Commentary

Obamacare As Sin Tax?

Ezra Klein, on the heels of yesterday’s court decision striking down health care reform, argues that “the fight over the individual mandate is not about liberty.” In Klein’s view, opposition to Obamacare is based on cynical political opportunism, since (1) some Republicans have previously supported individual mandates and (2) they would not oppose the constitutionality of the penalty for those who refuse to buy health insurance if it were called a “tax”, since Congress’s taxation powers are extensive.

The Congressional Research Service already commented on the tax vs. penalty issue in detail last October, finding that though “the power to tax and spend for the general welfare is one of the broadest powers in the Constitution,” it doesn’t authorize the government to institute any regulation it wants under the guise of taxation. The CRS report added:

As the tax is imposed conditionally and may be avoided by compliance with regulations set out in the statute, some might argue that it may also be accurately described as a penalty and, therefore, the taxing power alone might not provide Congress the constitutional authority to impose the requirement.

So if the “tax” (which, unlike any other tax levy in U.S. history, would be levied on inactivity) is actually a penalty, it requires additional statutory support (say, oh, the Commerce Clause) to be legal. Klein’s suggestion that there’s no real distinction between a tax and a penalty in this context, that it’s a matter of semantics, ignores the serious issues about what limits the government’s powers of taxation.

Of course, he’s not totally coming out of left field here. U.S. law has robust provisions for cracking down on supposedly undesirable behavior: sin taxes on alcohol, cigarettes, snack foods and soda are all designed to keep you and me safe from the consequences of our actions. There’s an obvious philosophical (if not legal) similarity between the Obamacare penalty and sin taxes on that count. Noting this similarity shouldn’t increase our acceptance of the penalty – it should make us question the ways our government uses actual taxes to manage behavior that should be left up to individuals.

Indeed, it would be disappointing to see politicians that opposed the individual mandate as violation of liberty unquestioningly accept increased sin taxes in their own states. We can argue about whether both sin taxes and the mandate are a question of avoiding external costs to society at large, but in the main they’re an effort to improve individual, personal decisionmaking. That shouldn’t sit easily regardless if one is a legally authorized tax.