The Volokh Conspiracy

My review of Michael Greve’s important new book, The Upside-Down Constitution is about to be published in Constitutional Commentary, and is now available on SSRN. Here is the abstract:

Michael Greve’s The Upside-Down Constitution is one of the most important works on constitutional federalism in years. It is the best exposition to date of the idea that the American Constitution establishes a federal system primarily devoted to promoting competition between state governments. It is also probably the most comprehensive critique of the traditional view that federalism is really about promoting the interests of state governments. As Greve recognizes, state governments rarely want to compete, often preferring to establish cartels among themselves.

Greve praises the original Constitution for creating an effective system of interstate competition and the nineteenth and early twentieth century Supreme Court for enforcing it. But he warns that the system has broken down over the last eighty years, replacing competition with cartels and what he considers to be dysfunctional empowerment of state governments. He argues that American federalism has now reached a crisis point from which we must either restore some of its earlier, more competitive, structure, or face a decline similar to those that have beset several other federal systems

In Part I, I describe Greve’s argument, focusing especially on the ways in which it enhances our understanding of the history of constitutional federalism. Part II addresses a potential internal contradiction in Greve’s position. While he emphasizes the need for the judiciary to enforce a competitive regime and recognizes that the federal government often has incentives to promote cartelization, he endorses a broad interpretation of congressional authority under the Commerce Clause and the Spending Clause which effectively gives Congress a blank check to suppress competition in ways he deplores.

Part III briefly considers a second tension in Greve’s analysis. Greve pins his hopes on originalism as the best possible way to restore a competitive federalist Constitution. While he argues that the original Constitution establishes a competitive structure, he also recognizes that the Founders paid little attention to interstate mobility and competition. These two positions are not completely irreconcilable. But they are more difficult to square than Greve sometimes allows.

NOTE: The editors of Constitutional Commentary invited me to review this book before Michael Greve accepted a position at George Mason University School of Law, where I also teach. When Greve accepted GMU’s offer, I informed the editors of this possible conflict of interest. We agreed that I could proceed with the review, so long as we included a note addressing the issue.

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.

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.

Today’s USA Today quotes me on the individual mandate decision as follows:

“You can look for silver linings in the cloud, but it’s still a cloud,” said George Mason University law professor Ilya Somin, who wrote a brief opposing the health law. He said the decision offers Congress a road map to enact similar laws by crafting them as taxes instead of mandates.

The quote is accurate. I do think the ruling is a cloud over the Constitution, and I do believe that Chief Justice John Roberts’ opinion allows Congress to mandate almost anything it wants, so long as the mandate is structured as a so-called “tax” similar to the individual health insurance mandate. In addition, the ruling upholds a major unconstitutional statute. Although the law might be repealed, there is also a good chance it will not be. Relative to a decision striking down the mandate that might have been and almost was, this result is a disappointment.

Some might wonder whether the above is consistent with other statements I have made to the effect that the decision also offers supporters of limits on federal power cause for optimism. Part of the explanation is that I spoke with the USA Today reporter less than an hour after I got the decision, and I have since had more time to study it closely, as well as read commentary by both supporters and opponents of the mandate who believe the Court’s decision gave a lot of ground to the latter.

But, ultimately, I don’t think there is any great inconsistency in my view. The decision is a disappointment relative to one that actually invalidated the mandate, and also dangerously expands Congress’ tax power. I fully acknowledge that. But at the same time it endorses important constraints on Congress’ powers under the Commerce and Necessary and Proper Clauses and lends new respectability to the notion of strong judicial enforcement of such limits. It makes it very difficult for anyone to seriously argue that such enforcement could only be advocated by wacko extremists or people ignorant of constitutional law. I am also far from certain that the Court will stick to Roberts’ dubious Tax Clause analysis in future, less politically charged cases. Finally, I believe that the Medicaid/Spending Clause ruling – which I don’t think I discussed with the USA Today reporter – is actually far more of a silver lining than a cloud.

Obviously, losing the mandate case was a significant setback. But if we had to lose at all, better this way than almost any other. Whether the positive effects of the decision predominate over the negative ones in the long run remains to be seen. It depends on future events such as the identity of the next few Supreme Court appointments, and whether or not Obama’s health care law can be repealed or modified.

