How Chief Justice Rube Goldberg Saved the Individual Mandate

By Dan Kervick

Imagine that the US Congress someday decides that as a matter of national security it is imperative for each American adult to be in possession of a smartphone.  (Perhaps they believe that we might all need to receive an important text message from Homeland Security in the event of a major terrorist attack.)   Suppose also that at the time of this decision there are 100 million American adults still without smartphones, and that the average smartphone costs $200.

According to the Supreme Court of the United States, here is a procedure Congress is permitted to follow:

Step 1: The government levies a one-time $200 tax on everyone who does not possess a smartphone.

Step 2: The government purchases 100 million smartphones from companies of its choosing.

Step 3: The government delivers the 100 million smartphones to the people without smartphones.

But here is something Congress is not permitted to do:

Step 1: The government mandates that everyone without a smartphone buys a smartphone from the company of their own choosing.

Step 2:  Nothing else.   All done.

Now isn’t this restriction ridiculous?  For one thing, the extra steps in the first procedure add pointless bureaucratic costs to accomplish the very same end result accomplished by the second procedure.  Also, in the second procedure, American adults without a smartphone get to choose their own smartphone company.   But if the first procedure is followed, the government buys the phones for them from the companies the government chooses.  What sensible country would permit the former procedure but prohibit the latter?

Suppose we don’t want to make everyone buy a smartphone, but wish to impose that requirement on only those who can afford to purchase a smartphone themselves, while providing smartphones for the less advantaged at public expense.  Suppose Congress decides that 80% of American adults without smartphones should buy their own smartphones, while the remaining 20% should have phones purchased for them by the government.   Following the first procedure, Congress can then impose a one-time $250 tax on the 80% of Americans without smartphones who can afford to buy them.  It thus raises the same revenue as in the first scenario: $20 billion dollars.  It then purchases smartphones for all 100 million adults who don’t have one.

Now back to the real world.  The Affordable Care Act contains a provision mandating that people who can afford health insurance purchase it, and it also contains a provision imposing a financial penalty on those who fail to obey the mandate.  Chief Justice Roberts has cast the deciding vote to uphold the Affordable Care Act mandate, but did so by reinterpreting the penalty as a conditional tax and the mandate as an optional act.   Now I am personally glad that the health care mandate was upheld.  But I think Roberts’s reasoning is somewhat ridiculous. In his effort to strike a Solomonic balance and make the court look apolitical, he only succeeded in making it look absurd.

First, why not just say that the mandate itself is covered under the Tax Clause? Compelling some person to buy a product – to tender payment to some third party in exchange for a good or service tendered in return – is functionally the same thing as compelling them to pay a tax to the government while the government purchases the good or service, and then delivers it to the person who paid the tax.  Since the latter combination of actions is clearly permissible, then it seems to me that compelling the citizen to buy the product directly is constitutionally justifiable simply as a means of executing in a more economically efficient and less wasteful way a manifestly permissible, but more complex action.

Instead, as I understand his decision, Roberts decided to say that the penalty – the “shared responsibility payment” – can be viewed as a tax, and was thereby forced to engage in a much more extensive rational reconstruction of the statute. The mandate is re-interpreted as an optional act, and the penalty is then reinterpreted as a conditional tax levied on people who do not perform that optional act. This makes mincemeat of the plain language of the statute, which is replete with terms like “mandate” and “penalty”.  But Roberts argued that the plain meaning of Congress’s intent is less important in this case than the functional effect of the act, because “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.”

But how far does this technique of functional reconstruction go?  Suppose the legislature had passed a law requiring each American to pay a tithe to a church, and to pay the government a non-tithing penalty if they fail to pay the tithe.  Would Roberts apply the same principles of construction and say that Congress had left tithing optional, while reinterpreting the non-tithing penalty as a tax?

Suppose Congress had imposed a law prohibiting people from entering a nuclear weapons installation, and had attached a mandatory five-year jail sentence to the act as the penalty for trespassing on the facility. It would be natural to say that the legislature had forbade or prohibited entering the installation, and that the jail sentence was a punishment for violating that prohibition.  Now suppose a sitting jurist comes along and issues a ruling that reinterprets the decision to enter or refrain from entering the nuclear facility as an optional choice, rather than as an action the refraining from which had been mandated by the government.  And then suppose the jurist upheld the jail sentence as a “time tax” imposed on those who choose the option of entering the facility. Wouldn’t we agree this is a preposterous interpretation and defense of the statute?  But isn’t this reasoning very close to Roberts’s reasoning?

I wish that Roberts had just swallowed another few morsels of conservative pride, embraced some common sense, and recognized that a democratic government that has the power to tax money from citizens, and purchase things for citizens, ought to be recognized as having the option of skipping the bureaucratic middleman and requiring the citizen to make the purchase directly.

In any case, Congress now has a road map – convoluted though it may be – for enacting constitutional workarounds for any purchasing mandates it wishes to enact.  All it needs to do is impose a tax on people for the amount it would otherwise compel them to spend on the good in question.  Then Congress can purchase that good and deliver it to the people who would have received it anyway if they purchased it themselves in compliance with a straightforward mandate.

Now here’s one last step: suppose Congress designates the sellers of the good in question as official tax collection agents, and also as delivery agents for the good.   Referring back to our smartphone example, imagine the government has pre-purchased a large quantity of smartphones from Apple stores around the country, but has told the stores to hold the phones on site, rather than deliver them to any government office.  The stores have invoiced the government, but the government has not yet paid.  The government has also pre-authorized the delivery from the store of government-owned smartphones to people who pay their smartphone tax at the store.  A citizen in need of the smartphone then walks into an Apple store.  Instead of purchasing a smartphone, they pay the smartphone tax to the government-designated agent – that is, to the store owner.   The store then delivers to that taxpayer, by hand, a government-owned smartphone that has been stored on the premises.  By pre-arrangement with the Federal government, the store uses the $200 tax it just collected to credit off part of the invoice it has sent to the government, and the government credits the store as having duly delivered the tax revenues they were authorized to collect.

Mission accomplished.  Mandate enacted, but appropriately gussied up using the Roberts formula to look like a tax.  The Republic marches on.