OF INDEPENDENT BUSINESS et al.
SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, et al.
certiorari to the united states court of appeals for the eleventh circuit
Decided June 28, 2012
Chief Justice Roberts announced the judgment of the Court.....
Today we resolve constitutional challenges to two provisions of the Patient Protection and Affordable Care Act of 2010: the individual mandate, which requires individuals to purchase a health insurance policy providing a minimum level of coverage; and the Medicaid expansion, which gives funds to the States on the condition that they provide specified health care to all citizens whose income falls below a certain threshold. We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation's elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions....This case concerns two powers that the Constitution does grant the Federal Government, but which must be read carefully to avoid creating a general federal authority akin to the police power. The Constitution authorizes Congress to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes...."
Congress may also "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." U. S. Const., Art. I, §8, cl. 1. Put simply, Congress may tax and spend. This grant gives the Federal Government considerable influence even in areas where it cannot directly regulate. The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control. And in exercising its spending power, Congress may offer funds to the States, and may condition those offers on compliance with specified conditions.These offers may well induce the States to adopt policies that the Federal Government itself could not impose.
The reach of the Federal Government's enumerated powers is broader still because the Constitution authorizes Congress to "make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers." We have long read this provision to give Congress great latitude in exercising its powers: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional."
Our permissive reading of these powers is explained in part by a general reticence to invalidate the acts of the Nation's elected leaders. "Proper respect for a co-ordinate branch of the government" requires that we strike down an Act of Congress only if "the lack of constitutional authority to pass [the] act in question is clearly demonstrated." Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation's elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.
Our deference in matters of policy cannot, however, become abdication in matters of law. "The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the constitution is written." Marbury v. Madison, 1 Cranch 137, 176 (1803). Our respect for Congress's policy judgments thus can never extend so far as to disavow restraints on federal power that the Constitution carefully constructed. "The peculiar circumstances of the moment may render a measure more or less wise, but cannot render it more or less constitutional."
The questions before us must be considered against the background of these basic principles.
In 2010, Congress enacted the Patient Protection and Affordable Care Act, 124 Stat. 119. The Act aims to increase the number of Americans covered by health insurance and decrease the cost of health care. The Act's 10 titles stretch over 900 pages and contain hundreds of provisions. This case concerns constitutional challenges to two key provisions, commonly referred to as the individual mandate and the Medicaid expansion.
The individual mandate requires most Americans to maintain "minimum essential" health insurance coverage. 26 U. S. C. §5000A. Many individuals will receive the required coverage through their employer, or from a government program such as Medicaid or Medicare. But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company.
2014, those who do not comply with the mandate
must make a "[s]hared responsibility payment"
to the Federal Government. That payment, which
the Act describes as a "penalty," is
calculated as a percentage of household
income, subject to a floor based on a
specified dollar amount and a ceiling based on
the average annual premium the individual
would have to pay for qualifying private
health insurance. §5000A(c). In 2016, for
example, the penalty will be 2.5 percent of an
individual's household income, but no less
than $695 and no more than the average yearly
premium for insurance that covers 60 percent
of the cost of 10 specified services (e.g.,
prescription drugs and hospitalization).
The Act provides that the penalty
will be paid to the Internal Revenue Service
with an individual's taxes, and "shall be
assessed and collected in the same manner" as
tax penalties, such as the penalty for
claiming too large an income tax refund. The
Act, however, bars the IRS from using several
of its normal enforcement tools, such as
criminal prosecutions and levies. And some
individuals who are subject to the mandate are
nonetheless exempt from the penalty--for
example, those with income below a certain
threshold and members of Indian
The Government advances two theories for the proposition that Congress had constitutional authority to enact the individual mandate. First, the Government argues that Congress had the power to enact the mandate under the Commerce Clause. Under that theory, Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, and could undercut the Affordable Care Act's other reforms. Second, the Government argues that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress's power to tax. According to the Government, even if Congress lacks the power to direct individuals to buy insurance, the only effect of the individual mandate is to raise taxes on those who do not do so, and thus the law may be upheld as a tax....
The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to regulate Commerce....That is not the end of the matter. Because the Commerce Clause does not support the individual mandate, it is necessary to turn to the Government's second argument: that the mandate may be upheld as within Congress's enumerated power to "lay and collect Taxes." Art. I, §8, cl. 1.
The Government's tax power argument asks us to view the statute differently than we did in considering its commerce power theory. In making its Commerce Clause argument, the Government defended the mandate as a regulation requiring individuals to purchase health in-surance. The Government does not claim that the taxing power allows Congress to issue such a command. Instead, the Government asks us to read the mandate not as ordering individuals to buy insurance, but rather as imposing a tax on those who do not buy that product.
