The government wants the individual mandate to be a tax, not a penalty, for two reasons.

1. Additional Congressional Authority Under Art. I, Sec. 8

Classifying the mandate as a tax opens up a head of congressional authority as an alternative to the Commerce Clause. If classified as a tax, the mandate could fall within Congress's power to "lay and collect Taxes, Duties, Imposts and Excises, to ... provide for the ... general Welfare of the United States” US Const. Art 1, Sec 8. As such, if the Supreme Court finds that the individual mandate does not comport with the Commerce Clause, the government is hoping that the court will find authority for it in the broader congressional authority to tax. This line of argument is unavailable if the individual mandate is classified as a penalty.

2. Anti-Injunction Act May Bar Lawsuit

A completely different statute called the Anti-Injunction Act prevents lawsuits "for the purpose of restraining the assessment or collection of any tax." 28 USC 7421. Essentially this means you can't bring a lawsuit until the IRS actually tries to collect the tax. Therefore, the government argues that this means the current lawsuit is barred since the "tax" does not go into effect until 2014. Of course, this argument will only delay the lawsuit since even if the mandate is classified as a tax, as soon as the IRS begins collecting it in 2014, the suit will be allowed under the Anti-Injunction Act.

Please note that the text of Act refers to the mandate as a penalty, not as a tax. See PPACA Sec. 1501(b). Further complicating the government's desire that the mandate be classified as a tax is that the legislative history of the Act indicates that the mandate was called a "tax" in earlier congressional drafts, but that the term "tax" was replaced with "penalty." (See Florida v. U.S. Department of HHS, 716 F.Supp.2d 1134 for a discussion about this.)

-- HarryKhanna - 24 Jan 2012

Courts Have Ruled the Mandate a Penalty

Judge Vinson, of the Northern District of Florida, rejected the governments argument that the mandate is a "tax," holding that it is a "penalty." The 11th Circuit affirmed his ruling in this regard, and refer repeatedly in their opinion to the mandate as a "penalty." The 11th Circuit did not agree with Judge Vinson's assessment that the mandate was not severable, and believe the potential unconstitutionality of the mandate would not render the entire act unconstitutional. (See Judge Vinson's Opinion: http://www.realclearpolitics.com/docs/2011/Vinson_HCRuling_0131.pdf and the 11th Circuit's Opinion: http://www.uscourts.gov/uscourts/courts/ca11/201111021.pdf)

-- KhurramDara - 24 Jan 2012

_Seems to me that courts are just using semantics to push political agendas. It reminds me of what Eben discussed today regarding the courts making decisions without having to point to what really is leading them to their conclusions. That is all._ -- KippMueller - 24 Jan 2012

The detailed summary of the Act (dpc.senate.gov/healthreformbill/healthbill04.pdf) lists the payment as a penalty: "Beginning in 2014, most individuals will be required to maintain minimum essential coverage or pay a penalty of $95 in 2014, $350 in 2015, $750 in 2016 and indexed thereafter; for those under 18, the penalty will be one-half the amount for adults. Exceptions to this requirement are made for religious objectors, those who cannot afford coverage, taxpayers with incomes less than 100 percent FPL, Indian tribe members, those who receive a hardship waiver, individuals not lawfully present, incarcerated individuals, and those not covered for less than three months." Do the categories of objectors give us any indication as to whether it resembles a tax or a penalty? The fact that there are exceptions made for religious objectors indicates to me that the fee resembles a penalty more than a tax; I couldn't find many taxes out of which it was possible to opt out based on religious objection. It looks like you can do so with the social security tax if you have religious objections to being part of a social insurance system, but that doesn't seem to parallel the case here.

-- KirillLevashov - 24 Jan 2012