A Tax Unlike Any Other

Court rules that Obamacare constitutes massive tax increase despite Obama claims to contrary

June 29, 2012

Chief Justice John Roberts ruled Thursday that Barack Obama used "magic words" to characterize a multi-billion dollar tax increase on middle and low income earners as a "penalty."

"‘Magic words or labels’ should not ‘disable an otherwise constitutional levy,’" he wrote, citing a 1992 sales tax case. "This process yields the essential feature of any tax: it produces at least some revenue for the Government … $4 billion per year by 2017."

The 5-4 ruling upholding Obama’s chief legislative achievement undermines the president’s claim that he would never raise taxes on Americans making less than $250,000 per year.

Obama attempted to sell the unpopular law to the country on the grounds that the individual mandate represented a penalty rather than a tax, and accused his critics of twisting words.

"For us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase," he told George Stephanopoulos of ABC news.

When the newsman and former Democratic official pressed Obama on the question and cited a dictionary definition of the term "tax," the president interrupted him.

"No, but—but, George, you—you can't just make up that language and decide that that's called a tax increase," he said, adding "the fact that you looked up Merriam's Dictionary, the definition of tax increase, indicates to me that you're stretching a little bit right now."

Chief Justice John Roberts and the liberal bloc of the Supreme Court cited the Constitution, as well as the law’s empowerment of the Internal Revenue Service (IRS), to conclude that Obama had passed one of the largest tax increases in history.

"The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects," Roberts wrote. "[The tax] conclusion should not change simply because Congress used the word ‘penalty’ to describe the payment."

Florida Sen. Marco Rubio slammed Obama for breaking his campaign pledge to avoid middle class tax hikes on multiple television interviews following the ruling.

"For the Obama administration a ‘victory’ is a middle class tax increase … that’s not me saying it, that’s what the Supreme Court said today," he told CNBC. "The reason why they say this is constitutional is because this is a tax increase … we have now created an IRS problem for millions of Americans."

"There are a lot of things that are constitutional that happen to be bad ideas," he said.

Obamacare is expected to raise taxes on hospitals, insurers, companies, and individuals by more than $500 billion over the next ten years, according to the nonprofit anti-tax group Americans for Tax Reform. Justices Clarence Thomas, Antonin Scalia, Samuel Alito, and Anthony Kennedy noted the steep price tag in their jointly signed dissent.

"The regulations and taxes will mean higher costs for insurance companies. Higher costs may mean higher premiums for consumers, despite the Act’s goal of ‘lower[ing] health insurance premiums,’" the dissenters argued.

Obama made healthcare taxes a central issue in the 2008 campaign, claiming he would not raise taxes on any American making less than $250,000 per year. He released a campaign ad claiming that Republican Sen. John McCain’s plan to issue tax credits to purchase personal insurance would "tax your healthcare for the first time ever."

Obama did not mention the word tax in post-decision remarks calling on the country to "move forward." The White House website still hosts a blog post that claims to "set the record straight" on Obamacare.

"The health insurance reform bill being considered in the Senate does not raise taxes on families making less than $250,000," wrote Deputy Director of the National Economic Council Jason Furman.

House Minority Leader Nancy Pelosi (D., Calif.) was also evasive when asked about the tax increase.

"Call it what you will—it is a step forward for America’s families. And you know what? Take yes for an answer," she responded. "What you’re talking about here is Washington talk."

Solicitor General Don Verrilli walked a tight line during three days of oral arguments in March. Verrilli told justices that the administration’s ability to impose the costs fell under the federal government’s taxing power on the first day of argument. He then pivoted and declared the tax a penalty on Day Two of the hearings.

The rhetorical gymnastics left justices on both sides of the aisle amused.

"General Verrilli, today you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax," Associate Justice Samuel Alito said. "Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?"

"The nature of the inquiry that we will conduct tomorrow is different from the nature of the inquiry that we will conduct today," he responded.

Roberts answered the question more completely in his opinion, according to attorney Adam J. White.

"This case proved that Chief Justice Roberts is the finest constitutional advocate of his time. He was able to argue and win the case that Verrilli couldn’t," he said. "The Court's distinction was sound: a law may be a ‘tax’ within the meaning of the Constitution, yet not be a ‘tax’ within the meaning of the Anti-Injunction Act."

"For the former, we look to what the Founders meant when they created the Constitution; for the latter, we look to what Congress meant when they passed the statute," he said.

Republicans plan to use the tax and Obama’s broken campaign pledge as a battering ram against Democrats at all levels in November.

"President Obama looked the camera in the eye and said ‘we’re not taxing you.’… This is disingenuous [and] it will not stand," South Carolina Sen. Lindsey Graham told Fox News. "Every Democrat who voted for this bill should be labeled as a massive tax increase member of Congress or repeal the bill—they can’t have it both ways."