Go Forth and Sin [Tax] No More: Important Tax Provisions, and their Hazards, in the Patient Protection and Affordable Care Act

Maximilian Held, Go Forth and Sin [Tax] No More: Important Tax Provisions, and their Hazards, in the Patient Protection and Affordable Care Act, 46 Gonz. L. Rev. 717 (2011)

[PDF] [Westlaw]     [LexisNexis] %CODE1%

I. Introduction

No tax law article would be complete without a reference to Benjamin Franklin’s vexatiously cited quote regarding the certainty of death and taxes.[1] Had this great Founding Father lived to modern times, perhaps he would list sin, and the taxation thereof, among the hopelessly inevitable. Social engineering by way of taxation is certainly nothing new. Taxes have long been imposed against activities deemed to conflict with certain governmental interests.[2] Deductions, meanwhile, serve to encourage government-favored conduct.[3] While requiring slovenly people to pay more taxes than the virtuous is superficially alluring, it can dangerously interfere with taxation’s revenue-raising purpose.[4] The recent gargantuan healthcare overhaul[5] arguably represents the nadir of such sin taxes, albeit a highly unconventional example, replete with provisions calculated to penalize poor choices. The tax laws therein are not only intrusive (and possibly unconstitutional), they are extremely expensive to enforce.[6] The purpose of this article is to tersely showcase some of the legislation’s most significant tax provisions and the constitutional and political controversy surrounding each. This article argues that even if these provisions pass constitutional muster, their impracticality, inefficiency, and potential for abuse illustrate the difficulties in the taxation-based engineering of society. Finally, this article suggests that litigation surrounding the Patient Protection and Affordable Care Act (PPACA) may ultimately provide much needed guidance concerning the limits, if any, of Congress’s taxation power.[7]%CODE2%

II. Background

Before the tax provisions contained in the new healthcare legislation can be properly dissected, it is necessary to first provide some insight regarding the details of its enactment as well as an overview of some of the laws therein that do not involve taxes. Furthermore, understanding the debate surrounding the constitutionality of the new legislation’s tax measures demands a brief synopsis of the federal government’s tax power itself.

A. The Patient Protection and Affordable Care Act

In his presidential campaign, Barack Obama placed healthcare reform high on his agenda.[8] Less than a year following his inauguration, the Senate passed a healthcare reform bill, the PPACA, on December 24, 2009.[9] Following the death of Senator Edward Kennedy, Massachusetts voters elected Republican Scott Brown to the vacant Senate seat, largely motivated by pervading discontent with the impending healthcare reform.[10] The Democrats, deprived of their Senate supermajority, faced the possibility of a Republican filibuster of further healthcare legislation.[11] This sharply diminished the likelihood that the Senate would approve the House bill, the more ambitious Affordable Health Care for America Act (AHCAA).[12] As a result, the House dropped the AHCAA, opting to pass the Senate’s bill with amendments via reconciliation.[13] On March 21, 2010, the House passed the Health Care and Education Reconciliation Act of 2010 (HCERA), modestly amending the PPACA and paving the way for final passage in the House and Senate just four days later.[14] The President signed the PPACA into law on March 23, 2010[15] and the HCERA on March 30 the following week.[16]

B. Significant Non-tax Provisions of the PPACA

Aside from the tax policies discussed later in this article,[17] the reforms introduced in this sweeping 2,700-page bill[18] include, most notably, new legislation to prohibit insurance companies from denying coverage to individuals based on preexisting conditions.[19] The PPACA also allows children to stay on their parents’ policies until reaching twenty-six years of age, sets up a long-term care insurance program, creates exchanges where individuals can “shop” for health insurance, and expands the Medicaid eligibility threshold to 133% of the poverty line.[20] The Act also prevents insurance companies from revoking policies based on errors made by the insured when applying for coverage.[21] Insurers are also estopped from imposing lifetime coverage limits on their customers.[22] In addition, the Act offers grants to the states for the purpose of assisting consumers in obtaining coverage, filing appeals and complaints against their insurers, and understanding their rights with regard to health insurance.[23] Furthermore, insurance companies must now waive deductibles and co-payments for certain preventive services such as colonoscopies and mammograms.[24] The aforementioned provisions are by no means exhaustive in listing the non-tax provisions of this enormous piece of legislation. Rather, they provide a mere glimpse into the Act’s aggressiveness in reforming the health insurance industry.

C. The Taxation Power, Generally

This article’s discussion of tax provisions of the PPACA[25] is also far from exhaustive. The analysis herein only concerns a handful of enactments that have proven particularly controversial. With the exceptions of increased Medicare taxes for wealthy taxpayers and the expanded 1099 reporting requirements discussed infra, the Act’s most contentious tax provisions share a common theme: they involve the imposition of taxes as a means of discouraging certain behavior. Accordingly, properly dissecting them merits a brief synopsis of the taxation power, including sin taxes, and the corresponding litigation thereof.

