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

I agree with Kipp - i could definitely imagine them deciding to remove the designation "tax" for political reasons rather than because they didn't believe it was a tax - not that the belief of congress/the administration in what metaphysically constitutes a "tax" necessarily affects whether the court believes it does. What does a tax do if not penalize those on whom it is applied, and what is a penalty if not a tax? The potentially different moral connotations typically associated with each word is of arguable relevance. Vinson's line here: "Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice in Wonderland” tack and argue in court that the Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad powers in check." is nice in theory but seems hilariously naive, given the inherent spin associated with choosing any descriptive language. Here is Justice Taft on his take of the difference between the two - i'd be curious if you any more informed than i was after reading it.

"The difference between a tax and a penalty is sometimes difficult to define, and yet the consequences of the distinction in the required method of their collection often are important. Where the sovereign enacting the law has power to impose both tax and penalty, the difference between revenue production and mere regulation may be immaterial, but not so when one sovereign can impose a tax only, and the power of regulation rests in another. Taxes are occasionally imposed in the discretion of the Legislature on proper subjects with the primary motive of obtaining revenue from them and with the incidental motive of discouraging them by making their continuance onerous. They do not lose their character as taxes because of the incidental motive. But there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty, with the characteristics of regulation and punishment. "

-- RohanGrey - 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

Without coming to any conclusions just yet, I'll add some text from the Act: *Subtitle F—Shared Responsibility for Health Care PART I—INDIVIDUAL RESPONSIBILITY SEC. 1501 [42 U.S.C. 18091]. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.* _(a) FINDINGS.—Congress makes the following findings: (2) EFFECTS ON THE NATIONAL ECONOMY AND INTERSTATE COMMERCE. The effects described in this paragraph are the following: (A) The requirement regulates activity that is commercial and economic in nature: economic and financial decisions about how and when health care is paid for, and when health insurance is purchased. In the absence of the requirement, some individuals would make an economic and financial decision to forego health insurance coverage and attempt to self-insure, which increases financial risks to households and medical providers. (I) ...By significantly increasing health insurance coverage, the requirement, together with the other provisions of this Act, will minimize this adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums... (J) Administrative costs for private health insurance, which were $90,000,000,000 in 2006, are 26 to 30 percent of premiums in the current individual and small group markets. By significantly increasing health insurance coverage and the size of purchasing pools, which will increase economies of scale, the requirement, together with the other provisions of this Act, will significantly reduce administrative costs and lower health insurance premiums. The requirement is essential to creating effective health insurance markets that do not require underwriting and eliminate its associated administrative costs._

The Internal Revenue Code was amended to include this "requirement"/"penalty"/"tax," including all relevant penalty amounts: http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00005000---A000-.html

This sparks possible new discussion ingredients: Holmes' notion of a legal duty and what this would mean to the "bad man"; the "law and economics" rationalization for a Congressional mandate to insure yourself against health risks; and the expansion of the insurance market through governmental regulations of people's health choices (and wallets).

What bothers me is the use of communitarian language ("shared responsibility") as a guise for the creation of a stable marketplace ("economies of scale"). Perhaps that's why the word "penalty" was used instead of "tax": to instill the feeling of guilt in the uninsured. Breaking the tax code does not instill the sense of committing a crime against your community.

-- ArleneOrtizLeytte - 25 Jan 2012