Printer Friendly

NFIB v. Sebelius and the transformation of the taxing power.

ABSTRACT

In National Federation of Independent Business v. Sebelius, Chief Justice Roberts wrote for a majority of five Justices in holding that the "shared responsibility payment" required by the Patient Protection and Affordable Care Act ("ACA ") constituted an imposition of a "tax" rather than a "penalty." Thus, even though the Chief Justice and four other Justices had concluded that the provision was not a legitimate exercise of the commerce power, the Court held that it was a valid exercise of the taxing power.

The origin of the distinction between taxes and penalties in taxing power jurisprudence is found in the 1922 decision of Bailey v. Drexel Furniture Co., more commonly known as the Child Labor Tax Case. There the Court invalidated a provision of the Revenue Act of 1918 imposing an excise of ten percent on the net profits of all firms employing children under specified ages in various tasks, for longer than specified hours, or at night work. The Child Labor Tax Case was followed in other, similar cases in the 1920s and 1930s, and the Court continued to treat those precedents as good law throughout the remainder of the twentieth century.

Chief Justice Roberts did not reject the authority of the Child Labor Tax Case. Instead, he reviewed the features of the Child Labor Tax that had prompted Chief Justice Taft and his colleagues to conclude that the measure imposed a regulatory penalty, and then offered several distinctions between the ACA and the earlier exaction. But a review of the reaction of child labor reformers to the 1922 decision suggests that contemporaries would not have regarded those distinctions as constitutionally significant. For child labor advocates in the 1920s did not believe that if they revised the measure to remove those objectionable features, the tax would then pass constitutional muster. Instead, they regarded the idea of such a constitutional excise as hopeless, and turned their attention to an unsuccessful effort to amend the Constitution to permit Congress to enact federal child labor legislation.

This Article proceeds as follows: Part I provides an overview of the relevant twentieth-century taxing power precedents. Part II reviews the decisions of the lower federal courts concerning the construction and constitutionality of the ACA as a taxing measure. Part III canvasses the arguments made in the briefs submitted to the Court, observing that the decisive taxing power issue received scant attention from the parties. Part IV scrutinizes Chief Justice Roberts's efforts to distinguish the Child Labor Tax Case, concluding that if the assessment of that decision by contemporary observers was accurate, each of those distinctions is insufficient. Part V draws on the contemporaneous analysis of Professor Thomas Reed Powell to isolate the core principle emerging from the Child Labor Tax Case and its progeny: that a nominal tax is in fact a regulatory penalty where it imposes an exaction triggered by departure from a detailed and specified course of conduct, and the exaction is sufficiently onerous to induce those engaged in the targeted conduct generally to alter their behavior. Part VI presents an argument, not considered by the Court, that the A CA might be understood to impose a regulatory penalty so defined. If that understanding is correct, then the Court may have effectively overruled the Child Labor Tax Case and its progeny sub silentio, thereby substantially transforming taxing power doctrine. Part VII explores an alternative, albeit considerably less likely possibility: that contemporary child labor reformers misunderstood the Child Labor Tax Case, and could have successfully revised and defended a new Child Labor Tax by altering one or more of the distinguishing features identified by Chief Justice Roberts. If that is so, then that unfortunate generation of social activists squandered fifteen years in fruitless pursuit of a constitutional amendment authorizing Congress to regulate the labor of children, when a much easier and more expeditious solution lay right before their eyes.

INTRODUCTION

The Supreme Court has revived an old asymmetry in its jurisprudence of enumerated powers. In the late nineteenth century and during the first four decades of the twentieth, Congress frequently sought to achieve regulatory objectives it could not attain through its commerce power by imposing excise taxes designed to discourage disfavored activities. (1) Occasionally these exactions were challenged before the Supreme Court, and the Justices permitted this indirect fiscal regulation of such "local" activities as the production of oleomargarine colored to resemble butter, (2) the intrastate distribution of narcotics, (3) and the intrastate sale of machine guns and sawed-off shotguns. (4) For decades following the Court's 1942 decision in Wickard v. Filburn, (5) after which the commerce power was commonly thought to be virtually plenary, this asymmetry in the regulatory scope of these two enumerated powers was effaced. With the more recent decisions in United States v. Lopez (6) and United States v. Morrison, (7) however, the question of whether Congress's reach under its taxing power would again exceed its grasp under the Commerce Clause once again became salient.

To this question we now have our answer. Beginning in 2014, the Patient Protection and Affordable Care Act ("ACA') will require every "applicable individual" who has not secured "minimum essential [health insurance] coverage" to make a "shared responsibility payment" to the Internal Revenue Service. (8) In National Federation of Independent Business v. Sebelius, (9) five Justices held that this "individual mandate" could not be sustained as an exercise of the commerce power. Another group of five Justices, however, held that the provision was a valid exercise of Congress's Article I, Section 8 power to "lay and collect Taxes, Duties, Imposts and Excises." (10) The deciding vote in each instance was cast by Chief Justice Roberts.

No lower federal court had upheld the mandate as a tax, (11) and the parties understandably lavished considerably more attention on the Commerce Clause issue, which they anticipated would be decisive. As a taxing power case, the challenge to the ACA presented two distinct issues that often seemed to bleed together. The first was an issue of statutory construction: whether the language of the statute, which purported to rely upon the commerce power rather than the taxing power, expressed the regulatory objective of inducing people to purchase insurance rather than a fiscal purpose to raise revenue, and referred to the payment as a "penalty" rather than as a "tax," could properly be construed to impose a tax. The second issue was whether, assuming that the statute's language was properly so construed, the measure imposed a true tax rather than a penalty for purposes of constitutional analysis. The second issue, in other words, was this: suppose that we were to imagine that in enacting the statute Congress had purported to rely on its taxing power rather than on its commerce power, had expressed no regulatory objective but instead had stated that the law's purpose was to raise revenue, and had termed the payment a "tax" rather than a "penalty." Under those circumstances, would the exaction be a tax within the meaning of Article I of the Constitution?

