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A Tax, Not a Penalty

So we now know that Chief Justice Roberts has joined with the four progressive members of the Court to uphold the Affordable Care Act on the ground that the “penalty” owed by any citizen violating the purchase mandate is not a penalty but a tax. As Ilya Somin notes at Volokh this is quite the surprise given that virtually every lower court judge rejected this argument.

Justice Scalia’s dissent powerfully address this point. Here are two brief excerpts:

“Our cases establish a clear line between a tax and a penalty: “[A] tax is an enforced contribution to provide for the suppport of a government; a penalty . . . is an exaction imposed by statute as punishment for an unlawful act.” U. S. v. Reorganized CF&I Fabricators of Utah, Inc., 518 U.S. 213, 224 (1996) (quoting United States v. La Franca, 282 U. s. 568, 572 (1931)). In a few cases, this Court has held that a “tax” imposed upon private conduct was so onerous as to be in effect a penalty. But we have never held–never–that a penalty imposed for violation of the law was so trivial as to be in effect a tax. We have never held that any exaction imposed for violation of the law is an exercise of Congress’ taxing power-even when the statute calls it a tax, much less when (as here) the statute repeatedly calls it a penalty.

In further part, the dissent presses this point by observing as follows:

We never have classified as a tax an exaction imposed for violation of the law, and so too, we never have classified as a tax an exaction described in the legislation itself as a penalty.

But we have never–never–treated as a tax an exaction which faces up to the critical difference between a tax and a penalty, and explicitly denominates the exaction a “penalty.” Eighteen times in § 5000A itself and elsewhere throughout the Act, Congress called the exaction in § 5000A(b) a “penalty”

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