Perhaps most important, it depends on the future development of our constitutional culture. Over the last twenty to thirty years, the idea of strong judicial enforcement of limits on federal power has gained a lot of ground. It has moved from being the preserve of a small number of activists and academics to becoming an integral part of mainstream legal discourse. Many jurists and academics still hate it; but they now have to take it seriously. As Jack Balkin might put it, judicial enforcement of federalism has moved from “off the wall” to “on the wall.” Whether we can make further progress is difficult to say. Much could potentially go wrong. But at this point, I am guardedly optimistic.

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.

Georgetown law professor Neal Katyal is a highly respected liberal constitutional law scholar. He also argued several of the individual mandate cases for the Obama administration in the lower courts. In this recent New York Times op ed, he suggests that the result may well have been a “Pyrrhic victory” for federal power:

The obvious victor in the Supreme Court’s health care decision was President Obama, who risked vast amounts of political capital to pass the Affordable Care Act....

But there was a subtle loser too, and that is the federal government. By opening new avenues for the courts to rewrite the law, the federal government may have won the battle but lost the war....

The health care decision also contains the seeds for a potential restructuring of federal-state relations. For example, until now, it had been understood that when the federal government gave money to a state in exchange for the state’s doing something, the federal government was free to do so as long as a reasonable relationship existed between the federal funds and the act the federal government wanted the state to perform.

In potentially ominous language, the decision says, for the first time, that such a threat is coercive and that the states cannot be penalized for not expanding their Medicaid coverage after receiving funds....

This was the first significant loss for the federal government’s spending power in decades....

Of equal concern is the court’s analysis of the constitutionality of the individual mandate. While the court upheld the mandate, it did so by rejecting the federal government’s claim that it was regulating commerce.

Obviously, Katyal and I disagree on the merits of the two cases. For example, I think he is wrong to suggest that “until now, it had been understood that when the federal government gave money to a state in exchange for the state’s doing something, the federal government was free to do so as long as a reasonable relationship existed between the federal funds and the act the federal government wanted the state to perform.” The Supreme Court had indicated that “coercive” conditional grants are unconstitutional as far back as the 1930s, and reiterated that point in South Dakota v. Dole (1987), the leading modern precedent on conditional grants.

But we do agree that both the Medicaid decision and the individual mandate ruling contain potentially important gains for those who want stricter enforcement of constitutional limits on federal power. Indeed, Katyal’s pessimism on this score is probably greater than my optimism. I think that he underrates the significance of Chief Justice Roberts’ overexpansive interpretation of the Tax Clause.

Interestingly, Katyal points to yesterday’s Stolen Valor Act decision as an additional indication that both the Court and the public are willing to support judicial overruling of federal statutes. The case is very different from the mandate and Medicaid rulings in many ways. But I can to some extent see his point.

I would not go so far as to say that Katyal’s side of the debate over the scope of federal power has “won the battle, but lost the war.” Far from it. But it is clear that yesterday’s decisions give supporters of limits on federal power some useful ammunition, despite also dealing us a painful defeat. At the very least, the “war” is far from over.

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.

As I pointed out yesterday, five justices, including Chief Justice Roberts, accepted all the plaintiffs’ major arguments against the individual mandate with respect to the Commerce and Necessary and Proper Clauses. But how much does that conclusion actually matter? My tentative view is that it will have little immediate effect, but may well be significant in the future.

One possible reason to dismiss the importance of the Court’s treatment of these issues is that it might have been mere dictum. After all, the Court upheld the mandate based on the Tax Clause, so the other two issues were not essential to the outcome. However, as co-blogger Jonathan Adler points out, Chief Justice Roberts’ controlling opinion explicitly holds that this analysis was essential to the outcome:

[T]hese analyses form an essential predicate to his ultimate conclusion that the mandate could be upheld as a tax. As the entire Court accepts, the most natural reading of the minimum coverage provision is as an economic mandate adopted pursuant to the Commerce Clause. It is only after rejecting the possibility that the mandate could be justified in this manner that the Chief returns to the text to see if it is susceptible to an alternative construction. Thus, the only reason the Chief Justice even considers whether the mandate could be considered a tax, the statutory text notwithstanding, is because of his prior conclusion on the Commerce and Necessary and Proper Clauses. Thus this decision provides five firm votes for meaningful limits on the most expansive of Congress’ powers.

