The powers of Congress are enumerated in several places in the Constitution. The most important listing of congressional powers appears in Article I, Section 8 (see left) which identifies in seventeen paragraphs many important powers of Congress. In this section, we consider how the enumerated power of Congress "to lay and collect taxes" has been interpreted. Article I,
Section 8 gives Congress the power to "lay and
collect taxes, duties, imports, and
excises." The Constitution allows Congress
to tax in order to "provide for the common defense
and general welfare." The Court has
flip-flopped on the issue of whether Congress has
the constitutional power to tax in order to
accomplish regulatory goals that would otherwise
be outside of the scope of its enumerated
powers. In Bailey vs Drexel Furniture
(1922), the Court invalidated a 10% tax on
the annual profits of employers who knowingly
employ child labor. The tax, imposed after
an earlier attempt to block the interstate
transportation and sale of products produced by
child labor was struck down in Hammer, was
seen by the Court as an unconstitutional attempt
to make an end-run around its earlier
decision. In 1925, in Linder v United
States, the Court reversed the conviction
of a doctor who had given three cocaine tablets to
a patient to relieve an addiction. The
conviction, based on a law that imposed a $3 tax
on doctors who prescribed cocaine, rested on the
theory that the law limited the prescription of
cocaine to the treatment of diseases, not
addictions, and that the defendant had given
cocaine tablets to an addict. The Court
concluded that the law could survive only as a
revenue measure, and that the Taxing Power gave
Congress no authority to regulate directly the
practice of medicine--that is, to tell doctors who
had paid the required tax what they can or cannot
do for their patients.
The Court reversed its ban on taxes serving primarily regulatory (rather than revenue-producing) goals in Steward Machine (1937), which upheld a tax on employers designed to encourage states to enact unemployment compensation schemes. In Kahriger (1953), the Court upheld a law requiring bookies to register and pay on tax on all wagers--even though the tax had the regulatory goal of wiping out bookmaking operations and could not be expected to produce significant revenue. The Affordable Health Care Act ("Obamacare") survived, mostly, when five justices found "the individual mandate" to be within the taxing power of Congress. In perhaps the most significant taxing power case ever decided, the Court ruled in National Federation of Independent Business v Sebelius (2012) that the so-called "individual mandate" (generally considered a requirement that individuals purchase health insurance) contained in the Affordable Care Act could be sustained as a tax, even though the requirement was outside of Congress's power to regulate commerce. Writing for five members of the Court, Chief Justice Roberts held that even though proponents of the Act consistently said a penalty, not a tax, would apply to individuals who failed to purchase insurance, it still operated as a tax and that a functional analysis should control. The Court noted that failure to purchase insurance required a payment to the IRS, that no criminal penalties attached to failure to purchase insurance, and that the cost of the tax would, in most cases, be less than the cost of buying insurance. In sum, the law did not make it unlawful to purchase insurance, allowing individuals a choice of paying a tax instead. Roberts also reaffirmed that the Congress may seek to achieve regulatory goals through its taxing power that it might not be able to achieve under its other Article I powers. Justices Kennedy, Alito, Scalia, and Thomas dissented, arguing that the taxing power could not sustain the mandate.
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Questions TAXING POWER-- QUESTIONS 2. Does the Court's decision in National Federation of Independent Business v Sebelius suggest that Congress will increasingly rely on its taxing power to accomplish goals it may not be able to accomplish under its commerce power? 3. Do you think that the description of a mechanism in an act as a "penalty" not a "tax" should control, or was the Court correct to use a functional analysis to conclude that the individual mandate penalty/tax operated as a tax--no criminal punishment, for example, for not purchasing health insurance so long as you make the payment to the IRS (and the amount paid will generally be less than the cost of insurance)? |