The lower federal courts uniformly had concluded that the mandate could not properly be construed to impose a tax, (12) and the dissenting Justices in Sebelius agreed that several of the statute's features precluded such a construction. (13) Chief Justice Roberts, by contrast, offered a generous "saving construction" of the statute as a tax, (14) leaving the dissenters astonished and indignant. (15) As to the second issue, both Chief Justice Roberts and the dissenting Justices critically agreed on the test to be applied. Each of them relied upon a definition articulated by Justice Sutherland in a Double Jeopardy case decided in 1931. (16) "A tax," Sutherland explained, "is an enforced contribution to provide for the support of government; a penalty, as the word is here used, is an exaction imposed by statute as punishment for an unlawful act." (17) Employing this test, the question was whether the ACA made the failure to acquire qualifying health insurance unlawful. The dissenters concluded that it did; (18) Chief Justice Roberts concluded that under the ACA it was perfectly legal not to secure such insurance, so long as one paid the tax imposed for failing to do so. (19)

This should not have been the end of the matter, for there were decisions that both Chief Justice Roberts and the dissenting Justices recognized as good authority in which the Court had declared a putative tax to be a regulatory penalty even though the conduct triggering the tax was not unlawful. Indeed, one finds the very genesis of the tax/penalty distinction in just such a case: the 1922 decision of Bailey v. Drexel Furniture Co., more commonly known as the Child Labor Tax Case. (20) There the Court had invalidated a provision of the Revenue Act of 1918 imposing an excise of ten percent on the net profits of all firms employing children under specified ages in various tasks, for longer than specified hours, or at night work. (21) The Child Labor Tax Case was followed in other, similar cases in the 1920s and 1930s, and none of these decisions has been formally overruled. (22)

Chief Justice Roberts did not ignore the Child Labor Tax Case. He reviewed the features of the Child Labor Tax that prompted Chief Justice Taft and his colleagues to conclude that the measure imposed a regulatory penalty, and then offered several distinctions between the ACA and the earlier exaction. (23) But a review of the reaction of child labor reformers to the 1922 decision suggests that contemporaries would not have regarded those distinctions as constitutionally significant. For child labor advocates in the 1920s did not believe that if they revised the measure to remove those objectionable features, the tax would then pass constitutional muster. Instead, they regarded the idea of such a constitutional excise as hopeless, and turned their attention to an unsuccessful effort to amend the Constitution to permit Congress to enact federal child labor legislation. (24)

This Article proceeds as follows: Part I provides an overview of the relevant twentieth-century taxing power precedents. Part II reviews the decisions of the lower federal courts concerning the construction and constitutionality of the ACA as a taxing measure. Part III canvasses the arguments made in the briefs submitted to the Court, observing that the decisive taxing power issue received scant attention from the parties. Part IV scrutinizes Chief Justice Roberts's efforts to distinguish the Child Labor Tax Case, concluding that if the assessment of that decision by contemporary observers was accurate, each of those distinctions is insufficient. Part V draws on the contemporaneous analysis of Professor Thomas Reed Powell to isolate the core principle emerging from the Child Labor Tax Case and its progeny: that a nominal tax is in fact a regulatory penalty where it imposes an exaction triggered by departure from a detailed and specified course of conduct, and the exaction is sufficiently onerous to induce those engaged in the targeted conduct generally to alter their behavior. Part VI presents an argument, not considered by the Court, that the ACA might be understood to impose a regulatory penalty so defined. If that understanding is correct, then the Court may have effectively overruled the Child Labor Tax Case and its progeny sub silentio, thereby substantially transforming taxing power doctrine. Part VII explores an alternative, albeit considerably less likely possibility: that contemporary child labor reformers misunderstood the Child Labor Tax Case, and could have successfully revised and defended a new Child Labor Tax by altering one or more of the distinguishing features identified by Chief Justice Roberts. If that is so, then that unfortunate generation of social activists squandered fifteen years in fruitless pursuit of a constitutional amendment authorizing Congress to regulate the labor of children, when a much easier and more expeditious solution lay right before their eyes.

I. THE PRECEDENTS

The distinction between a true tax and a regulatory penalty may seem obscure, because until recently it may have seemed like little more than a remote artifact of the constitutional law of the early twentieth century. A review of the relevant precedents therefore may better enable us to appreciate their bearing on the Court's recent decision upholding the individual mandate. This line of doctrinal development is sometimes understandably characterized as marked by inconsistency and discontinuity. (25) One aim of this and subsequent sections is to caution against exaggeration in this regard, and to identify the principle that lent unity to this body of doctrine.

A. Early Decisions

In Veazie Bank v. Fenno, (26) decided in 1869, the Supreme Court unanimously upheld a federal excise of ten percent on the issuance of state bank notes. The law was clearly designed to tax state bank notes out of circulation, and the Court sustained the tax as a valid exercise of Congress's monetary power to establish and regulate a sound and uniform national currency. (27) But Chief Justice Chase's opinion also maintained that the statute could be upheld as an exercise of the taxing power. (28) The foundation for this conclusion was a conception of the separation of powers that would permeate subsequent taxing power decisions. "[T]he judicial cannot prescribe to the legislative departments of the government limitations upon the exercise of its acknowledged powers," Chase wrote. "The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected." (29)

It was this conception that drove the Court's 1904 decision in McCray v. United States. (30) There the Court, by a vote of 6-3, upheld a statute that imposed a tax at a rate of one-fourth of a cent per pound on uncolored oleomargarine, but at a rate of ten cents per pound where the oleomargarine was colored to resemble butter. (31) There was no doubt that the tax was designed to discourage the production of oleomargarine colored so that it would compete with butter. (32) The report of the Senate Committee on Agriculture and Forestry frankly admitted that the bill's purpose was "to encourage the sale of the genuine article and to discourage the fraudulent sale of the imitation article, and to protect the honest producer, dealer, and consumer of both butter and oleomargarine." (33) The House Committee on Agriculture Report similarly confessed that
 [t]he object sought by the legislation ... is to provide the best
 means of protecting the public against imposition in the sale of
 oleomargarine in guise and under the name of butter, and at the
 same time protect the producer of the genuine article in the full
 enjoyment of the market to which he is justly and honestly entitled
 as a result of the general demand upon the part of the public for
 his product. (34)


"[S]tringent measures" were "necessary for the protection of the public and producers of butter against fraud in the sale of oleomargarine," and "only the burdening of the counterfeit or imitation article with a heavy tax, taking from it the large profit that is the incentive to its fraudulent sale as butter," could "successfully correct the flagrant abuses accompanying its sale." (35) The Senate Committee's Minority Report charged that
 [t]he advocates of this proposed legislation admit that their
 object is to place the tax on oleomargarine so high that it can not
 be placed upon the markets of the country if colored.... The object
 ... of imposing this excessive tax of 10 cents a pound upon colored
 oleomargarine is not for the purpose of raising revenue, but for
 the purpose of prohibiting its manufacture, and of thus destroying
 the industry. (36)


The bill was thus "not a revenue measure." (37)

