Taxation’s legality is key to health reform

March 28, 2012
By Michael Hiltzik, Los Angeles Times
One afternoon in 1934, Supreme Court Justice Harlan Fiske Stone decided to quietly help Labor Secretary Frances Perkins out of a jam.

Her quandary was how to write a Social Security law that would survive scrutiny by the court’s conservative bloc. Stone, a progressive, pulled her aside during a tea party at his home, glanced around to make sure he wasn’t overheard, and whispered, “The taxing power of the federal government, my dear; the taxing power is sufficient for everything you want and need.”

As Stone counseled, the court had earlier held that the government’s taxing power was virtually absolute. And so it was that tax provisions were liberally sown throughout the bill enacting the nation’s landmark social insurance program, which handily survived Supreme Court challenge a few years later.

Nor is there any mystery why a federal tax is the hub of the federal healthcare reform act’s individual mandate, the constitutionality of which is being argued this week before the current Supreme Court. The tax is the mechanism for enforcing the mandate — if you don’t have insurance, you’ll pay a tax. Or why the court’s upholding of Social Security in 1937 has been cited repeatedly in their briefs and oral arguments by the lawyers defending the mandate, not to mention by Justice Ruth Bader Ginsburg during oral arguments Tuesday.

The tax issue pervades the judicial debate over the healthcare law, but whether Congress’ clever maneuver was enough to inoculate the act from court hostility is open to question. At least, that’s one question. You don’t have to go as far as the attack brief by a lobbying group for small business, which calls the mandate an “unprecedented … threat to individual liberty,” to understand that no act of Congress in recent times has a greater potential effect on how businesses perform, government regulates, individuals conduct their lives.

The court acknowledged the act’s importance by scheduling an unprecedented six hours of arguments on its constitutionality over three days, including a two-hour session Tuesday on the individual mandate and its associated tax penalty alone.

As befits a measure implicating legal and ideological principles so directly, the discussion was a dramatic one. Three conservatives, Chief Justice John Roberts and Justices Antonin Scalia andSamuel Alito, and purported swing voter Anthony Kennedy, worried the law’s defender, Solicitor General Donald B. Verrilli Jr., as mercilessly as dogs with a bone, leading some court watchers to declare the mandate dead.

Once the lectern was turned over to lawyers for the challengers, including the small-business group and 26 states, that wasn’t so clear. Kennedy and Roberts both indicated that they were at least receptive to the government position that healthcare is an interstate market that involves virtually every American, and is therefore ripe for congressional regulation.

“The young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries,” Kennedy said. “That’s my concern in this case.”

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