Obamacare faces new legal challenge: Its 'tax' still violates the Constitution

With tax day and IRS forms fresh in their minds, most Americans might think the US tax system couldn’t get any more daunting.

But next year, some new complexity kicks in.

One of the hotly debated features of the Patient Protection and Affordable Care Act (or “Obamacare”) takes effect in 2014. Under the law’s “individual mandate,” nearly everyone who isn’t covered by an employer will have to buy health insurance or pay a penalty. This penalty was officially labeled a “tax” by the Supreme Court, or at least by five of the justices, in its decision on Obamacare last June.

The Obama administration, however, never argued that the individual mandate is an exercise of Congress’s taxing authority. And as recently as October, in an interview with Rolling Stone magazine, President Obama avoided the “tax” justification, and still insisted that the individual mandate is a regulatory action authorized by the Commerce Clause.

Just what Americans need: more confusion and ambiguity in their tax law. 

By calling the mandate to buy insurance a “tax,” the court did more than trigger new debates about semantics. It created a potentially fatal constitutional glitch in the law.

Article I, Section 7 of the Constitution says that tax bills – “all bills for raising revenue” – must “originate in the House of Representatives.” The framers wrote this “Origination Clause” because they recognized the potential danger in the taxing power, and they wanted to keep it as close as possible to voters. So they entrusted it to members of the House, who are elected every two years and have smaller constituencies than senators, who represent whole states and serve staggered six-year terms.

But Obamacare didn’t follow the constitutional script. Instead of originating in the lower chamber, it started in the Senate, when Majority Leader Harry Reid took an old bill the House had passed that would have given veterans tax credits to buy homes, struck out all of that bill’s language, and inserted instead the confusing web of provisions that became the Affordable Care Act.

Was this “gut and amend” ploy valid?

That question is now in front of US District Judge Beryl Howell in Washington, D.C., in a challenge to Obamacare filed on behalf of Matt Sissel, an Iowa small business owner who was decorated for service as a medic in the Iraq war.

Obamacare was passed hastily, by lawmakers who admitted they had not read the bill. The legislation was passed during the holiday season, through questionable procedural tricks. It was never popular, and a recent Kaiser Family Foundation poll found that only 36 percent of Americans currently support the law. Even the Supreme Court’s liberal wing agreed that large parts of it were unconstitutional. In part of last June’s decision, Justices Stephen Breyer and Elena Kagan joined the conservatives to hold that Congress had illegally tried to force states to expand their Medicaid rolls.

These are all good reasons not to give a reflexive pass to the law’s most controversial aspects – including the way it was enacted.

The Supreme Court has never addressed whether the Senate can evade the Origination Clause by hollowing out a House bill and substituting its own tax. “If any act violates the Origination Clause, it would seem to be the Affordable Care Act,” Randy Barnett, a Georgetown University Law School professor and leading constitutional critic of Obamacare, has written.

The Constitution’s procedural guidelines might seem like dry formalities. But such procedures were designed to safeguard the rights of the American people. And if last June’s Supreme Court decision is not to become a precedent for Congress to impose any variety of mandates on Americans under the taxing power, courts should take care to enforce democratic controls over that power.

Timothy Sandefur is a principal attorney with Pacific Legal Foundation, a public-interest legal organization that litigates for limited government, individual rights, and free enterprise. He represents small business owner Matt Sissel in challenging the constitutionality of the Affordable Care Act’s individual mandate “tax.”