The Commerce Clause, Taxing, and the General Welfare

I have in my hot little hands a debate published in the Pennsylvania University Law Review about the Individual Mandate.  No less, the side that argues that te individual mandate is an unlawful power grab is written by the very same David Rivkin and Lee Casey who are arguing the plaintiff's case in Florida et al v. US DHHS: A Healthy Debate. The debate took place before final passage of the PPACA, so there is some uncertainty in the exact language at play.

Rivkin and Casey start out where I would in the Commerce Clause debate, noting that the Supreme Court has held that Congress has the power to pass laws to regulate "activities, [which] taken in the aggregate, substantially affect interstate commerce." Gonzales v. Raich, 545 U.S. 1,22 (2005). This standard was first applied in defense of a law which prevented a farmer from growing, but not selling wheat in Wickard v. Filburn, 317 U.S. 111 (1942).  Because the hoarding of wheat would drive prices down if every farmer did it, Congress could regulate the practice.

First, let's see if the general thrust of the health care bill is Constitutional. If we examine the economic transactions involving health care, and specifically health care insurance, we would find that individual actions do have a substantial effect on interstate commerce. One of the findings written into the PPACA law is that health care costs constituted 17.9% of American GDP in 2009. For good measure, Congress cites a Supreme Court opinion which I was unaware of that confirms that insurance is interstate commerce. United States v. South-Eastern Underwriters Association, 322 U.S. 533 (1944). By the way, all the fireworks in this debate are over Section 1501 of the act (pdf).

Section 1501 changes the tax code to include a penalty on individuals who do not carry adequate health insurance for a month-long duration. The penalty is stated in dollar amounts and is indexed to the cost-of-living adjustment. Rivkin and Casey must be pointing to this dollar amount when they charge in the complaint filed in district court that the individual mandate relies upon a capitation for enforcement.

Tax Trouble

The Court held in Bromley v. McCaughn, 280 U.S. 124, 136 (1929), that "a tax imposed upon a particular use of property... is an exercise which need not be apportioned." That is, for a tax to be proscribed by Article I sec 9, it must be a tax on property regardless of condition of use. If the property is employed to make money, the income is taxable. It may be a novel question whether an absence of property such as an insurance policy is a condition which can be taxed on the federal level.  Seen another way, however, this is an excise on the behavior of individuals to take on unnecessary risk by remaining uninsured. This type of tax has been supported before (e.g. alcohol excise taxes pay for highway spending). When Rivkin and Casey argue that this type of tax is in violation of Article I sec 9, they reach back to Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601 (1895).  Tax scholars or fans of the amendment process may recall that this is the opinion which spurred the drafting and ratification of the 16th Amendment, already discussed on my main blog post for this case.

It's clear from the debate that Rivkin and Casey cannot expect to win on the merits that taxing in order to regulate is unconstitutional. In an attempt to say so, they reach back to a Lochner era case Bailey v. Drexel Furniture Co. (Child Labor Tax Case), 259 U.S. 20 (1922). It's true that Bailey has never been explicitly overruled, but that seems to be because the Supreme Court post-1937 has agreed to pretend that that era of jurisprudence never existed.  In a surprisingly snarky moment for a law review article, Rivkin and Casey point to an agency opinion as "not exactly a green light" for the Constitutionality of the individual mandate. I may not be a DC power lawyer like these two, but I do know that when your line of argument requires that you reach back to the Lochner era, the same phrase applies.  For those keeping score at home, it's the second argument upon which they rest which has been either discredited or amended out of the constitutional order.

Back to Reality

Plaintiffs will have to win both that the tax is in violation of Article I sec 9 as it stands after the 16th Amendment and that regulating health care is a power outside of the reach of the commerce clause. Rivkin and Casey do have an interesting argument that the commerce clause power has so far only been affirmed in preventing citizen action which has the potential to create economic activity, but it is far outweighed by the plain meaning of Scalia's words in Raich at 37, "Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce." Some might consider carrying the additional risk of being uninsured as an economic activity, but even Scalia seems to require far less so long as the general goal of the law is regulation of a market.