Chief Justice White's analysis of the taxing power issue treated the question as if it were wholly controlled by separation of powers concerns. As White understood McCray's argument, he was contending that
 because a particular department of the government may exert its
 lawful powers with the object or motive of reaching an end not
 justified, therefore it becomes the duty of the judiciary to
 restrain the exercise of a lawful power wherever it seems to the
 judicial mind that such lawful power has been abused. (38)


White recoiled from the proposition that the judiciary should intervene to prevent such a pretextual exercise of an enumerated power, an exercise of a "lawful power ... for an unlawful purpose." (39) As White saw it, McCray's claim "reduce[d] itself to the contention that, under our constitutional system, the abuse by one department of the government of its lawful powers is to be corrected by the abuse of its powers by another department." (40) That proposition, White worried,
 if sustained, would destroy all distinction between the powers of
 the respective departments of the government, would put an end to
 that confidence and respect for each other which it was the purpose
 of the Constitution to uphold, and would thus be full of danger to
 the permanence of our institutions. (41)


White quoted at length from judicial paeans to separation of powers, and worried aloud about 'Judicial usurpation" overthrowing "the entire distinction between the legislative, judicial[,] and executive departments of the government, upon which our system is founded." (42) He recognized that the lack of judicial authority to invalidate the exercise of an enumerated power animated by "a wrong[ful] motive or purpose" might result in "temporarily effectual.... abuses of a power conferred." (43) But he insisted, as Veazie Bank had maintained, that the remedy lay "not in the abuse by the judicial authority of its functions, but in the people, upon whom, after all, under our institutions, reliance must be placed for the correction of abuses committed in the exercise of a lawful power." (44)

The Court was thus powerless to inquire into "the motive or purpose of Congress" in enacting the measure, and it was "self-evident" that the statute on its face levied an excise tax. (45) It therefore followed that the Act was "within the grant of power." (46) The contention that enforcement of the Act would "destroy or restrict the manufacture of artificially colored oleomargarine" was entirely irrelevant. (47) Because "the taxing power conferred by the Constitution" knew "no limits except those expressly stated in that instrument, it must follow, if a tax be within the lawful power, the exertion of that power may not be judicially restrained because of the results to arise from its exercise." (48) The incidental effects that such taxation might have on matters otherwise subject to state regulatory authority did not impugn the validity of the tax. (49)

United States v. Doremus, (50) decided in 1919, involved a constitutional challenge to the Harrison Act of 1914. (51) Section 1 of the Act required persons who produced, imported, or transferred opium or cocoa leaves or any compound, derivative or preparation thereof to register with the collector of internal revenue in his district. (52) At the time of registration, all such persons were required to pay to the collector a special annual tax of $1.00. (53) It was made unlawful for any person required to register under the Act to engage in any of the enumerated drug-related activities without having registered and paid the special tax. (54) Section 2 made it unlawful for any person to transfer any of the listed drugs except pursuant to a written order of the person to whom the drugs were so transferred, "on a form to be issued in blank for that purpose by the Commissioner of Internal Revenue." (55) Anyone transferring any of the listed drugs was required to preserve the order for a period of two years so that it could be inspected by agents of the Treasury Department. (56) The statute created exemptions for dispensations to a patient by a physician in the course of his professional practice, and by pharmacists pursuant to prescriptions from a treating physician, so long as proper records of such prescriptions were preserved. (57)

Doremus was a physician who had duly registered and had paid the special tax required by the first section of the Act. (58) He was charged with unlawfully distributing heroin to a known addict without the written order required by Section 2 of the Act. (59) The indictment charged that Doremus did not distribute the heroin in the course of his regular professional practice, nor for the treatment of any disease from which the addict was suffering, but instead "for the purpose of gratifying [the addict's] appetite for the drug as an habitual user thereof." (60) Doremus demurred to the indictment, and the district court ruled in his favor on the ground that the Act was "not a revenue measure," but was instead "an invasion of the police power reserved to the States." (61)

The Court upheld the Act by a vote of 5-4, reaffirming the principles established in Veazie Bank and McCray. "[F]rom an early day," wrote Justice Day for the majority,
 the court has held that the fact that other motives may impel the
 exercise of federal taxing power does not authorize the courts to
 inquire into that subject. If the legislation enacted has some
 reasonable relation to the exercise of the taxing authority
 conferred by the Constitution, it cannot be invalidated because of
 the supposed motives which induced it. (62)


The fact that "the same business may be regulated by the police power of the State" was irrelevant, for an exercise of the taxing power "may not be declared unconstitutional because its effect may be to accomplish another purpose as well as the raising of revenue." (63) The "decisive question," therefore, was whether Sections 1 and 2 of the Act had "any relation to the raising of revenue." (64) It could not be "successfully disputed" that Congress had power to levy the excise imposed on opium dealers in Section 1, which "specifically provid[ed] for the raising of revenue." (65) And the Court could not agree that the provisions of Section 2 had "nothing to do with facilitating the collection of the revenue" sought by Section 1. (66) Those provisions aimed "to keep the traffic aboveboard and subject to inspection by those authorized to collect the revenue." (67) They accordingly tended "to diminish the opportunity of unauthorized persons to obtain the drugs and sell them clandestinely without paying the tax." (68) "Congress may have deemed it wise to prevent such possible dealings because of their effect upon the collection of the revenue." (69)

The tax in D0remus was sustained by the narrowest of margins, and the dissenting Justices were led by the author of McCray himself. Chief Justice White noted that he
 dissents because he is of opinion that the court below correctly
 held the act of Congress, in so far as it embraced the matters
 complained of, to be beyond the constitutional power of Congress to
 enact because to such extent the statute was a mere attempt by
 Congress to exert a power not delegated, that is, the reserved
 police power of the States. (70)


White's dissent, which was joined by Justices McKenna, Van Devanter, and McReynolds, offered tangible evidence that several of the Justices were becoming concerned about Congress's increasingly aggressive use of the taxing power to achieve regulatory ends. (71)

B. The Child Labor Tax Case and Its Progeny

Those concerns would inspire an 8-1 majority of the Court to invalidate the Child Labor Tax just three years later. In 1916, Congress had passed the Keating-Owen Act, (72) which prohibited the interstate shipment of articles produced by firms that employed children under the age of sixteen in mines or quarries, or employed children under the age of fourteen in any mill, cannery, workshop, factory, or manufacturing establishment, or employed children between the ages of fourteen and sixteen in this latter category of businesses for more than eight hours per day, or for more than six days in any week, or before the hour of 6:00 a.m., or after the hour of 7:00 p.m. (73) In 1918, the Court invalidated the Act in the case of Hammer v. Dagenhart, (74) holding that the statute was not a legitimate exercise of the commerce power. (75) Relying on the authority of McCray, Congress responded by adding a provision to the Revenue Act of 1918 imposing a ten percent excise on the net profits of any firm employing children in violation of any of the standards established by the Keating-Owen Act. (76) That exaction was successfully challenged in the Child Labor Tax Case. (77)

