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Under the Constitution’s original meaning, the Supreme Court’s holding that Obamacare’s penalty for not purchasing health insurance is a tax is defective in at least two respects.
First: The court fails to understand the Constitution’s line of distinction between those exactions that qualify as taxes and those that are regulatory in nature. That line was critical to the Founding Generation—in fact, it was a basis for the American Revolution.
In Founding-Era parlance a “tax” is a measure adopted primarily for the production of revenue—that is, to raise funds “to pay the Debts and provide for the Common Defence and general Welfare of the United States.” While it is true that the Founders recognized that a bona fide revenue measure could serve the subsidiary goal of influencing behavior, the principal purpose had to be financial for it to qualify as a tax.
On the other hand, an exaction imposed primarily to regulate behavior (such as the ACA’s penalty for not buying insurance) is a regulation of commerce, not a tax, even if it might raise a small amount of revenue. As such, it is valid only if within the scope of the Commerce Power.
That the court misunderstood the distinction is clear from its statement that “[T]axes that seek to influence conduct are nothing new. Some of our earliest federal taxes sought to deter the purchase of imported manufactured goods.. . ” If the Court was referring to prohibitory tariffs, then it failed to recognize that the Founders considered them regulations of foreign commerce, not taxes.
Second: The court failed to recognize that even if the penalty were a tax it would be a “direct” tax, and therefore subject to apportionment among the states.
My book, The Original Constitution: What It Actually Said and Meant (2d ed., 2011), pp. 159-61, contains what may be the most complete compendium of Founding-Era sources on the distinction between direct and indirect taxes. While there were some exceptions (for example, although taxes on ownership of capital and household goods were direct, excises on ownership of luxury goods were indirect) the usual line of distinction was that direct taxes were imposed on status, while indirect taxes were imposed on transactions. A tax that one must pay despite doing nothing is the quintessential direct tax.
Because the Court failed to examine the sources fully, it missed the nature of the distinction. This appears poignantly when the Court justifies Congress’s power to tax inactivity by citing congressional authority to impose capitations.
But of course capitations are direct taxes, and must be apportioned.