The Breakfast Table

Supreme Court Year in Review: It was always about the tax.

That boring old tax argument was always a winner.

Rob Donnelly.

Dear Emily, Dahlia, Walter, and Judge Posner:

Even before the ACA was passed in March of 2010, I had been arguing to anyone who would listen that the simplest way to justify the individual mandate was as a tax under the General Welfare Clause. I continued to make the arguments in front of any number of audiences, most of whom just wanted to hear about broccoli.

The case’s ultimate result did not surprise me. If the Commerce Clause argument couldn’t command five votes, the tax power argument was always waiting in the wings. As soon as members of the court saw the individual mandate as a tax, they would almost certainly hold it constitutional. The biggest challenge was getting five of them to see it as a tax.

There were a number of obstacles standing in the way of that conclusion. The first was the strategy of the mandate opponents, who, from the outset, wanted to fight exclusively about the scope of the Commerce Clause. The second was President Obama and the Democrats in Congress, who were desperate to avoid any suggestion that they had created new taxes. The third was the Tax Anti-Injunction Act. If the mandate were a tax under the meaning of the TAIA, that would prevent any court from hearing a challenge until around 2015. The mandate opponents were not the only ones interested in a quick resolution: The Obama Administration needed to implement the many different moving parts of the Affordable Care Act in the states, and it didn’t want to see the act laboring under a cloud of suspicion for many years.

The fourth obstacle, frankly, was that the tax argument seemed like a fifth wheel. Any federal district judge who thought the mandate was a constitutional tax probably also thought it was constitutional under the commerce power, and any federal district judge who thought it wasn’t constitutional under the commerce power probably wasn’t going to uphold it as a tax.

As a result of all these factors, almost nobody wanted to think about the mandate as a tax. (Well almost nobody. The Justice Department dutifully included the tax-power argument throughout the litigation, and I was part of an amicus team who worked specifically on tax power issues.) Depending on their ideological priors, federal courts seemed eager either to uphold the ACA or strike it down. As a result, almost all of them concluded that the mandate was not a tax—thus avoiding the obstacle of the Tax Anti-Injunction Act—and letting them move on to what everybody thought was the main event, the debate over the Commerce Clause.

Most of the coverage in the press focused on the Commerce Clause, too. Debate after debate focused relentlessly on only one ground for upholding the mandate. For the supporters of the ACA, this was pretty much like fighting a wily opponent with one hand tied behind your back. Even if you win, you are going to get bruised and battered in the process.

Essentially, the entire debate over the Affordable Care Act was played out on the turf most favorable to mandate opponents. And with an entire political party and its associated media behind the opponents’ arguments, conventional wisdom quickly changed to reflect the growing view that the act would fall.

Once the case made its way to the Supreme Court, however, the calculations changed.  Here it was entirely possible that either Chief Justice John Roberts or Justice Anthony Kennedy, or both, might accept the tax-power argument as a lifeline because they couldn’t stomach the Commerce Clause argument. Solicitor General Donald Verrilli—improperly maligned by people who should have known better—carefully organized both the government’s briefs and his oral argument to make the tax-power option clearly available to Kennedy and Roberts.

At that point, the question became  whether either justice would form a five-person coalition with the liberals. Roberts ultimately did so, but his motivations are complicated.

Roberts’ opinion on the tax-power issue is straightforward doctrinally. But he also got to create a five-person majority (with the four dissenters) sticking a knife in the back of the Commerce Clause argument. He got to play John Marshall in Marbury v. Madison, giving the Democrats a bottom-line political result they wanted while vindicating conservative arguments against the mandate in his opinion.

Subject to important qualifications noted below, this may turn out to be yet another exercise in symbolic federalism. If the argument about the Commerce Clause isn’t dicta, it will have very little effect on what Congress does going forward, because Congress can now use the tax power instead of the commerce power. The specter of vegetables still haunts us. We may be safe from broccoli mandates, but we are not safe from broccoli taxes.   

Second, Roberts opened up a brand new field for constitutional litigation about conditional federal spending programs like Medicaid. The decision says that when Congress threatens to withhold funding for program A unless states agree to program B, this can be coercive if the costs of exit from A and the reliance interest in A are too high. 

In this case, Roberts argued that Old Medicaid, which protects mostly disabled and the elderly poor, is a different program than New Medicaid, which reaches everyone up to 133 percent of the poverty line. Congress cannot say to the states: “Participate in New Medicaid or we’ll pull funding from Old Medicaid.”

The logic of this argument depends on a court knowing that Old Medicaid is really different in kind and not merely in degree from New Medicaid. Why Congress isn’t the best judge of whether the two programs are different in kind is a mystery to me. (It would also probably come as a surprise to Congress, which had changed the program’s eligibility requirements before.)

It’s that conclusion that will cause lots of work for lawyers going forward. (And it’s also great for authors of constitutional law textbooks like yours truly!) I will be interested to see if the same logic is used to challenge changes in conditional spending programs that conservatives favor. (Consider the Welfare Reform Act of 1996 as an example. Indeed, perhaps there are parts of the proposed Paul Ryan budget that might be vulnerable, although I haven’t inspected it closely enough to tell.)

I’m also wondering what becomes of laws that threaten to withhold federal funding from all of a state’s operations if the state refuses to acquiesce on a federal policy that only affects a small or distinct aspect of its operations. Is that akin to removing funding from program A because you won’t play ball on program B? The Solomon Amendment, I seem to recall, withheld funding for state and private universities if their law schools did not admit military recruiters on an equal basis with other recruiters. Does the logic of this case apply to that? Does it apply to civil rights laws like Title VI and Title IX? To be sure, these cases seem distinguishable in several ways, and there is language in the various opinions that suggests that the principle will not be extended so far. Yet Chief Justice Roberts has opened the proverbial can of worms, and nobody knows where those worms will squiggle once they are loosed upon the world.

It’s hard to predict what will flow from this opinion doctrinally. If President Obama manages to appoint a majority of liberal justices in his second term, most of the innovations in this case will be forgotten.  The new spending clause doctrines will be confined, and the Commerce Clause language treated as dicta or made practically irrelevant. If Mitt Romney wins, on the other hand, he may be able to appoint a strong conservative majority to work with Chief Justice Roberts. Then, in hindsight, Roberts’ seemingly compromised opinion won’t be very compromised at all. His apparent flip-flop won’t be understood as a change of mind. Instead, his opinion may turn out, in hindsight, to be the beginning of an important transformation in constitutional law. What will happen can’t be deduced from the four corners of these documents. It will depend on the Supreme Court appointments of the next decade.