“Let me tell you how it will be … If you try to sit, I’ll tax your seat.” Taxman by the Beatles.
Conservatives and libertarians may be dismayed by Thursday’s ruling on the Affordable Care Act, but they shouldn’t be surprised. For decades politicians have used the tax code to reward laudable behaviors such as home ownership, marriage, higher education, childbearing, and employment. Congress also has a long history of raising supplemental revenue from disfavored economic activities.
- In 1890 Congress levied a $300/lb tax on opium
- In 1904 the Supreme Court upheld a tax on butter-colored margarine that was 40 times the tax levied on margarine that was not butter-colored
- In 1937 the Supreme Court offered its stamp of approval to a $200 transfer tax on certain firearms and firearm paraphernalia
- In 1950 the Supreme Court affirmed a tax on unregistered marijuana dealers that exceeded the tax on their registered counterparts by a ratio of 100 to 1
In the last instance, the Supreme Court summarized the breadth of Congress’s authority to tax as follows: “act may not be declared unconstitutional because its effect may be to accomplish another purpose as well as the raising of revenue. If the legislation is within the taxing authority of Congress – that is sufficient to sustain it.”
Nevertheless, the United States Supreme Court has also unambiguously proclaimed that Congress may not use the tax code to penalize behavior it deems unacceptable. In 1922 Chief Justice Taft observed “…there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty, with the characteristics of regulation and punishment.” One need not be clairvoyant to conclude the Supreme Court’s distinction between permissible taxes and impermissible penalties is frightfully unclear.
Throughout the legislative process, the revenue-raising provisions of the Affordable Care Act were characterized as taxes by the act’s opponents and penalties by the act’s supporters. Since the legislative winners adopted the rhetoric of penalties, the financial levies are arguably unconstitutional. Yet even if the penalizing facets of the bill are taxes, serious constitutional questions still remain. May the government tax an individual’s inaction?
In an effort to explain the Constitution to a concerned public, James Madison (arguably one of the most important founding fathers) explained that Congress’s enumerated powers served to “explain and qualify” the controversially vague “common defense and general welfare” clause. Stated differently, Madison believed the federal government had little (if any) authority to regulate the economic activity of individual citizens. Much has changed since 1787; now it’s constitutional to tax an individual’s inaction.
Aside from the practical difficulty of distinguishing illegitimate penalties from legitimate taxes, the government now has an unimaginable ability to influence each citizen’s choices. At what point does this imperial authority power terminate? Will citizens who refuse to make their homes energy-efficient be taxed for their intransigence? Is the federal government limited in theory only? Chief Justice John Roberts has taken the country down a rough road indeed.
Economic liberty is more than the right to purchase most goods or services as one’s savings and inclination allow, it’s also the right to disregard calls from government officials to purchase anything in particular. Any suggestion to the contrary only serves to undermine the very foundations of individual liberty.
*Legal information and quotes are from Cases in Constitutional Law, 1963 (p. 286-302)
**Federalist No. 41