NCPA - National Center for Policy Analysis


July 19, 2010

When Congress required most Americans to obtain health insurance or pay a penalty, Democrats denied that they were creating a new tax.  But in court, the Obama administration and its allies now defend the requirement as an exercise of the government's "power to lay and collect taxes." 

And that power, they say, is even more sweeping than the federal power to regulate interstate commerce: 

  • Administration officials say the tax argument is a linchpin of their legal case in defense of the health care overhaul and its individual mandate, now being challenged in court by more than 20 states and several private organizations.
  • Under the legislation signed by President Obama in March, most Americans will have to maintain "minimum essential coverage" starting in 2014.
  • Many people will be eligible for federal subsidies to help them pay premiums. 

In a brief defending the law, the Justice Department says the requirement for people to carry insurance or pay the penalty is "a valid exercise" of Congress's power to impose taxes: 

  • Congress can use its taxing power "even for purposes that would exceed its powers under other provisions" of the Constitution, the department said.
  • For more than a century, it added, the Supreme Court has held that Congress can tax activities that it could not reach by using its power to regulate commerce.  

While Congress was working on the health care legislation, Obama refused to accept the argument that a mandate to buy insurance, enforced by financial penalties, was equivalent to a tax. 

"For us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase," the president said last September, in a spirited exchange with George Stephanopoulos on the ABC News program "This Week." 

When Stephanopoulos said the penalty appeared to fit the dictionary definition of a tax, Obama replied, "I absolutely reject that notion." 

Source: Robert Pear, "Changing Stance, Administration Now Defends Insurance Mandate as a Tax," New York Times, July 16, 2010. 

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