When Is a Tax not a Tax?

Well, when a politically ambitious appellate judge wants to avoid getting himself in trouble.

Via Washington Monthly, SCOTUSBlog makes it clear that the Supremes might not even consider the so-called merits of the so-called constitutional questions regarding the Affordable Care Act.  That’s because of an old (but still important) federal law called the Anti-Injunction Act, which says that you can’t challenge a federal tax law’s constitutionality unless you pay the tax first.  The idea behind the act is that if you could do so, the federal government would soon be so short of revenue that it would shut down (insert joke here, but you get the idea).

Where in the world did this idea come from?  From Circuit Judge Brett Kavanaugh, a George W. Bush appointee who was associate counsel during the administration and who wrote the Starr Report.  Kavanaugh is a clear political player: he will be the next Republican President’s first Supreme Court nominee.  And so when he found that he was on the panel to consider the ACA, that gave him a real problem.  Uphold the Act, and you become anathema to conservatives.  Strike down the Act, and you become anathema to Democrats.

So what Kavanaugh did was concoct an argument that the Anti-Injunction Act prevents courts from hearing the suit until taxpayers pay the penalty, which because the Act rolls out so painfully slowly (thank you Steaming Pile of Senator Kent Conrad), won’t be until 2015.  Great!  Avoid the political problem.

But that creates a huge legal problem.  Notice what it is?

If the Anti-Injunction Act applies to penalties under the ACA, then why in the world aren’t they simply taxes, and thus easily constitutional under the Taxing Clause?  The entire argument of the plaintiffs in the ACA cases is that the federal government doesn’t have the authority to enact these penalties because of the Commerce Clause.  But if these are just taxes, there isn’t a problem.

Kavanaugh’s way out of this problem is almost laughably weak.  He insists (at footnote 36, for those of you keeping score at home) that simply because something is a tax for the purposes of the Anti-Injunction Act, that doesn’t make it a tax for the purposes of the Taxing Clause — and cites two opinions from 1922 as his justification.  One of those cases, Bailey v. Drexel Furniture, held that a tax on child labor was a “penalty” because it sought to penalize the use of child labor — which that Court had previously and infamously held, in Hamner v. Dagenhart, was unconstitutional.  Bailey has since been overruled, (as has Hamner) an outdated example of the Lochner era.  But it’s still good law according to Judge Kavanaugh.

Kavanaugh’s opinion — the focus of today’s proceedings — is an incoherent mish-mash of right-wing politics.  Later on, he insists that it is best to wait on ruling on the issue because a subsequent (sub silentio Republican) President might simply “decline to enforce” it because he sees the mandate as unconstitutional — a recollection of George Bush’s infamous “signing statement” regime.

So what we see is:

1)  We can’t consider this now because the anti-tax injunction act forbids ruling on taxes before enforcement; but

2)  That doesn’t make it a tax.  Not at all.  Because jurisprudence from the 1920’s that has been overruled says that it might not be; and

3)  A Republican president might just decided all by himself that it’s unconstitutional even if the courts say it’s fine because he’s the King President and he can do whatever he wants as long as he’s a Republican.

That, ladies and gentleman is your restrained, deferential non-activist conservative jurisprudence.  And it’s coming if Mitt Romney wins in November.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.

18 thoughts on “When Is a Tax not a Tax?”

  2. In general, I’m rather in favor of 3); I think that the President being more willing to say, “It’s unconstitutional, even if the courts will let me” would be AWESOME. (e.g., extraordinary rendition, Bradley Manning, etc.)

    1. Sam,
      You’ve committed a category error here. The “take care” clause does not tell the President to perform extraordinary renditions or torture Bradley Manning. At most, such acts have Congressional (or judicial) authorization, but this authorization merely empowers the President. It compels nothing.
      The “take care” clause only cuts in when there is some law that directs the President to do something, rather than merely empowering him. Most of the ACA is such a law.

    2. Right. But there are a couple of distinctions here. First, in the security realm no on denies that there is a zone of President discretion under the commander-in-chief clause. This would involve a validly enacted and (per the hypothetical) perfectly constitutional law directing establishing an administrative system for implementing health care reform that’s quite different. Second, it’s one thing if Congress gives the President the AUTHORITY to do something. It’s quite another if Congress enacts a law DIRECTING the President to do something. If the President simply refused to do so even after a Court ruled the law constitutional, he or she would be violating the oath to “take care to see that the laws are faithfully executed.” The President can’t do that unless it is part of his or her inherent power under Article II, and that is strongest in the national security area. Even there, it would be contested. What if Congress writes a law forbidding, say, armed forces in Afghanistan, and it’s upheld and the President says, “sorry, I think we need to go to war there?” Very dangerous. Under domestic legislation, it’s even worse.

      1. I was responding to SamChevre. Ebenezer and I are making related and complementary points.

      3. Jonathon,

        The President may think we need to go to war there, but the power to declare wars lies exclusively with Congress. I know what you’re trying to say, but this isn’t the right way to say it.

      4. “Even there, it would be contested. What if Congress writes a law forbidding, say, armed forces in Afghanistan, and it’s upheld and the President says, “sorry, I think we need to go to war there?” Very dangerous. Under domestic legislation, it’s even worse.”

