The Corner

Re: Tax vs. Penalty

Dan, thanks for your supportive post. I think the bottom line here is pretty simple. The popular political definition of a “tax” is broader than the Supreme Court’s definition of a “tax for the general welfare” for purposes of the constitutional taxing power. The latter is a technical term of constitutional law that has (or until this decision, had) a very precise meaning. The former, on the other hand, is often understood to mean any charge imposed on persons or property for any public purpose. (See, e.g., a dictionary near you.) In fact, the general meaning of “tax” is even broader than that, as in, “Rich had a particularly taxing conversation with Mario this afternoon.”

The individual mandate penalty is certainly a “tax” as the word is commonly used. It is added on to your taxes, it goes from your income to the IRS, and no adjudication or other public action is necessary to assess it. Such taxes may or may not be in the form of penalties — and tax benefits for one group can be the economic equivalent of a tax penalty for everyone else. Bottom line here, the Obama administration promised he wouldn’t pass a tax on the middle class, and this is a tax on the middle class.  

Now, none of that makes this a tax for purposes of determining whether it may be assessed under Congress’s power to tax “for the general welfare.” In that context, “tax” is a technical term, and is highly restricted by the qualifier “for the general welfare.” 

In common usage this is a tax. For purposes of determining whether the Obama administration has kept its promise, it is a tax. But on the constitutional question, the dissent was entirely correct: This mandate is not a proper exercise of the power to tax “for the general welfare” because it is a penalty meant to enforce a mandate that cannot be sustained under the Commerce Clause or any other enumerated power.

The constitutional issue partly overlaps with the popular one: We know for sure that if the Court rules it is a tax for constitutional purposes than it is a tax for popular purposes. The administration has to face the fact that the only reason its law was upheld is that has been ruled a tax for all purposes. But outside that overlap, there is ample room to insist that this mandate is a tax, and also a penalty, and also not a tax “for the general welfare.”

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