The question, as Chief Justice Taft saw it, was "[d]oes this law impose a tax with only that incidental restraint and regulation which a tax must inevitably involve? Or does it regulate by the use of the so-called tax as a penalty?" (78) Taft recognized that if the excise were one "on a commodity or other thing of value we might not be permitted under previous decisions of this court to infer solely from its heavy burden that the act intends a prohibition instead of a tax." (79) But this act was "more." It provided "a heavy exaction for a departure from a detailed and specified course of conduct in business." (80) If an employer were to depart from "this prescribed course of business, he [was] to pay to the Government one-tenth of his entire net income in the business for a full year." (81) That amount was "not to be proportioned in any degree to the extent or frequency of the departures," but was "to be paid by the employer in full measure whether he employs five hundred children for a year, or employs only one for a day." (82)

Moreover, if the employer did not know that the child was within the specified age limit, he was excused from payment. It was "only where he knowingly departs from the prescribed course that payment is to be exacted." (83) "Scienter," the Chief Justice explained, "is associated with penalties[,] not with taxes." (84) In addition, the employer's factory was
 to be subject to inspection at any time not only by the taxing
 officers of the Treasury, the Department normally charged with the
 collection of taxes, but also by the Secretary of Labor and his
 subordinates whose normal function is the advancement and
 protection of the welfare of the workers. (85)


"In the light of these features of the act," Taft concluded:
 a court must be blind not to see that the so-called tax is imposed
 to stop the employment of children within the age limits
 prescribed. Its prohibitory and regulatory effect and purpose are
 palpable. All others can see and understand this. How can we
 properly shut our minds to it? (86)


Taft recognized that taxes were "occasionally imposed in the discretion of the legislature on proper subjects with the primary motive of obtaining revenue from them and with the incidental motive of discouraging them by making their continuance onerous." (87) Such measures did not "lose their character as taxes because of the incidental motive." (88) Nevertheless, the Chief Justice insisted, "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. Such is the case in the law before us." (89) The statute's "so-called tax" was in fact "a penalty to coerce people of a State to act as Congress wishes them to act in respect of a matter completely the business of the state government under the Federal Constitution." (90)

The Chief Justice conceded that "[o]ut of a proper respect for the acts of a coordinate branch of the Government, this court has gone far to sustain taxing acts as such, even though there has been ground for suspecting from the weight of the tax it was intended to destroy its subject. But, in the act before us," he insisted, "the presumption of validity cannot prevail, because the proof of the contrary is found on the very face of its provisions." (91)

McCray and Veazie Bank were distinguished on the ground that "[i]n neither of these cases did the law objected to show on its face[,] as does the law before us[,] the detailed specifications of a regulation of a state concern and business with a heavy exaction to promote the efficacy of such regulation." (92) By contrast, the Child Labor Tax, which did display these features "on the face of the act," was a "penalty." (93)

Taft did not deny that the reduction of child labor was a worthy policy objective. Nevertheless, he maintained that it was "the high duty and function" of the Court "to decline to recognize or enforce seeming laws of Congress, dealing with subjects not entrusted to Congress[,] but left or committed by the supreme law of the land to the control of the States," even where it required the Justices "to refuse to give effect to legislation designed to promote the highest good." (94) "The good sought in unconstitutional legislation," Taft warned, "is an insidious feature because it leads citizens and legislators of good purpose to promote it without thought of ... the harm which will come from breaking down recognized standards." (95) "Grant the validity of this law," the Chief Justice reasoned,
 and all that Congress would need to do, hereafter, in seeking to
 take over to its control any one of the great number of subjects of
 public interest, jurisdiction of which the States have never parted
 with, and which are reserved to them by the Tenth Amendment, would
 be to enact a detailed measure of complete regulation of the
 subject and enforce it by a so-called tax upon departures from it.
 To give such magic to the word "tax" would be to break down all
 constitutional limitation of the powers of Congress and completely
 wipe out the sovereignty of the States. (96)


It would constitute a "breach" in "the ark of our covenant," which had been responsible for the "maintenance of local self government, on the one hand, and the national power, on the other," and under which the country had "been able to endure and prosper for near a century and a half." (97) The case therefore required
 the application of the principle announced by Chief Justice
 Marshall in McCulloch v. Maryland ... : "Should Congress, in the
 execution of its powers, adopt measures which are prohibited by the
 Constitution; or should Congress, under the pretext of executing
 its powers, pass laws for the accomplishment of objects not
 intrusted to the government; it would become the painful duty of
 this tribunal, should a case requiring such a decision come before
 it, to say, that such an act was not the law of the land." (98)


Unlike Hammer, which was decided by a vote of 5-4, the decision in the Child Labor Tax Case was supported by eight of the nine Justices. (99) Three of the Hammer dissenters--Justices McKenna, Holmes, and Brandeis--each joined Taft's opinion. Justice Brandeis wrote on his return of Taft's circulated draft opinion, "Yes Sir: You have made this clear & forceful & have done all that can be done to distinguish the earlier cases." (100) Taft later circulated a "[f]urther revision to meet suggestions of the brethren," to which Brandeis replied, "Yes. A very good opinion." (101)

Hill v. Wallace (102) was decided the same day as the Child Labor Tax Case. The Future Trading Act of 1921 (103) imposed a tax of twenty cents per bushel on all contracts for the sale of grain for future delivery, but exempted from its application sales on boards of trade designated as contract markets by the Secretary of Agriculture. (104) The Secretary could designate a board as a contract market only if it fulfilled a detailed series of conditions and requirements set forth in the Act. (105) The petitioners argued that the Act "in effect prohibits all those who are not members of a board of trade, which has been designated by the Secretary of Agriculture a contract market under [the Act], from making any contracts of sales for future delivery. (106)

