

We never have classified as a tax an exaction imposedfor violation of the law, and so too, we never have classified as a tax an exaction described in the legislation itself as a penalty. To be sure, we have sometimes treated as a tax a statutory exaction (imposed for something other than a violation of law) which bore an agnostic label that does not entail the significant constitutional consequences of a penalty—such as “license” (License Tax Cases, 5 Wall. 462 (1867)) or “surcharge” (New York v. United States, supra.). But we have never—never—treated as a tax an exaction which faces up to the critical difference betweena tax and a penalty, and explicitly denominates the exaction a “penalty.” Eighteen times in §5000A itself and else- where throughout the Act, Congress called the exaction in§5000A(b) a “penalty.”

That §5000A imposes not a simple tax but a mandate towhich a penalty is attached is demonstrated by the factthat some are exempt from the tax who are not exempt from the mandate—a distinction that would makeno sense if the mandate were not a mandate. Section 5000A(d) exempts three classes of people from the definition of “applicable individual” subject to the minimumcoverage requirement: Those with religious objections orwho participate in a “health care sharing ministry,”§5000A(d)(2); those who are “not lawfully present” in the United States, §5000A(d)(3); and those who are incarcerated, §5000A(d)(4). Section 5000A(e) then creates a separate set of exemptions, excusing from liability for thepenalty certain individuals who are subject to the minimum coverage requirement: Those who cannot affordcoverage, §5000A(e)(1); who earn too little income to require filing a tax return, §5000A(e)(2); who are membersof an Indian tribe, §5000A(e)(3); who experience only shortgaps in coverage, §5000A(e)(4); and who, in the judgmentof the Secretary of Health and Human Services, “havesuffered a hardship with respect to the capability to obtaincoverage,” §5000A(e)(5). If §5000A were a tax, these twoclasses of exemption would make no sense; there being no requirement, all the exemptions would attach to the penalty (renamed tax) alone.

In the face of all these indications of a regulatory requirement accompanied by a penalty, the Solicitor Generalassures us that “neither the Treasury Department nor the Department of Health and Human Services interprets Section 5000A as imposing a legal obligation,” Petitioners’ Minimum Coverage Brief 61, and that “[i]f [those subject to the Act] pay the tax penalty, they’re in compliance withthe law,” Tr. of Oral Arg. 50 (Mar. 26, 2012). These selfserving litigating positions are entitled to no weight. What counts is what the statute says, and that is entirely clear. It is worth noting, moreover, that these assurances contradict the Government’s position in related litigation. Shortly before the Affordable Care Act was passed, theCommonwealth of Virginia enacted Va. Code Ann. §38.2–3430.1:1 (Lexis Supp. 2011), which states, “No resident of [the] Commonwealth . . . shall be required to obtain or maintain a policy of individual insurance coverage exceptas required by a court or the Department of Social Services . . . .” In opposing Virginia’s assertion of standing to challenge §5000A based on this statute, the Government said that “if the minimum coverage provision is unconstitutional, the [Virginia] statute is unnecessary, and if the minimum coverage provision is upheld, the state statute isvoid under the Supremacy Clause.” Brief for Appellantin No. 11–1057 etc. (CA4), p. 29. But it would be void under the Supremacy Clause only if it was contradicted bya federal “require[ment] to obtain or maintain a policy ofindividual insurance coverage.”

Against the mountain of evidence that the minimum coverage requirement is what the statute calls it—a requirement—and that the penalty for its violation is what the statute calls it—a penalty—the Government brings forward the flimsiest of indications to the contrary. It notes that “[t]he minimum coverage provision amends theInternal Revenue Code to provide that a non-exempted individual . . . will owe a monetary penalty, in addition tothe income tax itself,” and that “[t]he [Internal RevenueService (IRS)] will assess and collect the penalty in the same manner as assessable penalties under the Internal Revenue Code.” Petitioners’ Minimum Coverage Brief 53. The manner of collection could perhaps suggest a tax if IRS penalty-collection were unheard-of or rare. It is not. See, e.g., 26 U. S. C. §527(j) (2006 ed.) (IRS-collectible penalty for failure to make campaign-finance disclosures);§5761(c) (IRS-collectible penalty for domestic sales of tobacco products labeled for export); §9707 (IRS-collectible penalty for failure to make required health-insurancepremium payments on behalf of mining employees). In Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, we held that an exaction not only enforced by the Commissioner of Internal Revenue but even called a “tax” was in fact a penalty. “[I]f the concept of penalty meansanything,” we said, “it means punishment for an unlawfulact or omission.” Id., at 224. See also Lipke v. Lederer, 259 U. S. 557 (1922) (same). Moreover, while the penalty is assessed and collected by the IRS, §5000A is administered both by that agency and by the Department of Health and Human Services (and also the Secretary of Veteran Affairs), see §5000A(e)(1)(D), (e)(5), (f)(1)(A)(v),(f)(1)(E) (2006 ed., Supp. IV), which is responsible for defining its substantive scope—a feature that would bequite extraordinary for taxes.