        I keep thinking that there’s a specific clause granting Congress the power to declare war, along with some other powers.

  3. Is this the time to point out that Diana Motz, nobody’s idea of a right-wing judge, wrote the Fourth Circuit opinion that bounced Liberty University’s challenge to the ACA, on the same Anti-Injunction Act grounds as Kavanaugh?

    1. Yes, this would be the time to point it out.
      Just after this opinion was released I was at the Judicial Collegiality conference at USC, and wondered if one can predict when a judge will punt like this (Motz notwithstanding). It seems strategic, but I’m not aware of any research that explains it systematically.

    2. That’s a fair point, but if you think that what is animating Kavanaugh and what is animating Motz are the same things, then I’ve got a bridge in Brooklyn to sell you. In any event, the idea that something can be a “tax” for the purposes of the AIA and yet “not a tax” for the purposes of the taxing power is illogical (the reverse less so, although I think it’s a lousy argument).

      1. Put it this way: I think you have failed to make a non-circular argument that the two judges are animated by different things. And the question is not whether, as a matter of pure logic and policy, the scope of “tax” under the AIA and under the Taxing Power should be identical; the question, at the very least for a lower court judge, is whether the Supreme Court has said that the scope of “tax” should be different in the two contexts. The answer to that question is yes.

        And it doesn’t work to say that Bailey v. Drexel Furniture employs an outmoded conception of the scope of the taxing power; what Kavanaugh (and Motz as well) are pointing to is the combination of Bailey v. Drexel and Bailey v. George. The two cases together say that something can be within the AIA even if outside the taxing power; disputes over the proper scope of the taxing power doesn’t in itself change that conclusion. Now, you might say that because of the much broader conception of the taxing power that prevailed in the post-New Deal period, it’s no longer conceivable that you could have something outside the taxing power that’s in any way recognizable as a tax; but (1) that doesn’t grapple with what, in Motz’s view, is the highly formalistic character, under prevailing precedent, of tax for AIA purposes (is it in the IRC? is it collected by the IRS? then it’s a tax); (2) nor, as noted by Motz, does it deal with the Supreme Court’s reaffirmation (without dissent) _in 1974_ that the Bailey distinction between an AIA-tax and a Taxing Power-tax is still good law. See Bob Jones Univ. v. Simon, 416 US 725, 739-41 (1974).

        Look, I’m not saying that this argument is necessarily right; but you can’t just dismiss it out of hand as something cooked up by right-wing hacks relying on discredited precedents.

        1. I see your point, but I think it has less purchase than you describe. Put it this way: two judges might come to the same result for very different reasons. Or how about this: Pat Robertson is very pro Israeli settlements. Sheldon Adelson is very pro Israeli settlements. I would argue that Pat Robertson’s view stems from his conservative evangelicalism. I think it would be wrong to say, “That can’t be right, because Adelson agrees with that position and certainly he isn’t an evangelical.”

          Lots of judges have looked at this issue and only two — Kavanaugh and Motz — have taken this position. (On the Fourth Circuit, Wynn went along with Motz’ position to get a decision, but it was clear he would have gone further). You could say (as you did), “well, it’s a position, and it persuaded Motz and Kavanaugh.” Or you could say (as I did), “Kavanaugh is an unprincipled hack and is campaigning for the Supreme Court, which is buttressed by his work for Starr and for Bush, so that explains him, but I don’t know what explains Motz.” I don’t know enough about Motz to explain her position. Your position has the advantage of explaining both judges’ behavior, but my position has the advantage of giving a coherent account of what drives the next Republican appointee to the Supremes.

          We might have had this argument a few years ago about John Roberts. I would have predicted that he would become a typical partisan hack on the bench, and so he has. A more formalistic account would not have. So I still think I’m on pretty solid ground, although you are right that Motz’ position weakens it somewhat.

  4. When the legislation says it isn’t a tax, but a penalty?

    Congress routinely gets deference from the courts, when they label blatant penalties “taxes”. When they actually call a penalty a “penalty”, why shouldn’t the courts take them at their word?

    1. Fair enough, but then hacks like Kavanaugh shouldn’t therefore insist that it is a tax for AIA purposes. In any event, the real reason that the courts shouldn’t take them at the their word is that just because Congress labels something doesn’t make it that thing. If Congress did something that, say, went farther than the interstate commerce power, labeling it “regulation of interstate commerce” woudln’t save it. See, e.g., City of Boerne v. Flores. But thansk for playing.

  5. AS usual, Brett seems to be right about this silly post. Based on the questions and comments in oral argument yesterday, there is a good chance that the Court would rule 9-0 against application of the Anti-Injunction Act.

    1. I agree with that prediction, which is why it is so transparently obvious that Kavanaugh is covering his political rear end. You can say: 1) this thing is a tax, and so the AIA applies; and thus 2) it is a tax for constitutional purposes. Or you can say: 1) it isn’t a tax, and thus exceeds Congress’ power under the Taxing Clause and thus, 2) it isn’t a tax for AIA purposes. But to say 1) it is a tax for AIA purposes, but 2) isn’t a tax for Taxing Clause purposes makes virutally no sense.

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