The Court unanimously held that these provisions of the Act could not be sustained as an exercise of the taxing power of Congress. (107) Chief Justice Taft concluded that the decision in the Child Labor Tax Case "completely covers this case." (108) Here it was "impossible to escape the conviction, from a full reading of this law, that it was enacted for the purpose of regulating the conduct of business of boards of trade through supervision of the Secretary of Agriculture." (109) Indeed, the title of the Act recited that one of its purposes was the regulation of Boards of Trade. (110) The imposition of a tax of twenty cents per bushel was "most burdensome." (111) The Revenue Act imposed a tax on contracts for sales for future delivery of only two cents per $100 of value. (112) The tax imposed by the Future Trading Act, by contrast, varied according to the price and character of the grain from fifteen to fifty percent of its value. (113) The "manifest purpose of the tax" was "to compel boards of trade to comply with regulations," many of which had "no relevancy to the collection of the tax at all." (114) The Act was thus, "in essence and on its face[,] a complete regulation of boards of trade, with a penalty of 20 cents a bushel on all 'futures' to coerce boards of trade and their members into compliance." (115) a5 When this purpose was "declared in the title to the bill," and was "so clear from the effect of the provisions of the bill itself," it left "no ground" upon which its provisions could be "sustained as a valid exercise of the taxing power." (116)

Carter v. Carter Coal Co., (117) decided in 1936, considered the validity of provisions of the Bituminous Coal Conservation Act of 1935. (118) That Act established an elaborate scheme for the creation of a national commission (119) which was to promulgate a national Bituminous Coal Code (120) involving the organization of numerous coal districts, the setting up of numerous boards in the districts, and the fixing of all prices for bituminous coal, and of the wages, hours and working conditions of the miners, throughout the country. (121) It also imposed an excise tax of 15% on the sale price or market value at the mine of all bituminous coal produced in the country, but provided that those producers who submitted to the price-fixing and labor provisions of the Code would receive a 90% credit against the tax. (122) The constitutionality of the Act was successfully challenged in Carter Coal Following the authority of the Child Labor Tax Case, the Court held that the "so-called excise tax" was "clearly not a tax[,] but a penalty." (123) It was "not imposed for revenue[,] but exacted as a penalty to compel compliance with the regulatory provisions of the act." (124) Indeed, Justice Sutherland observed, "[t]hat the 'tax' is[,] in fact[,] a penalty is not seriously in dispute." (125) The Government conceded "that the validity of the exaction does not rest upon the taxing power[,] but upon the power of Congress to regulate interstate commerce; and that[,] if the act in respect of the labor and price-fixing provisions be not upheld, the 'tax' must fall with them." (126)

As the historian of regulatory taxation R. Alton Lee observes, these decisions constituted a refinement rather than a rejection of McCray. "As if to demonstrate that the [McCray] decision had not been overturned in 1922," Lee notes, "the Supreme Court refused to hear a case ten years later involving a discriminatory tax on ticket scalping." (127) The Revenue Act of 1926 had retained a World War I era five percent excise on tickets to places of amusement, "but further provided for an exactment of 50 percent on the resale of tickets on the amount exceeding fifty cents over the price printed on the ticket." (128) In 1928 Congress raised the permissible mark-up from fifty to seventy-five cents. (129) In F. Couthoui, Inc. v. United States, the Court of Claims relied upon McCray in sustaining the constitutionality of the scalping tax. (130) The Supreme Court's denial of certiorari, (131) Lee concludes, "indicated a continued adherence to the McCray principle." (132) McCray and the Child Labor Tax Case co-existed throughout this period, (133) and they would continue to do so.

C. Later Cases

Sonzinsky v. United States, (134) decided in 1937, involved a challenge to Section 2 of the National Firearms Act of 1934, (135) which imposed an annual license tax of $200 on all dealers in firearms. The exaction was essentially a tax on dealers in machine guns, sawed-off shotguns, and silencers--the Act defined a "firearm" as "a shotgun or a rifle having a barrel less than eighteen inches in length, or any other weapon, except a pistol or revolver, from which a shot is discharged by an explosive, if capable of being concealed on the person, or a machine gun, and includes a muffler or silencer for any firearm." (136) Sonzinsky argued that the levy was "not a true tax, but a penalty imposed for the purpose of suppressing traffic in a certain noxious type of firearms, the local regulation of which is reserved to the states because not granted to the national government." (137)

Justice Stone wrote the opinion upholding the tax. (138) First, he distinguished the Child Labor Tax Case and its progeny. Unlike those cases, Stone pointed out, the National Firearms Act did not contain "regulatory provisions related to a purported tax in such a way as has enabled this Court to say in other cases that the latter is a penalty resorted to as a means of enforcing the regulations." (139) The challenged provision contained "no regulation other than the mere registration provisions," which were "obviously supportable as in aid of a revenue purpose." (140) The exaction was "loin its face ... only a taxing measure," and was not a penalty simply "by virtue of its deterrent effect on the activities taxed." (141) Every tax was "in some measure regulatory," to "some extent" interposing "an economic impediment to the activity taxed as compared with others not taxed." (142) Veazie Bank, McCray, and Doremus each had established "that an Act of Congress which on its face purports to be an exercise of the taxing power is not any the less so because the tax is burdensome or tends to restrict or suppress the thing taxed." (143) Those cases further established that the Court was not competent to inquire into "the hidden motives which may move Congress to exercise a power constitutionally conferred upon it." (144) At least where the tax was not "attended by an offensive regulation," the Court would "not undertake, by collateral inquiry as to the measure of the regulatory effect of a tax, to ascribe to Congress an attempt, under the guise of taxation, to exercise another power denied by the Federal Constitution." (145) The tax was productive of some revenue, having been paid by twenty-seven dealers in 1934 and by twenty-two in 1935. (146) Because it was "not attended by an offensive regulation," and "operate [d] as a tax," it was "within the national taxing power." (147)

Lest we think that Sonzinsky constituted a departure from the Child Labor Tax Case, it bears emphasis that the decision was unanimous, and was joined by each of the Four Horsemen and by the three remaining members of the majority in the Child Labor Tax Case. Justices Van Devanter, McReynolds, and Brandeis. The unanimity of the opinion was deceptive, but only mildly. On the returns of Justice Stone's circulated opinion, Chief Justice Hughes and Justices Van Devanter, Sutherland, and Roberts all wrote "I agree." Justices Butler and Cardozo replied with a confirmatory "Yes." Only the dyspeptic Justice McReynolds wrote disconsolately, "I don't think so; but if all others do they must prevail though wrong." (148)

