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Thursday, June 28, 2012

A pro-federalism spin on NFIB's reading of the taxing power

As I just noted, I regard the Court's recent ACA decision as a major defeat for constitutional federalism, because it revives attention to Congress' long-dormant power to impose taxes for regulatory purposes. That power to impose regulatory taxes lapsed into desuetude after the Court expanded the Congress' commerce power in the wake of the New Deal, but, once upon a time, it was the basis for major federal "morality" regulations (against gambling and drugs) during the 1920s through the 1940s. Reviving such a massive power while placing a practically irrelevant limit on the commerce power is not, as Randy Barnett claims, a "weird victory for federalism": It is, to the contrary, a weird victory for nationalism in which, having gagged on the gnat of the commerce power, the Court blithely swallows the camel of regulatory taxes. The taxing power, after all, is not even subject to the minimal limits of Lopez and Morrison, which curtail "non-economic" federal laws directed at (for instance) marriage, education, family law, and other "Culture War" matters. A broad taxing power is, in short, so much worse than a commerce power to impose mandates on private persons that granting the first to gain limits on the second is truly a pyrrhic victory for federalism.

Chief Justice Roberts dropped a few hints in the majority opinion about how the taxing power could be limited in future cases, but some of these limits seem formalistic and silly. The fact that this "exaction" (as Roberts diplomatically calls the mandate) is collected by the IRS rather than, say, HHS seems like the sort of formalism that has given federalism doctrine a bad name.

But Roberts does provides federalism fans with a few small and more substantial consolation prizes. He emphasizes, for instance, that the ACA bars any exaction higher than the average insurance premium that an individual would otherwise have to pay to a qualified insurer (page 35). Footnote 8 at page 36 of the slip opinion also indicates that some such ceiling might be a necessary and not merely sufficient condition for a regulatory tax to be constitutional. Finally, Roberts offers a broad hint that, if Congress were to impose a tax burden so large that the effects were mostly excess burden rather than generation of revenue, then such a tax would not count as a "tax" under Article I, because it would be too "punitive" (pages 42-43 of the slip opinion).

This sort of dicta is encouraging, and, if one were, like myself, both in favor of stronger protections for state power and also inclined to look for silver linings, one might plausibly "spin" this language into a sort of "nexus" text for regulatory taxes: viz., The tax burden incident on some sort of action or inaction must be rationally proportional to the costs of such conduct, or else the tax will be treated as a de facto penalty enforcing a regulation and, therefore, a forbidden end run around the limits of Article I. So read, the language is actually an improvement on the taxing power as described in Kahriger.

Or, at least, that's what this pro-federalism guy says to himself to console himself in the wake of Randy's alleged "victory" for federalism.

Posted by Rick Hills on June 28, 2012 at 04:47 PM in Constitutional thoughts | Permalink


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Scott, Orin's thoughtful post says nothing whatsoever about how the opinion affects the scope of the taxing power, beyond noting that the "tax" argument appropriately read the ACA. Your equally thoughtful post likewise ignores the potential scope of the power to impose regulatory taxes.

I reiterate the obvious: The Court vindicated a meaningless and miniscule limit on the commerce power: Barring Congress from forcing people to buy stuff does nothing much for the protection of federalism. By contrast, the Court's revival of the power to impose regulatory taxes -- a power that has not really been used for over a half-century -- greatly enlarges Congress' constitutional powers far beyond any powers conferred by any other clause in Article I. The power to tax for regulatory purposes allows the federal government to outlaw anything -- from same-sex marriage (tax the license) to domestic violence (tax the conviction). Trading the limit on the commerce power for the renewed interest in regulatory taxes is a lousy bargain for a federalist.

The taxing clause is Article I's sleeping giant, and I would have advised the Court to let sleeping giants lie. That said, I appreciate those dicta in the opinion alluding to potential limits on this potent power.

Posted by: Rick Hills | Jun 29, 2012 8:31:14 AM

Both Orin Kerr (http://www.volokh.com/2012/06/28/the-conservative-john-roberts/) and I (http://lawprofessors.typepad.com/legal_skills/2012/06/obamacare-wins-but-so-does-federalism.html) have argued that the decision was a victory for federalism. Roberts upheld basic principles of federalism concerning the Commerce Clause, and, for the first time, the Court ruled that Congress cannot coerce states into enacting regulatory schemes.

Posted by: Scott Fruehwald | Jun 28, 2012 6:27:19 PM

Re:Federalism--Is it correct to assume that any state wishing to impose an insurance mandate is free to do so now without any concern for preemption?

Posted by: PeteCal | Jun 28, 2012 5:48:05 PM

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