The Government points out that “[t]he amount of the penalty will be calculated as a percentage of household income for federal income tax purposes, subject to a floor and [a] ca[p],” and that individuals who earn so little money that they “are not required to file income tax returns for the taxable year are not subject to the penalty”(though they are, as we discussed earlier, subject to themandate). Petitioners’ Minimum Coverage Brief 12, 53.But varying a penalty according to ability to pay is an utterly familiar practice. See, e.g., 33 U. S. C. §1319(d) (2006 ed., Supp. IV) (“In determining the amount of a civil penalty the court shall consider . . . the economic impact ofthe penalty on the violator”); see also 6 U. S. C. §488e(c); 7 U. S. C. §§7734(b)(2), 8313(b)(2); 12 U. S. C. §§1701q–1(d)(3), 1723i(c)(3), 1735f–14(c)(3), 1735f–15(d)(3), 4585(c)(2); 15 U. S. C. §§45(m)(1)(C), 77h–1(g)(3), 78u–2(d), 80a–9(d)(4),80b–3(i)(4), 1681s(a)(2)(B), 1717a(b)(3), 1825(b)(1), 2615(a)(2)(B), 5408(b)(2); 33 U. S. C. §2716a(a).

The last of the feeble arguments in favor of petitioners that we will address is the contention that what this statute repeatedly calls a penalty is in fact a tax because it contains no scienter requirement. The presence of such a requirement suggests a penalty—though one can imagine a tax imposed only on willful action; but the absence of such a requirement does not suggest a tax. Penalties for absolute-liability offenses are commonplace. And where a statute is silent as to scienter, we traditionally presume a mens rea requirement if the statute imposes a “severepenalty.” Staples v. United States, 511 U. S. 600, 618 (1994). Since we have an entire jurisprudence addressing when it is that a scienter requirement should be inferred from a penalty, it is quite illogical to suggest that apenalty is not a penalty for want of an express scienter requirement.

And the nail in the coffin is that the mandate and penalty are located in Title I of the Act, its operative core, rather than where a tax would be found—in Title IX, containing the Act’s “Revenue Provisions.” In sum, “the terms of [the] act rende[r] it unavoidable,” Parsons v. Bedford, 3 Pet. 433, 448 (1830), that Congress imposed a regulatory penalty, not a tax.

For all these reasons, to say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it. Judicial tax-writing is particularly troubl- ing. Taxes have never been popular, see, e.g., Stamp Actof 1765, and in part for that reason, the Constitutionrequires tax increases to originate in the House of Representatives. See Art. I, §7, cl. 1. That is to say, they mustoriginate in the legislative body most accountable to the people, where legislators must weigh the need for the tax against the terrible price they might pay at their nextelection, which is never more than two years off. The Federalist No. 58 “defend[ed] the decision to give the origination power to the House on the ground that the Chamber that is more accountable to the people should have the primary role in raising revenue.” United States v. Munoz-Flores, 495 U. S. 385, 395 (1990). We have no doubt that Congress knew precisely what it was doing when it rejected an earlier version of this legislation thatimposed a tax instead of a requirement-with-penalty. See Affordable Health Care for America Act, H. R. 3962, 111th Cong., 1st Sess., §501 (2009); America’s Healthy FutureAct of 2009, S. 1796, 111th Cong., 1st Sess., §1301. Imposing a tax through judicial legislation inverts the constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry.

Finally, we must observe that rewriting §5000A as a tax in order to sustain its constitutionality would force us to confront a difficult constitutional question: whether this is a direct tax that must be apportioned among the States according to their population. Art. I, §9, cl. 4. Perhaps it is not (we have no need to address the point); but the meaning of the Direct Tax Clause is famously unclear, and its application here is a question of first impression that deserves more thoughtful consideration than the lick-anda-promise accorded by the Government and its supporters. The Government’s opening brief did not even address the question—perhaps because, until today, no federal court has accepted the implausible argument that §5000A isan exercise of the tax power. And once respondents raised the issue, the Government devoted a mere 21 lines of its reply brief to the issue. Petitioners’ Minimum Coverage Reply Brief 25. At oral argument, the most prolongedstatement about the issue was just over 50 words. Tr. of Oral Arg. 79 (Mar. 27, 2012). One would expect this Court to demand more than fly-by-night briefing and argument before deciding a difficult constitutional question of first impression.

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