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 First Day of Supreme Court Oral Arguments on ACA: Is the Penalty a Tax?

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PostSubject: First Day of Supreme Court Oral Arguments on ACA: Is the Penalty a Tax?   Tue Mar 27, 2012 9:15 am

Hi folks, I got this from Medscape news. It has more detail than any report I have seen any where else. Thought it might be interesting.



From Medscape Medical News
First Day of Supreme Court Oral Arguments on ACA: Is the Penalty a Tax?
Robert Lowes
Authors and Disclosures Posted: 03/26/2012


March 26, 2012 (Washington, DC) — In the first day of oral arguments here at the Supreme Court on the constitutionality of the Affordable Care Act (ACA), the Obama administration told the 9 justices that a penalty for failing to obtain health insurance coverage should not bar them from ruling on the case later this year.

Its line of reasoning? While Gertrude Stein famously said, "A rose is a rose is a rose," US Solicitor General Donald Verrilli Jr, representing the administration, said today that a penalty is a penalty…is a tax.

It was an acute and confusing legal discussion — akin to Bill Clinton's "what the definition of 'is' is" — that contrasted sharply with the slogans shouted by ACA supporters and opponents who marched outside the Supreme Court building on a cool, sunny Monday morning in the nation's capital.
Demonstrators at the Supreme Court. Photo courtesy of Robert Lowes

How the justices define the individual-mandate penalty figured into today's question before the court — should it wait until at least 2015 to review the constitutionality of the mandate?

Specifically, the court entertained arguments this morning about the ACA's relationship to another law called the Anti-Injunction Act (AIA), which bans lawsuits that attempt to block the assessment or collection of a tax.

A federal appeals court in Richmond, Virginia, cited the law last year when it declared that it was premature to rule on the constitutionality of the individual mandate. The court said that the penalty owed by Americans who do not obtain insurance coverage beginning in 2014 amounts to a tax, a position not taken by other federal courts in ACA lawsuits. Until the first penalty is actually paid in 2015, the case is not ripe for review, the appellate court said.

Allowing the ACA case to be heard, it ruled, could open the door to more tax suits that would "wreak havoc" on the government's ability to raise revenue.
Justice Stephen Breyer

The need to collect revenue was not lost on Justice Stephen Breyer today.

"Taxes are, for better or for worse, the life's blood of government," said Breyer.

In his 30 minutes before the high court, Verrilli argued that the penalty is indeed a penalty, and therefore not subject to the AIA, because "penalty" is the word Congress explicitly chose to use in the text of the law. If the court were to agree with the administration on that, he said, it need not fear a flood of litigation hog-tying the Internal Revenue Service over tax collection.

"We've taken this position, after very careful consideration, and we've assessed the institutional interests of the United States and we think we are in the right place," said Verrilli.

This is a change of federal direction, because in a number of district court cases on the ACA, the government originally contended that the individual mandate should not be reviewed until someone paid the penalty, which it said qualified as a tax in regard to the AIA.

Verrilli will maintain a version of the older argument tomorrow when the court deliberates on the central issue in the ACA case — whether the individual mandate is constitutional. The Obama administration is saying that apart from the AIA, the mandate operates as a tax law, which buttresses its argument that the mandate is justified under Congress's constitutional authority to tax. In other words, the penalty is a penalty is a tax.

The justices saw this seeming incongruity coming.

"Today you are arguing that the penalty is not a tax," Justice Samuel Alito Jr said. "Tomorrow you are going to be back and you will be arguing that the penalty is a tax. Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?"

Verrilli replied that he could not point to a case, but added that the Supreme Court has held in other cases that "something can be a constitutional exercise of the taxing power whether or not it is called a tax."

Can the Punishment Be Separated From the Crime?

Like the administration, the officials from 26 states who are challenging the ACA in the Supreme Court case also do not consider the individual-mandate penalty as triggering AIA jurisdiction. However, their reasons are somewhat different from the administration's. They agree that the penalty is truly a penalty. However, Gregory Katsas, an attorney for the state officials, told the Supreme Court today that the AIA issue is a moot one because the officials are challenging the mandate itself, not the penalty. The ACA, Katsas noted, distinguishes between the 2 issues. For example, some categories of Americans are subject to the mandate, but not the penalty. One such category is the very poor.

Chief Justice John Roberts Jr did not find that line of reasoning persuasive.


"The idea that the mandate is something separate from whether you want to call it a penalty or tax just doesn't seem to make much sense," said Roberts. "It seems very artificial to separate the punishment from the crime…. Why would you have a requirement that is completely toothless?"

Katsas replied that "Congress reasonably could think that at least some people will follow the law precisely because it is the law."

Because neither the Obama administration nor the 26 state officials and the National Federation of Independent Business (NFIB), also a party to the lawsuit, consider the AIA an ACA speed bump, the Supreme Court appointed attorney Robert Long Jr as a "friend of the court" to argue that the AIA indeed applies. Long today told the justices that the penalty amounts to a tax because the ACA specifies that it be assessed and collected in the same way as a tax.

Justice Breyer contested that assertion.

"Being collected in the same manner as a tax doesn't automatically make it a tax, particularly since the reasons for the AIA are to prevent interference with revenue sources," said Breyer.


Justice Ruth Bader Ginsburg added that the AIA resembles another law on tax litigation that "does not apply to penalties that are designed to induce compliance with the law rather than to raise revenue."
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PostSubject: Re: First Day of Supreme Court Oral Arguments on ACA: Is the Penalty a Tax?   Tue Mar 27, 2012 9:24 am

It all gets tangled up on itself when the lawyers argue. This should be interesting to see unfold, and whatever happens I just hope that regular people get help and not screwed. Unfortunately when the lawyers start arguing it often means we all get screwed...lol.
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