United States v. Sanchez, (149) decided in 1950, upheld the Marihuana Tax Act of 1937. (150) That Act was designed to "'raise revenue and at the same time render extremely difficult the acquisition of marihuana by persons who desire it for illicit uses" (151) by "restricting traffic in marihuana to accepted industrial and medicinal channels." (152) The Act, which clearly was modeled on the Harrison Narcotic Drug Act upheld in Doremus, imposed a special tax ranging from $1 to $24 on "'every person who imports, manufactures, produces, compounds, sells, deals in, dispenses, prescribes, administers, or gives away marihuana.'" (153) The statute further required that such persons register at the time of the payment of the tax with the Collector of the District in which their businesses were located, and made it unlawful for any person to transfer marihuana except in pursuance of a written order of the transferee on a blank form issued by the Secretary of the Treasury. (154) At the time he applied for such an order form, the transferee was required to pay a tax of $1 per ounce if he had paid the special tax and registered, or $100 per ounce if he had not paid the special tax and registered. (155) The transferor was also made liable for the tax so imposed in the event the transfer was made without an order form and without the payment of the tax by the transferee. (156) In Sanchez, transferors who had been subjected to the tax challenged the exaction as an unconstitutional regulatory penalty. (157)

Justice Clark wrote for a unanimous Court that the levy was valid notwithstanding its "regulatory effect" and "close resemblance to a penalty." (158) Sonzinsky established that it was "beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed," "even though the revenue obtained is obviously negligible," "or the revenue purpose of the tax may be secondary." (159) Nor did "a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate." (160) As Justice Sutherland had written for a unanimous Court in 1934, two years before the decision in Carter Coal, "' [f] rom the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment.'" (161) Like those exactions, the Marihuana Tax was "a legitimate exercise of the taxing power despite its collateral regulatory purpose and effect.'" (162)

United States v. Kahriger, (163) handed down in 1953, concerned the constitutionality of the occupational tax provisions of the Revenue Act of 1951, which imposed an excise on persons engaged in the business of accepting wagers, and required such persons to register with the Collector of Internal Revenue. Kahriger, who was charged with willfully failing to register and pay the tax, argued that "Congress, under the pretense of exercising its power to tax has attempted to penalize illegal intrastate gambling through the regulatory features of the Act and has thus infringed the police power which is reserved to the states." (164) Justice Reed wrote the opinion rejecting this challenge. (165) The fact that there was "legislative history indicating a congressional motive to suppress wagering" was not fatal, Reed explained, because the "intent to curtail and hinder, as well as tax, was also manifest" in McCray, Doremus, Sonzinsky, and Sanchez, and in each of those cases the tax had been upheld. (166) It was "conceded that a federal excise tax does not cease to be valid merely because it discourages or deters the activities taxed," (167) Nor was the tax invalid "because the revenue obtained is negligible." (168) It was true that the wagering tax, like other taxes that the Court had upheld, had a "regulatory effect." (169) But it also produced annual revenue of over four million dollars, which was considerably more than the amounts produced by "both the narcotics and firearms taxes which we have found valid.'" (170)

Reed recognized that
 [t]he difficulty of saying when the power to lay uniform taxes is
 curtailed, because its use brings a result beyond the direct
 legislative power of Congress, has given rise to diverse decisions.
 In that area of abstract ideas, a final definition of the line
 between state and federal power has baffled judges and legislators.
 (171)


As the Child Labor Tax Case and its progeny demonstrated, "[p]enalty provisions in tax statutes added for breach of a regulation concerning activities in themselves subject only to state regulation have caused this Court to declare the enactments invalid." (172) But "[u]nless there are provisions extraneous to any tax need," courts were "without authority to limit the exercise of the taxing power." (173) All of the provisions of the excise at issue were "adapted to the collection of a valid tax." (174) The registration provisions made the tax "simpler to collect," and were thus "directly and intimately related to the collection of the tax," and "'obviously supportable as in aid of a revenue purpose.'" (175)

The Sonzinsky Court did not purport to overrule the Child Labor Tax Case; instead, Justice Stone's opinion for the majority distinguished it. Neither did the Sanchez or Kahriger Courts suggest that the Child Labor Tax Case was not binding authority. Indeed, Justice Reed's opinion in Kahriger treated both the Child Labor Tax Case and Hill v. Wallace as if they remained good law. (176) In his Kahriger dissent, Justice Frankfurter stood foursquare behind the Child Labor Tax Case decision. "[W] hen oblique use is made of the taxing power as to matters which substantively are not within the powers delegated to Congress," Frankfurter insisted, "the Court cannot shut its eyes to what is obviously, because designedly, an attempt to control conduct which the Constitution left to the responsibility of the States, merely because Congress wrapped the legislation in the verbal cellophane of a revenue measure." (177) For
 to allow what otherwise is excluded from congressional authority to
 be brought within it by casting legislation in the form of a
 revenue measure could, as so significantly expounded in the Child
 Labor Tax Case, offer an easy way for the legislative imagination
 to control "any one of the great number of subjects of public
 interest, jurisdiction of which the States have never parted with
 ...." (178)


"I say 'significantly,'" Frankfurter reminded his audience,
 because Mr. Justice Holmes and two of the Justices who had joined
 his dissent in Hammer v. Dagenhart, McKenna and Brandeis, JJ.,
 agreed with the opinion in the Child Labor Tax Case. Issues of such
 gravity affecting the balance of powers within our federal system
 are not susceptible of comprehensive statement by smooth formulas
 such as that a tax is nonetheless a tax although it discourages the
 activities taxed, or that a tax may be imposed although it may
 effect ulterior ends. No such phrase, however fine and well-worn,
 enables one to decide the concrete case. (179)


Yet Frankfurter was not accusing the majority of overruling the Child Labor Tax Case. He was instead maintaining that the majority was declining to enforce a broader principle within which its holding was subsumed:
 A nominal taxing measure must be found an inadmissible intrusion
 into a domain of legislation reserved for the States not merely
 when Congress requires that such a measure is to be enforced
 through a detailed scheme of administration beyond the obvious
 fiscal needs, as in the Child Labor Tax Case,


Frankfurter insisted. (180)
 That is one ground for holding that Congress was constitutionally
 disrespectful of what is reserved to the States. Another basis for
 deeming such a formal revenue measure inadmissible is presented by
 this case. In addition to the fact that Congress was concerned with
 activity beyond the authority of the Federal Government, the
 enforcing provision of this enactment is designed for the
 systematic confession of crimes with a view to prosecution for such
 crimes under State law. (181)


That is, a nominal taxing measure was invalid whenever it was designed to infringe any of the affirmative limitations imposed by the first ten amendments to the Constitution.