One can still argue that the Commerce and Necessary and Proper analysis was dictum on the grounds that it was not seen as essential by the other four justices who voted to uphold the mandate. But to the extent that the Chief Justice’s opinion is controlling, as that of the majority justice who concurred on “the narrowest ground,” it is his position that matters. Moreover, as a practical matter, lower courts are unlikely to simply ignore a position that was forcefully endorsed by five Supreme Court justices in a major case.

Even if the Chief Justice’s Commerce and Necessary and Proper analysis does bind lower courts, it’s possible it will not have much effect in practice. As Roberts emphasizes, the mandate exceeded the scope of those powers because it sought to regulate inactivity. No other current federal law does the same thing on the basis of those two clauses. But, as I explained in this article, the power to impose purchase mandates is one that Congress would have strong incentives to abuse in the future. So even if this case’s CC/NP rulings will not endanger any present laws, they could cut off future mandates.

Obviously, Congress can circumvent the limits on Commerce Clause mandates by trying to structure future mandates on inactivity as taxes, utilizing Roberts’ reasoning on why the health insurance mandate is a tax as a guide. However, the jerry-rigged nature of Roberts’ analysis and the possibility that it was developed primarily to avoid having to strike down this particular statute makes it possible that the the Court will back off at least some of it in future cases. Even if it does not, having to use the tax power at least prevents Congress from punishing mandate violators with prison time instead of fines.

Moreover, the doctrinal impact of this decision potentially goes beyond mandates in one important sense. Chief Justice Roberts and (less clearly) the four dissenting justices all reaffirmed the proposition that laws authorized by the Necessary and Proper Clause must be “proper” as well as “necessary.” As Roberts put it, “Even if the individual mandate is ‘necessary’ to the Act’s insurance reforms, such an expansion of federal power is not a ‘proper’ means for making those reforms effective.” This was the central theme of the amicus brief I wrote for the Washington Legal Foundation. Roberts did not give anything approaching a comprehensive definition of “proper.” But his emphasis on the idea that it imposes independent limitations on congressional power could well lead to future litigation on the subject.

The greatest potential significance of the Court’s Commerce and Necessary and Proper ruling, however, lies less in the doctrinal details and more in the fact that five justices were willing to endorse a strong substantive limit on these powers. That is both symbolically significant and a potential signal for future cases.

Obviously, whether or not Roberts’ analysis will really have an effect on future cases depends in large part on future Supreme Court appointments and the political situation. If, for example, Barack Obama gets reelected in November and replaces one or more conservative Supreme Court justices with liberals, yesterday’s Commerce and Necessary and Proper ruling will likely be ignored or overruled. But for reasons David Bernstein emphasizes, it’s also possible that things will move in the opposite direction. Some liberal observers fear such a result. It is still too early to say whether this part of the individual mandate decision will turn out to be an outlier or a sign of things to come.

Note the close parallels between my statements in this CBS News report and on the mandate decision, and those of University of Michigan law professor Richard Friedman, a well-known liberal legal scholar. It’s almost as if we coordinated our remarks in advance. But in truth I had no idea what he said until I read the article afterwards:

Although his liberal allies found that the commerce clause is a justifiable means to invoke the mandate, Roberts found it does not give Congress that authority. However, the court determined the mandate is constitutional under Congress’ power to “lay and collect taxes.”

Ilya Somin, law professor at George Mason University who wrote an amicus brief opposing the mandate, said he is “more surprised” that the court upheld it under the tax provision.

It was “the federal government’s weakest argument,” he said.

Richard Friedman, law professor at the University of Michigan, also said he was surprised that Roberts backed the tax argument, which he also called “the weaker argument....”

The University of Michigan’s Friedman attributed Roberts’ position to the weight of the case. “He was reluctant to see his court be the first one in 75 years to throw out a significant piece of legislation.”

