The Killer Precedent for Today’s Decision

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JUNE 28, 2012

The Killer Precedent for Today’s Decision

Today’s Supreme Court decision isn’t just a victory for Obama and his health plan: It’s a triumph of substance over formalism. The challengers’ argument all along rested on a curious claim that linguistics should trump reality. They treated the mandate as a fundamental change in Congressional power, but conceded that precisely the same financial effects could have been imposed if the mandate had been called a tax. Likewise, for all their alarm about a broccoli mandate, their argument implied that Congress could impose it if it just called it a broccoli tax.

As a result, the challenger argument was never really about the scope of Congressional power, which would not have been changed even if they had won, but just about the words Congress must use to exercise it. It was just a one-off argument that would enable them to strike down Obamacare because, they argued, it used the wrong wording.

The Supreme Court, quite sensibly, rejected this position, holding that substance trumps linguistics. This was clearly correct. Tax precedents have long held that whether a levy is within Congress’ taxing power depends not on labels, but on whether it has the same functional effect as a tax.

There are many such cases, but the killer precedent, which Chief Justice Roberts cited, was 1992’s New York v. United States. That case involved a federal law mandating that states “shall” be responsible for disposing of their nuclear waste, enforced by what the statute said was a “penalty” of having to pay a higher surcharge on out-of-state nuclear waste shipments. The Court nonetheless held this was within the taxing power because the surcharge functioned as a tax—even though it didn’t call itself a tax.

The Court’s decision was not only based on clear precedent, it was also politically deft. By upholding Obamacare, but doing so as a tax rather than under the Commerce Clause, the Court probably minimized the effects of its decision on the upcoming Presidential election. The Republicans lose their claim that Obama acted unconstitutionally. They also lose the argument, which recent Romney comments suggest they were hoping to make, that Obama spent too much of his presidency securing a statute that ended up stricken. So the decision is certainly a net positive for Obama.

On the other hand, the Republicans will get to campaign on the fact that Obamacare was only upheld because it was a tax. This was a reality that the Democrats liked to minimize, but it will be hard to deny after the Supreme Court decision.

The upshot is that the decision improves our political process, rather than interferes with it. The campaign can focus on the reality: that Obamacare imposed a tax in order to try to secure health insurance for nearly everyone. People reasonably disagree about whether this goal was worth the tax. Now that disagreement can be resolved by our ultimate authority—which is not the Court, but the electorate.

Einer Elhauge is a professor at Harvard Law School, founding director of the Petrie-Flom Center in Health Policy, and editor of The Fragmentation of U.S. Health Care—Causes and Solutions (Oxford University Press 2010). 

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