That was precisely the case in the 1994 decision of Department of Revenue of Montana v. Kurth Ranch. (182) There, members of the Kurth family were arrested and pled guilty to drug possession charges related to their cultivation and harvesting of marijuana plants. (183) The state of Montana thereafter sought to collect a state tax levied on the possession and storage of dangerous drugs. (184) The Supreme Court held that the tax, which averaged four times the market value of the confiscated drugs on which it was imposed, constituted a successive punishment for the same offense in violation of the Double Jeopardy Clause. (185) The Court recognized that Sonzinsky and Sanchez established that "neither a high rate of taxation nor an obvious deterrent purpose" automatically marked the tax as punitive. (186) But the Child Labor Tax Case had established that "'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." (187) After surveying the features of the tax, the Court found that, "[t]aken as a whole," the Montana drug tax was "too far removed ... from a standard tax assessment to escape characterization as a punishment." (188)

Thus, none of these later decisions overruled the Child Labor Tax Case, and the Court cited it as authoritative precedent as recently as 1994. As child labor historian Stephen Wood wrote in 1968, the Child Labor Tax Case "remains the authority, and forty years later is still the law of the land, conditioning congressional action and judicial decision-making. The judicial revolution that overtook the commerce power in the late thirties did not bring reversal." (189)

II. THE TAXING POWER ARGUMENT IN THE LOWER FEDERAL COURTS

All of the lower federal courts concluded that the minimum coverage provision was a regulatory penalty rather than a tax, (190) but they took differing views on the status of the Child Labor Tax Case. Three district courts reached the conclusion that the shared responsibility payment was a regulatory penalty rather than a tax, but only for purposes of determining whether suits challenging the ACA were barred by the Anti-Injunction Act. These courts did not address the question of whether the shared responsibility payment was a tax for purposes of constitutional analysis. (191) All of the lower courts that did address this issue, however, concluded that Congress intended the Act's shared responsibility payment to impose a regulatory penalty rather than a tax.

Several features of the Act's language and legislative history led the district and circuit courts to coalesce around this view. First, the statute expressly characterized the exaction as a "penalty" rather than as a "tax." (192) This was especially significant in view of the fact that earlier versions of the bill had expressly imposed a "tax" on applicable individuals failing to acquire minimum coverage, which indicated that the ultimate choice of terminology was conscious and deliberate. (193) Second, several other sections of the Act expressly imposed taxes, demonstrating that Congress understood the difference between a tax and a penalty and knew how to impose a tax when it intended to do so. (194) Third, the Act did not purport on its face to be exercising the taxing power in imposing the shared responsibility payment for failure to acquire health insurance. Instead, the legislative findings made it clear that Congress had relied exclusively on the power conferred by the Commerce Clause. (195) The fact that the penalty was to be placed in the Internal Revenue Code under the heading "Miscellaneous Excise Taxes" was of no consequence, as the Code contains and the IRS enforces many penalties as well as taxes, and the Code itself (196) expressly provides that such a placement does not give rise to any inference or presumption that the exaction was intended to be a tax. (197) In addition, the Act did not make available to the IRS the usual tax collection enforcement mechanisms of liens, levies, and criminal proceedings. (198)

Finally, the lower courts agreed that the exaction was not intended or designed to raise revenue. Judge Vinson of the District Court for the Northern District of Florida observed that the Act did not "mention any revenue-generating purpose that is to be served by the individual mandate penalty." (199) Congress "failed to identify in the legislation any revenue that would be raised from it, notwithstanding that at least seventeen other revenue-generating provisions were specifically so identified." (200) Judge Hudson of the District Court for the Eastern District of Virginia insisted that "the notion that the generation of revenue was a significant legislative objective is a transparent afterthought. The legislative purpose underlying this provision was purely regulation of what Congress misperceived to be economic activity." (201) "No plausible argument" could be made that it had "'the purpose of supporting the Government.'" (202) Judge Kessler of the District Court for the District of Columbia similarly maintained that "Congress did not intend the mandatory payment ... to act as a revenue-raising tax, but rather as a punitive measure." (203) The Act's legislative findings demonstrated that "the goal" of the minimum coverage provision was "not to raise revenue, but to achieve near-universal health care coverage by giving individuals the incentive to maintain their health insurance under threat of penalty." (204) The Eleventh Circuit concurred in this assessment, (205) adding that the projection that the Act would generate some $4 to 5 billion in annual revenue by the end of the decade did not make the exaction a tax rather than a penalty, because the Supreme Court had recognized in Kurth Ranch that "in our world of less than perfect compliance, penalties generate revenue just as surely as taxes." (206) Judge Sutton of the Sixth Circuit agreed that the "central function of the mandate was not to raise revenue" but instead "to change individual behavior by requiring all qualified Americans to obtain medical insurance." (207) The legislative findings said nothing about raising revenue, and a good deal about bringing a large number of new consumers into the health insurance market. To the extent that the Act raised revenue, its proponents would regard it as unsuccessful. (208) The fact that the minimum coverage provision was predicted to raise revenue of $4 billion per year did not "convert the penalty into a tax," for if the raising of revenue were sufficient to make an exaction a tax for constitutional purposes then "every monetary penalty, no matter how regulatory or punitive, would be a tax." (209) For these reasons, the exaction was not "a bona fide revenue raising measure enacted under the taxing power of Congress." (210) Instead, "on its face," (211) it was "in form and substance," (212) "a civil regulatory penalty and not a tax." (213)

Lower court judges differed, however, on the status of the Child Labor Tax Case. Judge Wynn, in his concurring opinion in Liberty University v. Geithner, cited the decision as an example of "cases from the 1920s and 1930s suggest[ing] that taxes are either regulatory or revenue-raising and that the former are unconstitutional." (214) But Judge Wynn maintained that more recent cases, such as Sonzinsky, Sanchez, and Kahriger, demonstrated "that the revenue-versus-regulatory distinction was short-lived and is now defunct." (215) Sonzinsky taught us that "'[e]very tax is in some measure regulatory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed. But a tax is not any less a tax because it has a regulatory effect....'" (216) Sanchez taught us that "a tax--regardless of its label--'does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed.'" (217) And Kahriger taught that "'a federal excise tax does not cease to be valid merely because it discourages or deters the activities taxed.'" (218) Earlier decisions such as McCray and Doremus taught similar lessons. (219) Judge Wynn remarked that in the 1974 case of Bob Jones University v. Simon, "the Supreme Court recognized that, while in some early cases it 'drew what it saw at the time as distinctions between regulatory and revenue-raising taxes,' the Court 'subsequently abandoned such distinctions." (220) Judge Wynn drew from this history the conclusion that "neither an exaction's label nor its regulatory intent or effect is germane to the constitutional inquiry." (221) In modern taxing power cases, courts did not "look to labels, regulatory intent, or regulatory effect." (222) The Child Labor Tax Case and its few progeny were nothing more than a brief, ill-advised detour from which the Court fortunately had backtracked. (223)

