The public debate over the Supreme Court’s Obamacare decision is getting confused on the supposed distinction between a “tax” and a “penalty.” As a matter of common English, a tax may also be a penalty – if it is a “tax penalty.” (That is also true for purposes of the Bankruptcy Code; see footnote 5 in the dissent’s opinion.)
But in order to be sustained under the Constitution’s taxing power, the tax must be nothing more than a tax for the general welfare. If it is a tax-penalty attached to a mandate, then it cannot be sustained under the taxing power; the constitutionality of the penalty is determined by the constitutionality of the mandate it is designed to enforce. That has been absolutely settled for almost 100 years.
The best way to articulate this position is to say that the Court and the Obama administration are both partly right. The Court is right that it is a tax, and the administration is right that it is a penalty. Hence, the administration broke its promise not to raise taxes on the middle class, because this is a tax on the middle class. The dissent calls it an “exaction” but when the government adds money to the amount you owe on your income taxes, most Americans can readily see that it’s a tax. Now, for purposes of the Constitution’s tax-and-spend clause, this is not a tax “for the general welfare,” which is why the dissent avoids the term “tax.” But in common English and popular understanding this is a tax.
The crucial thing is that it is also a penalty. That’s where the Obama administration is absolutely correct. And because it is a penalty, its constitutionality cannot be sustained under the taxing power. And because the mandate itself could not be sustained under the Commerce Clause, it follows inescapably, from the administration’s own hilarious attempt to escape the “tax” label, that the penalty is unconstitutional.
Every time the administration says this is a penalty, it is saying that it is unconstitutional. So rather than drowning in semantics, let’s just agree to call it a “tax penalty.” What the administration’s critics should be driving home is that the administration cannot have it both ways: Either the mandate is nothing other than a tax or it is unconstitutional.
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