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Supreme Court looks at tax issue in Obama health law

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Kicking off three days of highly anticipated oral arguments over President Obama's health care law, zealous demonstrators on Monday swarmed the streets outside the Supreme Court while inside the justices considered whether they have the power to decide the case at all.

In a hearing that felt like a warm-up to Tuesday and Wednesday, the court signaled it is not likely to let a 145-year-old tax law called the Anti-Injunction Act stop them from ruling on the merits of the case.

Neither the Obama administration nor the challengers are claiming that the tax law applies to 2010's Affordable Care Act, but the nine justices, eager to hear that argument anyway, invested themselves in knotty questions over whether the AIA bans them from ruling on the case right now — appearing skeptical of arguments made by their own self-appointed attorney, Robert Long.

Under at least one interpretation of the AIA, the court could duck the constitutional questions over whether the government can require Americans to purchase insurance coverage or pay a penalty — at least until 2014, when the penalty kicks in.

The key question is whether the penalty the Affordable Care Act would impose on those who refuse to buy insurance would fall under the jurisdiction of the 19th-century law, which protects the government's ability to collect taxes by blocking challenges until after a tax already has gone into effect.

Justice Stephen G. Breyer seemed doubtful that Congress intended the health care penalty to be a tax. Justice Ruth Bader Ginsburg said that's beside the point because the lawsuit is over the mandate, not the penalty. And Justice Antonin Scalia said that unless a limit on the court's jurisdiction is clear, the court's usual practice is to rule.

"And I find it hard to think that this is clear," he said.

Some lower courts have upheld the health care law, which passed Congress two years ago, while other courts have sided with challengers and found the law unconstitutional.

One panel of judges for the 4th U.S. Circuit Court of Appeals ruled that it was premature to consider challenges to the bill because of the AIA. Even though neither the Obama administration nor the Affordable Care Act's opponents believe that to be the case, the Supreme Court wanted to hear those arguments.

At times Monday, the Obama administration's chief attorney, Solicitor General Donald B. Verrilli Jr., seemed to get tripped up with the complex arguments. He repeatedly called the penalty a "tax" — drawing a correction from Justice Breyer, who countered that it in fact was just a penalty, under the law.

The seemingly arcane point matters to the Obama administration, which argues that while the penalty isn't a tax for purposes of the AIA, it is a tax when it comes to the extent of leeway Congress is granted under the Constitution's tax-and-spend powers.

Mr. Verrelli is expected to make those arguments this week when the court reaches the real crux of the case.

Justice Samuel Anthony Alito Jr. pointed out the seeming contradiction.

"General Verrilli, today you are arguing that the penalty is not a tax," Mr. Alito said. "Tomorrow you are going to be back and you will be arguing that the penalty is a tax."

As the justices huddled in their deliberations over the tax law, protesters gathered outside the court to argue over the broader implications of the case, which could set precedents on how far the federal government's powers can reach.

The court will hear two hours of arguments over the individual mandate on Tuesday, while the expansion of Medicaid and whether the mandate can be severed from the rest of the Affordable Care Act is on Wednesday's docket.

A CNN poll released Monday found that 73 percent of Americans want the court to overturn at least some of the health care reform's provisions, while 23 percent want to keep the law as is.

Just across the street, congressional lawmakers continued highlighting their differences over the law, with Senate Minority Leader Mitch McConnell, Kentucky Republican, blasting it from the Senate floor.

"We're basing our opinion on something simpler than the legal arguments we'll hear this week," Mr. McConnell said. "We're looking at whether this law helped or hurt. And on that question, the verdict's already in. Just like so much else this president has done over the past few years."

In a rare moment where both sides agreed in Monday's hearings, plaintiffs' attorney Gregory Katsas also argued against applying the AIA to the case. He represents the National Federation of Independent Businesses and 26 states bringing the lawsuit.

Both sides said that if Congress had viewed the penalty as a tax, it would have clarified that. But Mr. Long argued that by directing the penalty to be "assessed and collected in the same manner as a tax," Congress was intentionally placing it in the same category as a tax.

Justice Breyer seemed to disagree. "It being collected in the same manner as a tax doesn't make it a tax," he said.

Justice Breyer said that if the court decides the penalty isn't a tax, it could give future courts wide latitude to determine what counts as a tax and what doesn't. Giving future judges too much wiggle room "plays a significant role in my mind," he said.

"We don't want 500 federal judges substituting their opinion," he said.

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