Insofar as I know, no constitutional issue has been raised, briefed or argued in King v. Burwell in any of the courts below; so this may all be too much to hope for. But now that the Supreme Court has accepted certiorari, here is an entry from that perhaps-too-much-to-hope-for category.
According to the Court’s contradictory opinion in National Federation of Independent Business v. Sebelius, the individual mandate penalty is a tax (except when it is a penalty and not a tax) but “[e]ven if the taxing power enables Congress to impose a tax on not obtaining health insurance, any tax must still comply with other requirements in the Constitution.” Well, if Section 1401 of the health care law is to be read literally and if the Supreme Court finds for the King plaintiffs, it must fashion a remedy; however, the constitutional constraints on Congress create some interesting complications.
Article 1, Section 8, Clause 1 states that “Congress shall have power to lay and collect taxes, duties, imposts and excises, . . . but all duties, imposts and excises shall be uniform throughout the United States.” If tax subsidies are available only in states where the taxpayer is “enrolled in [a health plan] through an Exchange established by the State under 1311” and not in the states where the exchange is established by the federal government under Section 1321, then it appears that we have more than a case of dueling statutory interpretations; we have a constitutional problem. Tax subsidies that are designed to produce lower taxes in some states but higher taxes in other states do not operate uniformly everywhere, and it appears, they may be unconstitutional everywhere.
In applying the Uniformity Clause, the Supreme Court has ruled in the Head Money Cases that “[t]he tax is uniform when it operates with the same force and effect in every place where the subject of it is found,” and that a tax does not fail to be uniform simply because “the thing taxed is not equally distributed in all parts of the United States.”
But the tax subsidies available under Section 1401 do not present a case where the thing that is the subject of the taxation (the forced purchase of insurance) is not present or available everywhere. The purchase of insurance through the exchanges is available in every state because the federal government has made its own exchange for the purchase of insurance available wherever a state has refused to do so. The Affordable Care Act’s taxing scheme just treats the purchase of insurance differently in some states because the Congress wanted to coerce those states into building their own exchanges. It is a blackmail scheme in which the states are rewarded for submitting to the scheme with happy people receiving subsidies or, in the alternative, threatened for their refusal to cooperate with the wrath of their people who are angry for not getting the tax subsidies (“that’s a nice, happy citizenry you got there; be a shame if something was to happen to it”).
But what if the Court latches on to the idea that the subsidies are not part of a taxing scheme at all but just plain, old, garden-variety government spending,* which does not have to comport with the uniformity requirement. There’s still a constitutional problem. Even if the subsidies are interpreted to be spending, a not-insubstantial argument can be made that they should be unconstitutional on federalism grounds.
The Constitution establishes a federal system of sovereign states. One of the principle elements of the traditional model of sovereignty under the Westphalian model is non-intervention of one sovereign in the internal affairs of another sovereign. The tax subsidies at issue here are an interference by the federal government with the most basic relationship that the states have, the relationship of a sovereign state to its citizens.
The subsidy scheme is not the usual way in which the federal government influences state behavior. Ordinarily, the federal government offers to a state the carrot of federal spending to be used by the state for a particular purpose with certain conditions attached. That is the way that the Medicaid model works.
It is one thing to offer money to the state for the state to accept or reject in its sovereign capacity. It is quite another thing for the federal government to interject itself between the citizens of the state and their elected representatives by offering money directly to the people on the condition that the sovereign undertake a policy or an action that the sovereign would not otherwise do. It is offensive both to our federal system of sovereign states and, in fact, to the Constitution’s guaranty to the states of a republican form government for Congress with cash payments to bribe the people of a state into petitioning their state government to set up exchanges. For that reason as well, the subsidies should be ruled unconstitutional.
The Court already has ruled that it is unconstitutional for the federal government to attempt to coerce the states into expanding Medicaid by threatening to take away all Medicaid funding if they did not do so, but the remedy the Court ordered for the Medicaid issue may not be available for the taxing/spending/blackmail/bribery scheme. The remedy the court fashioned with the Medicaid expansion was that the administration was constrained from doing all Congress permitted it to do. The health care law would have permitted the administration to take all Medicaid funding away from uncooperative states, but the Court instructed it to do less, to take away only the offered increase in Medicaid funding. Here no similar remedy is available. The Court cannot (should not?) tell the Executive Branch to do more than Congress permitted it to do, i.e., to provide subsidies where Congress has not authorized, and cannot (should not?) permit the unconstitutional subsidy scheme to continue. The only thing the Court can (should?) do is throw out the subsidies everywhere.