Somin, who opposed the mandate agreed, saying, “It is generally rare for a court to strike down major legislation that has the support of the president and his party,”

While the 26 state plaintiffs ultimately lost the case challenging the constitutionality of the individual mandate, they partially prevailed on the other federalism case decided today: the challenge to provisions of the Affordable Care Act requiring states to massively expand Medicaid coverage or lose all of their federal Medicaid funds.

The Supreme Court ruled that the federal government may deny the states additional Medicaid funds if they refuse to comply with the coverage expansion requirement, but may not take away their preexisting Medicaid funds. In previous cases, such as South Dakota v. Dole (1987), which upheld the denial of 5% of federal highway funds to states that refused to raise their drinking age to 21, the Court ruled that federal grant conditions are might be unconstitutionally “coercive” if they put too much pressure on states. But this is the first time the Court has actually invalidated spending condition on that basis. Because states are so heavily dependent on federal Medicaid grants, Chief Justice John Roberts’ opinion for the Court reasons as follows:

[In South Dakota v. Dole], [w]e found that the inducement was not impermissibly coercive, because Congress was offering only “relatively mild encouragement to the States...” We observed that “all South Dakota would lose if she adheres to her chosen course as to a suitable minimum drinking age is 5%” of her highway funds. In fact, the federal funds at stake constituted less than half of one percent of South Dakota’s budget at the time. In consequence, “we conclude[d] that [the] encouragement to state action [was] a valid use of the spending power.” . Whether to accept the drinking age change “remain[ed] the prerogative of the States not merely in theory but in fact.”

In this case, the financial “inducement” Congress has chosen is much more than “relatively mild encouragement”—it is a gun to the head. Section 1396c of the Medicaid Act provides that if a State’s Medicaid plan does not comply with the Act’s requirements, the Secretary of Health and Human Services may declare that “further payments will not be made to the State.” A State that opts out of the Affordable Care Act’s expansion in health care coverage thus stands to lose not merely “a relatively small percentage” of its existing Medicaid funding, but all of it... Medicaid spending accounts for over 20 percent of the average State’s total budget, with federal funds covering 50 to 83 percent of those costs.

Six other justices agreed that this condition is unconstitutional, including liberals Stephen Breyer and Elena Kagan. Justice Breyer’s vote is particularly surprising, since he has been the the intellectual leader of the liberal wing of the Court in arguing that federalism limitations on congressional power should be left to the political process rather than enforced by the Court.

Unfortunately, Chief Justice Roberts gave little indication as to how punitive a funding condition must be before it becomes “coercive.” As he puts it, “We have no need to fix a line.... It is enough for today that wherever that line may be, this statute is surely beyond it.” The question of where the line is will likely to be the subject of much future litigation, as co-blogger Jonathan Adler explains here:

The Court’s decision on the Medicaid expansion dramatically reduces the pressure for states to accept this part of the PPACA. It will also limit the federal government’s ability to direct state implementation in other areas by threatening the withdrawal of federal funds. Given the frequency with which Congress uses the power of the purse to induce state cooperation, new rounds of litigation on the spending clause are sure to follow. Dole upheld a threat to withhold five percent of federal highway funds if states refused to adopt a 21-years-old drinking age. But will courts uphold a threat from the Environmental Protection Agency to shut off the lion’s share of highway funds should states not adopt sufficiently stringent pollution controls on local businesses? Perhaps not.

Regardless, the Medicaid case has now established the first potentially significant limit on Congress’ Spending Clause power in 75 years. Just how significant it turns out to be remains to be seen. It could be that it will apply only to extreme cases, where many states stand to lose 10 to 15 percent of their total budget, as was true here. But perhaps a smaller, yet still substantial, figure will be enough. We shall see.

I previously wrote about the Medicaid case here and in this March post where I explained both my doubts about the “coercion” standard, and why I nonetheless believe the states deserved to win this case.

