Constitutional Law I, Pages 233–238

National Federation of Independent Business v. Sebelius

Supreme Court of the United States, 2012


Congress passed the Affordable Care Act, requiring all Americans to have health insurance or face a penalty to be paid to the IRS as part of one's income taxes. This was challenged as an improper exercise of Congress' power to tax.


Can the federal government require Americans to have health insurance under its power to tax?


The Anti-Injunction Act forbids courts from adjudicating the validity of a tax until it has been imposed and collected. Ordinarily this would prevent adjudication on this as it will be another two years until it is collected, but the ACA does not refer to itself as a "tax". It calls itself a "penalty" to get around the Anti-Injunction Act. It is not actually a penalty though. Congress' intent will exclude it from the Anti-Injunction Act, but it cannot declare whether something is a tax or a penalty for constitutional purposes.

As the Commerce Clause does not support the individual mandate, it must be evaluated if this is valid under Congress' taxing power. The government's claim that it is a tax on those that do not purchase insurance goes against the most straightforward reading of the act. It literally says that individuals "shall" maintain health insurance. However, the only penalty is a tax, which is collected by the IRS. The government taxes a lot of things, so it might be able to tax this.

Many factors support this being a tax over a penalty. The tax is usually far less than the cost of insurance, so it still might be a reasonable decision to forgo insurance. There is no scienter requirement for the tax. The payment is just collected like any other tax by the IRS except it cannot prosecute criminally for not paying it. Nothing about these attaches negative legal consequences to not buying health insurance beyond the tax.

The Constitution does not guarantee that individuals can avoid taxation by inactivity, as capitations are expressly contemplated by it. This is not so punitive as to become a punishment. However, the tax power does not give Congress the same level as the Commerce Clause. It only allows the requiring of a monetary payment into the Federal Treasury, and this act complies with this limitation, so it is not for the courts to forbid it.

Dissenting Opinion:

Scalia: Penalty and tax are mutually exclusive terms. The act cannot be both at once. A penalty imposed for violating the law has never be held to be a tax, even when the statute calls it such, much less when it repeatedly calls it a penalty. This is unquestionably an exaction imposed for violating the law which the statute calls a penalty.

Congress' legislative findings confirm that it asserts its regulatory power, not mere taxing power. While the penalty is a percentage of one's taxable income, it is familiar for penalties to vary according to one's ability to pay. The lack of a scienter requirement does not suggest that it is a tax. Scienter would suggest that something is a penalty, but its absence does not suggest that it is a tax.

The mandate and its penalty are located in the act's operative core title, not in its "Revenue Provisions." This makes it obvious that Congress imposed a regulatory penalty, not a tax.

The majority's argument rewrites the statute, something which the judiciary should not do, especially to taxes. The Constitution requires tax increases to originate in the House of Representatives, the legislative body most accountable to the people.

See Also:

National Federation of Independent Business v. Sebelius (Commerce Clause)
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