So what are the implications of the right remedy? Well, if the subsidies are out everywhere, then is that enough to throw out the whole health care law? After all, the whole stated idea of the law was to insure the uninsured. If the most at-risk people, the ones who cannot afford insurance, are not helped and if there is no severability clause in the law, would Congress even have passed the law? Is that enough? The subsidies, after all, are one of the three legs of the Obamacare stool, with the other two being the individual mandate and the requirement that insurers accept people with pre-existing conditions. Maybe it’s enough. Maybe it’s not enough.
Also, if the subsidies are out everywhere, then the employer mandate is out everywhere, too. An employer is only mandated to provide insurance if it is an employer with at least 50 full time employees and at least one full-time employee that has qualified for the subsidies. If the subsidies are unconstitutional and out everywhere, then the employer mandate also would be out everywhere. Is that enough to throw out the whole health care law? Maybe. Maybe not.
Even if the loss of both the subsidies and the employer mandate is not enough to throw out the whole thing what if the Court read the subsidies and the individual mandate tax/penalty together as part of a single taxing scheme? After all, to force the purchase of insurance the government offered both the carrot in the form of the subsidies and the stick in the form of the individual mandate penalty. If that single taxing scheme is designed to apply in a non-uniform fashion, depending solely on the effectiveness of the blackmailing/bribery part of the law’s taxing scheme, then the whole taxing scheme may be unconstitutional. Then John Roberts gets to come to a conclusion different from the last time.
Finally, what if the Court decides that the subsidies are just government spending to which the uniformity requirement does not apply and that there is no federalism problem. There’s another constitutional problem. The whole point of the King case is that the plaintiffs are seeking relief from the individual mandate tax/penalty. Their argument is that without the availability of the subsidies to reduce the cost of their purchase of insurance to less than eight percent of their income, the individual mandate penalty would not apply to them. If they succeed in their claim that the subsidies are not available in their state, then the individual mandate tax/penalty will operate differently depending solely upon whether the subsidies are available, and the individual mandate penalty is a tax and must comport with the Constitution’s uniformity requirement.**
By the way, the employer mandate also is a tax and only applies in the places where the subsidies are available. Even if the Court finds the non-uniform tax subsidies to be just plain old spending and rules that they are not unconstitutional, then the employer mandate still applies only in states where subsidies are available and would itself fail the Constitution’s uniformity requirement.
But perhaps consistency in logic and faithfulness to our Constitution’s structure and text is too much to hope for. Remember that this Court already has held that a tax is a penalty when needed and that the same penalty is a tax when needed. So why can’t the Court just ignore the reference to Section 1311 and conclude that the federal government is acting on behalf of the state, a separate sovereign entity, without the sovereign’s permission? After all, one of the points of this law was to reverse federalism, i.e., to take the power of the states and put it in the hands of the federal government. To borrow the words of Thomas Jefferson, it was passed in part for the purpose of “suspending our own Legislatures and declaring themselves invested with power to legislate for us.”
On the other hand, no constitutional issue has been considered in the courts below. The Supreme Court could just construe the statute to say what it actually says and not even reach the question of whether the taxing/spending scheme is constitutional, leaving that issue for the next case. Or, and this perhaps is not too much to hope for, the Court could rule the tax subsidies to be unavailable in states using the federal exchange but, not wanting to order an unconstitutional statute enforced, temporarily stay the effectiveness of that ruling and instruct the parties to brief and argue the merits of the constitutional questions before issuing a final ruling. Congress and the president would then have some time to address and correct the issue legislatively before the Court addresses it for them (“that’s a nice, constitutionally questionable, taxing/spending scheme you got there in that statute without a severability clause; be a shame if something was to happen to it”).
That outcome would have a nice symmetry with what the health care law’s taxing/spending scheme tries to do to the states.
Think happy thoughts.
* I am not sure how easy an argument this is to sustain. The IRS treats the subsidies as tax credits, the amount of the tax credits are dependent upon income level, and if the taxpayer’s income changes during the year, the IRS requires that the tax credits already disbursed be repaid with the year-end tax return.
** David Rivkin and Lee Casey made a similar argument after the decision in NFIB, but the argument here is a little different from theirs. If I understand the argument that Messrs. Rivkin and Casey put forth, the individual mandate may not comport with the uniformity clause because the alternative to paying the individual mandate penalty, signing up for Medicaid coverage, is different in states that chose not to expand Medicaid, thereby differently influencing individuals’ choices about whether to incur the penalty. The argument here is that the individual mandate penalty either does or does not apply in the first place, not based upon individual purchasing choices, but based upon Congress’s choices about where to make the subsidies available.