SCOTUSblog has just posted a detailed analysis of today’s decision that I did for them. It’s much more thorough than anything I have been able to put up elsewhere. Here is an excerpt:

Today’s 5-4 Supreme Court decision upholding the individual health insurance mandate is an extremely frustrating result for those of us who argued that the mandate is unconstitutional. One might even call it taxing. The plaintiffs came about as close as one can to winning a major constitutional case without actually winning it. It is the legal equivalent of losing the World Series after leading in the bottom of the ninth inning in the seventh game. It is not a happy day for supporters of limited government.

Yet the Court also offers us a measure of hope and vindication. A majority of the justices rejected claims that the mandate is authorized by the Commerce Clause and Necessary and Proper Clause. That has little immediate impact, but bodes well for the future. The numerous pundits who claimed that this case was a slam dunk for the federal government turned out to be spectacularly wrong. The struggle over the constitutional limits on federal power is far from over....

In his discussion of the Commerce Clause, Roberts ruled that the Constitution denies Congress the power to “bring countless decisions an individual could potentially make within the scope of federal regulation and … empower Congress to make those decisions for him.” Yet, having closed the front door of the Commerce Clause, the Chief Justice has now “empowered” Congress to make those same decisions for us through the tax power...

Today’s decision is unlikely to be the last word on the constitutional limits of federal power. As the close 5-4 division in the Court shows, the justices remain deeply divided on federalism issues.... No one can any longer say that the case against the mandate was a sure loser that could only be endorsed by fringe extremists or people ignorant of constitutional law.

Defenders of extremely broad federal power won an important battle today. But the war will continue.

Some, including co-blogger Orin Kerr, have argued that today’s ruling that the individual mandate is a tax rests on a mere technicality. The mandate could have been a tax if only Congress had labeled it as such or structured it slightly differently, and so it makes sense for the Court to assume that it is a tax rather than invalidate an important law.

But the argument that this is not a tax has never been just about labeling or technicalities. The mandate is substantively a penalty rather than a tax, for reasons I explained here:

As recently as 1996, the Supreme Court reiterated the crucial distinction between a penalty and a tax. It ruled that “[a] tax is a pecuniary burden laid upon individuals or property for the purpose of supporting the Government,” while a penalty is “an exaction imposed by statute as punishment for an unlawful act” or – as in the case of the individual mandate – an unlawful omission. The individual mandate is a clear example of a penalty, where Congress requires people to purchase health insurance, and then punishes them with a fine if they fail to comply.

In September 2009, President Obama himself noted that “for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.” He was right....

Even if the individual mandate does somehow qualify as a tax, it is not one of the types of taxes that Congress is authorized to impose. The Constitution gives Congress the power to enact several types of taxes: Excise taxes, duties and imposts, income taxes, and “direct taxes” that must be apportioned among the states in proportion to population.

No one, including the federal government, claims that the individual mandate is a duty or an impost. The individual mandate is not an income tax because an income tax must target some “accession to wealth,” in the words of Commissioner of Internal Revenue v. Glenshaw Glass Co., the leading Supreme Court case on the subject. The fine imposed by the mandate does not target any accession to wealth or flow of income. It simply forces individuals to pay a penalty if they disobey the federal government’s regulatory requirement. The fact that low-income individuals are exempted does not change this analysis. A fine for jaywalking would not become an income tax if low-income individuals were exempted from it....

It is even more implausible to suggest that the mandate is an excise tax. Excise taxes apply to economic transactions or the use of property of some kind. For example, a tax on the sale of alcoholic beverages qualifies as an excise. The individual mandate does not tax any kind of activity, use of property or economic transaction....
If the mandate is not a tariff, impost, income tax, or excise tax, it is either a direct tax or no tax at all. And if it is a direct tax, it would be an unconstitutional one, because it is not apportioned among the states in proportion to population as the Constitution requires.

Even if Congress had called the mandate a a tax, that still would not have made it constitutional. But to the extent that labeling does matter, it’s not just a pure legal technicality. Those who argue that Congress has a virtually unlimited power to impose taxes claim that the main constraint on this power is political accountability. But that accountability is undermined if the federal government can pretend that a bill is not a tax in order to get it enacted, and then turn around and claim it is a tax when it comes time to defend the law in Court. Had President Obama and the Democratic leaders in Congress announced this was a tax from the start, it likely would not have passed in the first place.

