Class 15: The Taxing Power

Congress shall have power to lay and collect taxes (constitution)

Articles of confederation did not work because it did not have taxing power
I. Introduction to the taxing power
- Only can tax if the court has held that it doesn’t reach past commerce
- Commerce comes before tax (also always solves that problem)
- Whicketr applies in economic activity
- This tax power will apply when the court says the congress power doesn’t reach
that far??
II. National Federation of Independent Business v. Sebelius (2012)
Facts- In 2010, Congress passed the Patient Protection and Affordable Care Act.
Many parties, including businesses, individuals, and 26 states, challenged the Act's
constitutionality in court. The two main points of contention were the individual
mandate, which requires people to buy health insurance or pay a penalty, and the
Medicaid expansion provision, which ties federal Medicaid funds to states expanding
their eligibility requirements for the program. The district court ruled that Congress
had overstepped its authority with the individual mandate and struck down the entire
Act. The case eventually made its way to the Supreme Court
Court reads it narrowly
- The Supreme Court ruled that the individual mandate is a valid use of Congress's
power to tax. The Court reasoned that the penalty for not buying health insurance
operates like a tax. However, the Court also ruled that the Medicaid expansion
provision is an unconstitutional use of Congress's spending powers. The Court
found that the federal government cannot withhold existing Medicaid funding
from states that choose not to expand their Medicaid programs. The Court decided
that this provision is separate from the rest of the Act, which remains in place

A. The argument that the individual mandate falls outside Congress’s taxing power
Because 5 justices say distinction between inactivity and activity
They say the individual mandate is inactivity
Arg- 1. the statute calls the mandate a penalty and 2. actually is because it is designed
to punish behavior and not aimed at generating revenue 3.
B. The Court’s argument for why the individual mandate falls within Congress’s taxing
authority.
- 5 votes that say yes
- Liberals say yes to both
- Roberts say not commerce but yes to taxing
Court factors saying it is a tax
1. Revenue
a. We know it is a tax because it raises revenue (this is an essential
feature) It could not count as a tax if no revenue is raised
2. Administered through the IRS
 a. It is being enforced by the agency that normally deals with tax
b. Creates an incentive to run things through IRS to through arg it is tax
3. Not excessive
a. Payment required in child labor case was excessive (10 %)
i. There was no choice here but to abandon it because the tax was
no high and had to comply with congress to stop child labor
ii. But if there was no choice here congress can go around it
b. They don’t say what is excessive but at a certain point you don’t have
a choice to pay the tax
c. Tax has to be set when it is possible to pay the tax
d. They say it is not excessive because it less than the insurance would
cost and is possible to pay
e. But- not getting insurance if you have to pay the tax
4. No scienter (guilty knowledge) requirement
a. Requirement that person has intent of knowledge of wrongdoing
b. Individual mandate doesn’t care
5. Congress’s label doesn’t matter
a. Court must say that otherwise it would be a penalty
Aspects of individual mandate to call it a tax but they all are not
mandatory
Doesn’t matter that it was called penalty
- Cant be excessive and has to raise some revenue
- This is functionalist
- Commerce is formalist
- Roberts both
Level of scrutiny
- Court applies rational basis review
C. Hypothetical variants on the individual mandate (in power or no)
1. d
2. Congress imposes a tax equal to the cost of purchasing insurance plus 10%
a. Not in power because it is too excessive it is a penalty
b. It is either do what congress wants or pay a finance destroying tax
i. That is no choice= exess
3. Can congress tax ppl if they fail to buy broccoli or go to gym
a. Yes
b. As long as it is a small tax you can still choose not to do this and as long
as it wasn’t excessive
4. suppose congress says if you don’t get insurance you go to jail
a. Not a tax
b. doesn’t raise revenue
5. can congress tax those who don’t get the covid vaccine
a. yes, in general
b. what does count as not excessive
6. can congress force ppl to get covid shot
 a. not
b. activity versus inactivity
D. What, if anything, did NFIB accomplish for federalism and enumerated powers?
- Under tax all that congress can wield is money
- It is a smaller stick (more limited)
Not a constraint
- They got it done and the activity v inactivity won’t come up much
- More symbolic than real
- It is not an obstacle congress always has to worry about
Dissent
- They call it a penalty and it was not meant to be a tax
- They invented the tax
- Taxes have to originate congress and this has originated with the court
Response
- We didn’t invent anything
- Just saying it falls in here
-