The text of a statute can sometimes have more than one possible meaning. To take a familiar example, a law that reads "no vehicles in the park" might, or might not, ban bicycles in the park. And it is well established that if a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so. Justice Story said that 180 years ago: "No court ought, unless the terms of an act rendered it unavoidable, to give a construction to it which should involve a violation, however unintentional, of the constitution." Justice Holmes made the same point a century later: "[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act."
The most straightforward reading of the mandate is that it commands individuals to purchase insurance. After all, it states that individuals "shall" maintain health insurance. Congress thought it could enact such a command under the Commerce Clause, and the Government primarily defended the law on that basis. But, for the reasons explained above, the Commerce Clause does not give Congress that power. Under our precedent, it is therefore necessary to ask whether the Government's alternative reading of the statute--that it only imposes a tax on those without insurance--is a reasonable one.
Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. That, according to the Government, means the mandate can be regarded as establishing a condition--not owning health insurance--that triggers a tax--the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress's constitutional power to tax.
The question is not whether that is the most natural interpretation of the mandate, but only whether it is a "fairly possible" one. As we have explained, "every reasonable construction must be resorted to, in order to save a statute from unconstitutionality." The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read, for the reasons set forth below.
The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The "[s]hared responsibility payment," as the statute entitles it, is paid into the Treasury by "taxpayer[s]" when they file their tax returns. It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which--as we previously explained--must assess and collect it "in the same manner as taxes." This process yields the essential feature of any tax: it produces at least some revenue for the Government....
It is of course true that the Act describes the payment as a "penalty," not a "tax." But while that label is fatal to the application of the Anti-Injunction Act, it does not determine whether the payment may be viewed as an exercise of Congress's taxing power. It is up to Congress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress's choice of label on that question. That choice does not, however, control whether an exaction is within Congress's constitutional power to tax....
We have similarly held that exactions not labeled taxes nonetheless were authorized by Congress's power to tax. In the License Tax Cases, for example, we held that federal licenses to sell liquor and lottery tickets--for which the licensee had to pay a fee--could be sustained as exercises of the taxing power....Our cases confirm this functional approach.....
The same analysis here suggests that the shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the "prohibitory" financial punishment in Drexel Furniture. Second, the individual mandate contains no scienter requirement. Third, the payment is collected solely by the IRS through the normal means of taxation--except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution. The reasons the Court in Drexel Furniture held that what was called a "tax" there was a penalty support the conclusion that what is called a "penalty" here may be viewed as a tax.
None of this is
to say that the payment is not intended to
affect individual conduct. Although the
payment will raise considerable revenue, it is
plainly designed to expand health insurance
coverage. But taxes that seek to influence
conduct are nothing new. Some of our earliest
federal taxes sought to deter the purchase of
imported manufactured goods in order to foster
the growth of domestic industry. Today,
federal and state taxes can compose more than
half the retail price of cigarettes, not just
to raise more money, but to encourage people
to quit smoking. And we have upheld such
obviously regulatory measures as taxes on
selling marijuana and sawed-off shotguns.
Indeed, "[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." That
§5000A seeks to shape decisions about
whether to buy health insurance does not mean
that it cannot be a valid exercise of the
distinguishing penalties from taxes, this
Court has explained that "if the concept of
penalty means anything, it means punishment
for an unlawful act or omission."
While the individual mandate clearly aims to
induce the purchase of health insurance, it
need not be read to declare that failing to do
so is unlawful. Neither the Act nor any other
law attaches negative legal consequences to
not buying health insurance, beyond requiring
a payment to the IRS. The Government agrees
with that reading, confirming that if someone
chooses to pay rather than obtain health
insurance, they have fully complied with the
Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.
The plaintiffs contend that Congress's choice of language--stating that individuals "shall" obtain insurance or pay a "penalty"--requires reading §5000A as punishing unlawful conduct, even if that interpretation would render the law unconstitutional. We have rejected a similar argument before....