Ultimately, the constitutionality of this law doesn’t turn on labels. Labeling this penalty a tax would not have made it so. But for those who believe that political accountability is the sole constraint on the tax power, labels are not mere legal tecnicalities either.

UPDATE: It’s worth noting that Chief Justice Roberts’ opinion only briefly discusses the crucial question of whether the mandate – if it is a tax at all – turns out to be an unconstitutional “direct tax.” The four justice dissent by Alito, Kennedy, Scalia and Thomas properly takes him to task for this:

[W]e 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 itis 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 thatdeserves 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 raisedthe issue, the Government devoted a mere 21 lines of its reply brief to the issue....

UPDATE #2: Chief Justice Roberts’ opinion does include a very brief discussion of why the mandate is not a “direct tax” that must be apportioned among the states (pp. 40-41). But that does not address the question of whether it falls under one of the other categories of taxes allowed by the Constitution. If it is not an income tax, excise tax, tariff, or impost, it’s not a tax authorized by the Constitution – even if it also isn’t a direct tax.

With all the hoopla surrounding the individual mandate case, the media and most commentators have often given short shrift to the other big health care case the Supreme Court is about to decide: the constitutionality of the Obamacare’s massive expansion of Medicaid. Constitutional law scholar David Oedel recently posted this interesting article on the subject, arguing that the case raises important issues and that the 26 states challenging the law have a stronger case than most pundits think. Oedel is serving as counsel for the state of Georgia, one of the plaintiffs in the case:

As we await the U.S. Supreme Court’s decision on health care reform, it makes sense to recall an under-reported part of the case. Five of six hours of the Supreme Court’s oral arguments in March about the constitutionality of health care reform focused on the individual mandate and got most of the media’s attention. The last hour was left for considering whether the tradition of federal/state cooperation in delivering Medicaid has, in the Affordable Care Act, morphed into unconstitutional coercion of the states...

Until that oral argument, the 26 plaintiff states faced widespread expert skepticism about the states’ constitutional challenge to Medicaid’s expansion. No court has ever before held that the federal government unconstitutionally coerced any state through conditional federal spending. The ACA, though, puts an unusually heavy federal clamp on state “partners” in Medicaid. If any rogue state were to fail to extend free health care to large portions of the lower-middle class, as ordered under the ACA, it could lose all its federal funding for Medicaid for the poor. That funding is by far the largest federal outlay to any state, and is critical to states being able to care for the poor.

Justice Stephen Breyer unexpectedly suggested at oral argument that a decision by the secretary of Health and Human Services to strip any noncompliant state of all Medicaid funding would be unreasonable, and just cause for litigation...

[Chief Justice] Roberts... interjected, “[S]o long as the Federal government has that power [to strip all funding], it seems to be a significant intrusion on the sovereign interests of the State,” even if the states may have experienced and accepted such intrusions before.

Riffing off the classic duress case of “your money or your life,” Roberts summarized the federal government’s position (embellished by [justices] Breyer and Kagan) as being that “there is no evidence that anyone has ever been shot,” rather than that a free choice exists. “You don’t have a choice,” declared the chief flatly. Justice Anthony Kennedy echoed Roberts’ view later, agreeing, “There’s no real choice. And Congress does not in effect allow for an opt-out.”

In short, the Court’s center seemed to lean toward the possibility that Medicaid’s expansion is being financially coerced....

I gave my own tentative thoughts on the Medicaid case in this post. I continue to believe that the Court is more likely to uphold than strike down this part of the law. As I explained in my earlier post, the line between “coercive” and “voluntary” conditional federal grants is murky at best. At the same time, for reasons outlined in that post, I do believe that the states should win. And Oedel is correct to point out that the Court’s swing-vote justices are giving their case more credence than most experts expected.

As Oedel recognizes, there is a small chance that this case will be rendered moot by a decision striking down the mandate and holding that all the rest of the health care bill goes down with it, because it cannot be severed. If that doesn’t happen, the Medicaid case is going to be an extremely important ruling no matter who wins; probably the most important Spending Clause case since the 1930s, or at least since South Dakota v. Dole in 1987.

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?