Judge Vinson also agreed that the Court had abandoned the distinction between revenue-raising and regulatory taxes. "It is true, as held in certain of the early tax cases ... that the Supreme Court once drew distinctions between regulatory and revenue-raising taxes." (224) But Sonzinsky, Sanchez, and Bob Jones persuaded Judge Vinson that these distinctions "had a very short shelf-life." (225) Judge Vinson therefore assumed that "Congress could have used its broad taxing power to impose the exaction and that, if it had clearly (or even arguably) intended to do so, then the exaction would have been sustainable under its taxing authority." (226)

The Eleventh Circuit did not directly address the status of the Child Labor Tax Case, but suggested that the question of the individual mandate's constitutionality might have been different had the Act purported "on its face" to be an exercise of the taxing power--if Congress had "expressly and unmistakably indicated" that the provision was a tax. (227) Under those circumstances, the court suggested, it would not matter that the tax was "'burdensome or tends to restrict or suppress the thing taxed." (228) In such a case courts would not inquire into "'the hidden motives which may move Congress to exercise a power constitutionally conferred upon it.'" (229) But here those principles were inapplicable, because the statute "on its face" imposed a penalty rather than a tax. (230) It was "in every important respect" a "'punishment for an unlawful act or omission,' which defines the very 'concept of penalty.'" (231)

By contrast, Judge Hudson made clear his view that the Child Labor Tax Case and its progeny remained good law. "Notwithstanding criticism by the pen of some constitutional scholars," he insisted,
 [T]he constraining principles articulated in this line of cases,
 while perhaps dormant, remains [sic] viable and applicable to the
 immediate dispute. Although they have not been frequently employed
 in recent years, this absence appears to be more a product of the
 unprecedented nature of the legislation under review than an
 abandonment of established principles. (232)


In his concurring opinion in Thomas More Law Center, Judge Sutton likewise maintained that it was "premature ... to abandon the distinction between taxes and penalties." (233) Judge Sutton rejected the Government's contention that the Supreme Court in Bob Jones had "'abandoned'" the "'distinction[ ] between regulatory and revenue-raising taxes.'" (234) This language from Bob Jones was "the purest of dicta, as the case involved the Anti-Injunction Act, not the taxing power, and was not even necessary to the statutory holding." (235) Judge Sutton conceded that many of the cases adhering to the tax/penalty distinction were "old," but insisted that "cases of a certain age are just as likely to rest on venerable principles as stale ones, particularly when there is a good explanation for their vintage." (236) All of these decisions, Judge Sutton observed, "pre-date the Court's expansion of the commerce power, which largely 'rendered moot' the need to worry about the tax/penalty distinction." (237) "Nonetheless," Judge Sutton maintained, "the line between 'revenue production and mere regulation,' described by Chief Justice Taft in the Child Labor Tax Case, retains force today. Look no further than Kurth Ranch," he advised his readers, "a 1994 decision that post-dated Bob Jones and that relied on the Child Labor Tax Case to hold that what Congress had labeled a tax amounted to an unconstitutional penalty under the Double Jeopardy Clause." (238)

III. TAXING POWER ARGUMENTS BEFORE THE SUPREME COURT

The briefs for the parties submitted to the Supreme Court scarcely touched on the taxing power precedents. (239) The Government's brief devoted little more than a page to their discussion, and did not even mention the Child Labor Tax Case. (240) The Solicitor General pointed out that the minimum coverage provision would "plainly be 'productive of some revenue,' and thus satisfies a key attribute of taxation." (241) The Eleventh Circuit's perception that the goal of the minimum coverage provision was to reduce the number of uninsured people rather than to raise revenue was inapt, for Sanchez taught that a tax "'does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed.'" (242) Sonzinsky and Kahriger reminded us that "'[e]very tax is in some measure regulatory,' in that 'it interposes an economic impediment to the activity taxed as compared with others not taxed.'" (243) As long as the statute was "'productive of some revenue,'" Congress could "exercise its taxing powers irrespective of any 'collateral inquiry as to the measure of the regulatory effect of a tax.'" (244) Thus, as the Sanchez Court had observed, "'[f]rom the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment.'" (245) Bob Jones had announced that the Court had "long 'abandoned the view that bright-line distinctions exist between regulatory and revenue-raising taxes.'" (246)

The respondents argued that Congress had called the exaction a penalty "because it is, in fact, a penalty." (247) It did not matter that the exaction would be housed in the Internal Revenue Code and would be productive of some revenue. The Code contained a number of civil penalties, and such penalties did generate some revenue, but that did not make them taxes. (248) The respondents insisted that the shared responsibility payment should be considered a penalty even had it been labeled a tax, because it was "a monetary exaction ... imposed as a consequence for failure to abide by a separate legal command," namely, the command to acquire and maintain minimum essential coverage. (249) The Child Labor Tax Case established that "Congress may not use its tax power to circumvent the Constitution's enumeration of limited regulatory powers by 'enact[ing] a detailed measure of complete regulation of [a] subject and enforc[ing] it by a so-called tax upon departures from it.'" (250) That precedent continued to stand for the proposition that "Congress may not 'break down all constitutional limitation [on its] powers ... and completely wipe out the sovereignty of the states' by invoking its tax power to enforce commands that it lacks the authority to impose." (251) Because the ACA "imposes a command that is unprecedented and invokes a power that is both unbounded and not included among the limited and enumerated powers granted to Congress," the respondents concluded, it was "therefore unconstitutional." (252)

Perhaps in light of the respondents' reliance on the Child Labor Tax Case, the Government did feel the necessity to engage the precedent in its reply brief. The Solicitor General did so by denying that the shared responsibility payment constituted "punishment for an unlawful act," (253) and by identifying three features of the exaction that distinguished it from the Child Labor Tax. First, it was "tied to income" and "due only for months in which coverage is not maintained," unlike the Child Labor Tax, which was not "'proportioned in any degree to the extent or frequency of the departures." (254) Second, the shared responsibility payment contained no scienter requirement. (255) And third, enforcement was to be handled solely by the IRS, rather than in part by the Department of Labor or some other government agency unconnected to the collection of revenue. (256) Those distinctions would prove critical to the Supreme Court's resolution of the taxing power issue.
COPYRIGHT 2013 University of Notre Dame Law School
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2013 Gale, Cengage Learning. All rights reserved.

 
Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Abstract through III. Taxing Power Arguments Before the Supreme Court, p. 133-161
Author:Cushman, Barry
Publication:Notre Dame Law Review
Date:Nov 1, 2013
Words:10689
Previous Article:Originalism and the colorblind Constitution.
Next Article:NFIB v. Sebelius and the transformation of the taxing power.
Topics:

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters