Friday, June 29, 2012

More on Taxes vs. Penalties in ACA

  I do have to say that my post below was pretty much on target, although I really did not think that the decision would be made on the basis of whether the mandate can be interpreted as a tax.

  On the whole, I am not disappointed with the Supreme Court decision. I think that Roberts and his majority colleagues did what I would want them to do and what they should do: Not look for way to find that the ACA is unconstitutional, but look to see if there is a way to rule it constitutional. Innocent until proven guilty. Roberts says this in a different way, when he discusses the point that if a law can be read in more than one way, the Court needs to read it in the most constitutionally favorable way.  The Commerce Clause limitations were even strengthened, and the idea that laws like this have to be recognized as taxes will make the political process more transparent.

  The ACA is also not a terrible base from which to build, if certain things were to be modified. I would really like to see us sever health insurance from employment, and while the ACA does provide a platform for that to happen -- the exchanges, and the beginning of taxation of health benefits -- it does not go nearly far enough. 

  But there is one more ethical question, related to my Apr. 4 post below. Roberts actually created a third option in addition to the two that I had: Scheme C: A mandate to buy insurance, with a tax penalty to be paid if the mandate is not followed. However, "...the mandate is not a legal command...(p.32, Opinion) and "...if someone chooses to pay rather than obtain health insurance, they have fully complied with the law...(p.37) Is there an ethical difference between Scheme C and Scheme A, the mandate and penalty? Seems pretty clear to me that there is. According to Roberts, I can skip insurance  simply pay the fine, and feel no qualms about doing so. I don't have "..all the attendant consequences of being branded a criminal..."

   I do worry that we are creating a precedent here, by creating a law with the word "shall" in it, and then saying that you can break that law and simply pay the penalty and be off the hook, including according to Roberts avoiding any "social stigma." So when the government says I shall do other things, such as parking in no parking zones, can I just pay the fine and be off the hook, legally and socially?


Anonymous said...

Although I am against using the tax code for social engineering in general, I believe there is an ethical difference between these two scenarios which may sound like semantics, but can have significant practical consequences.

If you tax everyone and provide credits, an individual is not coerced to take an action. They simply get rewarded if they do so.

If one is penalized for not doing something, you are being coerced into action.

The key difference is taxing everyone means the majority is impacted, thus interested in the tax. Though a minority can exploit this system to their benefit, e.g. electric car tax credits, the majority is unlikely to allow an overly excessive tax. In the case of the penalty, minorities can be explicitly targeted while the majority remains uninterested since they are not affected.

For example:

1. The TV tax: We will tax everyone to fund the purchase of TVs. If you buy a TV you will receive a credit, so you are no worse off.

2. The TV penalty: those that do not buy a TV will be penalized.

In the first case, everyone's taxes will be raised and so everyone will be interested and the level of the tax will be kept in check by the majority. In the second case, no one will care except a few. There is nothing to limit the level of this tax--it could be 50% or 75% of one's income.

Maintaining protections for the minority is one of the key strengths of the US system. I believe this ruling weakens this protection.

As an aside, I find it ironic that many of those that are concerned by Citizens United are pleased with this decision. It seems like these people should be worried about this scenario: "Hey Mr. Congressman, I would love to penalize those that do not buy my product. BTW, here's some money for your Super PAC."

It's a good thing I'm not concerned about the exercise of free speech by individuals or groups of individuals that organize themselves into corporations, or else I would be very worried by this scenario.

SpaceShot said...

The biggest problem is our acceptance that the Congress can tax and then spend for any purpose, even purposes not laid out in Article 1 Section 8. We are very foolish and stupid people for allowing this interpretation to stand. It means there is no point in enumerating limited powers, since the Congress may simply choose to lay a tax and then spend it for any purpose.

I know this is not new law and Roberts did not create this interpretation of the General Welfare clause, but we dismantled Enumerated Powers when we accepted it as a people. Eventually, big programs would be created without amending the Constitution to authorize them, and the power of the federal government now knows no bounds.