The joint dissenters argue that we cannot uphold §5000A as a tax because Congress did not "frame" it as such. In effect, they contend that even if the Constitution permits Congress to do exactly what we interpret this statute to do, the law must be struck down because Congress used the wrong labels. An example may help illustrate why labels should not control here. Suppose Congress enacted a statute providing that every taxpayer who owns a house without energy efficient windows must pay $50 to the IRS. The amount due is adjusted based on factors such as taxable income and joint filing status, and is paid along with the taxpayer's income tax return. Those whose income is below the filing threshold need not pay. The required payment is not called a "tax," a "penalty," or anything else. No one would doubt that this law imposed a tax, and was within Congress's power to tax. That conclusion should not change simply because Congress used the word "penalty" to describe the payment. Interpreting such a law to be a tax would hardly "[i]mpos[e] a tax through judicial legislation." Rather, it would give practical effect to the Legislature's enactment.
demonstrates that Congress had the power to
impose the exaction in §5000A under the
taxing power, and that §5000A need not be
read to do more than impose a tax. That is
sufficient to sustain it. The "question of the
constitutionality of action taken by Congress
does not depend on recitals of the power which
it undertakes to
considerations allay this concern. First, and
most importantly, it is abundantly clear the
Constitution does not guarantee that
individuals may avoid taxation through
inactivity. A capitation, after all, is a tax
that everyone must pay simply for existing,
and capitations are expressly contemplated by
the Constitution. The Court today holds that
our Constitution protects us from federal
regulation under the Commerce Clause so long
as we abstain from the regulated activity. But
from its creation, the Constitution has made
no such promise with respect to taxes.
Whether the mandate can be upheld under the Commerce Clause is a question about the scope of federal authority. Its answer depends on whether Congress can exercise what all acknowledge to be the novel course of directing individuals to purchase insurance. Congress's use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote, for example, purchasing homes and professional educations. Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can. Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.
Second, Congress's ability to use its taxing power to influence conduct is not without limits. A few of our cases policed these limits aggressively, invalidating punitive exactions obviously designed to regulate behavior otherwise regarded at the time as beyond federal authority. More often and more recently we have declined to closely examine the regulatory motive or effect of revenue-raising measures. We have nonetheless maintained 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.' "
....Third, although the breadth of Congress's power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior. Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal: deprivation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment opportunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes.
By contrast, Congress's authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the severe burden that taxation--especially taxation motivated by a regulatory purpose--can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.
The Affordable Care Act's requirement that certain in-dividuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Be-cause the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.
Justice Scalia, Justice Kennedy, Justice Thomas, and Justice Alito, dissenting.
As far as
§5000A is concerned, we would stop there.
Congress has attempted to regulate beyond the
scope of its Commerce Clause authority,
and §5000A is therefore invalid. The
Government contends, however, as expressed in
the caption to Part II of its brief, that "the
minimum coverage provision is independently
authorized by congress's taxing power."
The phrase "independently authorized" suggests
the existence of a creature never hitherto
seen in the United States Reports: A penalty
for constitutional purposes that is also
a tax for constitutional purposes. In all
our cases the two are mutually exclusive. The
provision challenged under the Constitution is
either a penalty or else a tax. Of
course in many cases what was a regu-
latory mandate enforced by a penalty could have been imposed as a tax upon permissible action; or what was imposed as a tax upon permissible action could have been a regulatory mandate enforced by a penalty. But we know of no case, and the Government cites none, in which the imposition was, for constitutional purposes, both. The two are mutually exclusive. Thus, what the Government's caption should have read was "alternatively, the minimum coverage provision is not a mandate-with-penalty but a tax." It is important to bear this in mind in evaluating the tax argument of the Government and of those who support it: The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so....
The last of the feeble arguments in favor of petitioners that we will address is the contention that what this statute repeatedly calls a penalty is in fact a tax because it contains no scienter requirement. The presence of such a requirement suggests a penalty--though one can imagine a tax imposed only on willful action; but the absence of such a requirement does not suggest a tax. Penalties for absolute-liability offenses are commonplace. And where a statute is silent as to scienter, we traditionally presume a mens rea requirement if the statute imposes a "severe penalty."
And the nail in the coffin is that the mandate and penalty are located in Title I of the Act, its operative core, rather than where a tax would be found--in Title IX, containing the Act's "Revenue Provisions." In sum, "the terms of [the] act rende[r] it unavoidable," that Congress imposed a regulatory penalty, not a tax.
For all these
reasons, to say that the Individual Mandate
merely imposes a tax is not to interpret the
statute but to rewrite it. Judicial
tax-writing is particularly troubling. Taxes
have never been popular, and in part for that
reason, the Constitution requires tax
increases to originate in the House of
Representatives. That is to say, they must
originate in the legislative body most
accountable to the people, where legislators
must weigh the need for the tax against the
terrible price they might pay at their next
election, which is never more than two years
off....Imposing a tax through judicial
legislation inverts the constitutional scheme,
and places the power to tax in the branch of
government least accountable to the
I dissent for
the reasons stated in our joint opinion, but I
write separately to say a word about the