The extensive breadth of Congress’s taxation power is evident in the language of the Constitution itself.[26] Like all enumerated powers, however, the power to tax is subject to important limitations.[27] The first of these constraints, and possibly the most controversial, is the requirement that all “direct taxes” be apportioned.[28] Apportionment requires that the entire tax liability be distributed among the states in proportion to their respective populations.[29] Professor Erik M. Jensen explains the concept succinctly, “If a state has one-tenth of the national population, its residents should pay one-tenth of the total direct taxes.”[30] An indirect tax, meanwhile, need only be uniformly applied against the states, with no states subjected to higher rates than others.[31]

Whether a tax is direct or indirect, however, is considerably more vague.[32] Professor Jensen suggests a simple means of distinguishing them: direct taxes are imposed upon the taxpayer himself, whereas indirect taxes are imposed vicariously via someone else, who subsequently passes the cost of these taxes to the indirectly-taxed party.[33] Such an explanation would handily apply to most ordinary sin taxes, which are excise taxes assessed on manufacturers or vendors who sell repugnant goods and services, and pass these taxes on to their customers through higher prices.[34] Despite the convenience of Professor Jensen’s theory, the lack of a consensus among scholars indicates uncertainty as to how courts will separate direct taxes from indirect taxes in future cases.[35]

III. Controversial Tax Policies Within the PPACA

Aside from its considerable revamping of America’s healthcare industry, the PPACA is also noteworthy for conscripting the IRS to carry out many of its reforms. Consequently, some of the Act’s most contentious provisions have been incorporated into the Internal Revenue Code. Exercising the taxation power for a purpose so far removed from the raising of revenue, as explained infra, invokes an assortment of practical and constitutional pitfalls, further calling into question the defensibility of tax-based social engineering.

A. The Individual and Employer Mandates

Quite possibly the cornerstone of the PPACA is its requirement that individuals and employers purchase health insurance. Congress delegated the task of enforcing these monumental provisions to the IRS.[36] In turn, longstanding concerns have been reinvigorated as to the boundaries, if any, of the federal government’s ability to tax its citizens. The following material highlights political criticisms and constitutional challenges to the mandates along with the retorts of the Act’s defenders.

1. Summary of the Individual Mandate

Beginning in 2013, Section 5000A of the Internal Revenue Code requires taxpayers to purchase or retain health insurance that qualifies as “minimum essential coverage” and to report this information on their federal tax returns.[37] “Minimum essential coverage” under Section 5000A includes government-provided health insurance as well as policies offered in an applicable “market within a State” whether purchased by individuals or their employers.[38] The Code, however, grants exceptions to individuals with qualifying religious objections, illegal aliens, and the incarcerated.[39] A taxpayer is also exempted if the “annual premium for the lowest cost bronze plan available in the individual market” in the applicable state (or the taxpayer’s “required contribution” to an employer-sponsored policy) exceeds eight percent of the taxpayer’s annual household income.[40] The penalty for noncompliance, meanwhile, is the greater of a “flat dollar amount”[41] or a percentage of the taxpayer’s income.[42]

As an added incentive, the PPACA enacted a premium assistance tax credit.[43] In brief, this credit equals the lesser of the monthly premiums paid to a qualifying health plan or the difference between the premiums “for the applicable second lowest cost silver plan” and a specified percentage of the taxpayer’s household income.[44] In order to be eligible, however, a taxpayer’s household income must fall on or between 100 percent and 400 percent of the applicable poverty line based on the size of the taxpayer’s family.[45] Furthermore, the credit only applies to taxpayers who are not eligible for an employer-sponsored health plan that covers at least sixty percent of “total allowed costs” and requires an employee contribution of less than 9.5 percent of the taxpayer’s household income.[46]

2. Summary of the Employer Mandate

Starting in 2014, “applicable large employer[s]” must provide “minimum essential coverage” to each full-time employee who is eligible for the premium assistance tax credit or a “cost-sharing reduction,”[47] and the dependents thereof, under an employer-provided plan.[48] Failure to comply with the employer mandate will result in a penalty equal to one-twelfth of $3,000 for each month multiplied by the applicable number of full-time employees.[49] The Code limits the definition of “applicable large employer” to those with a work force in excess of fifty full-time employees, not including temp-seasonals.[50] In order to encourage employers to provide affordable health insurance, the Code further specifies that large employers can also violate the mandate by offering employer-sponsored coverage that fails to render full-time employees ineligible for the premium assistance tax credit or cost-sharing reduction.[51]

3. Practical Considerations

The PPACA’s insurance mandates are designed to offset the costs faced by insurers as a result of the new requirements to insure individuals with preexisting conditions and prevent consumers from abusing the new protections against those with preexisting conditions.[52] Practically, however, the consequences might not be so favorable. Many of the IRS’s best tax enforcement mechanisms are unavailable with regard to the insurance mandates.[53] Specifically, Congress has “defanged” the IRS of its ability to seek criminal sanctions and impose liens and levy upon property.[54] This waiver effectively cabins enforcement to subtracting penalty amounts from taxpayers’ refunds.[55] Thus, only individuals due a refund are vulnerable; whereas self-employed taxpayers, whose wages are not typically withheld, are largely immune.[56] But the practical difficulties facing the individual mandate do not stop with inadequate enforcement. Republican lawmakers estimate that 16,500 additional IRS agents will be needed to properly enforce the mandates, an expense not mentioned in the Congressional Budget Office’s reported ten billion dollars in associated administrative expenses.[57] Worse yet, when a need for health insurance arises, nothing in the PPACA estops taxpayers who ignore the mandate from taking advantage of the new requirement imposed upon insurers to accept applicants with preexisting conditions.[58] In short, the mandate is not only defanged, it is toothless.

4. Constitutional Challenges

Practical difficulties aside, the insurance mandates also face constitutional scrutiny.[59] Litigation has thus far yielded mixed results, summarized infra. Yet to be formally decided, however, is the constitutionality of the individual mandate under Congress’s taxation power, the analysis of which may prove critical on appeal.

a. Virginia ex rel. Cuccinelli v. Sebelius

In Virginia ex rel. Cuccinelli v. Sebelius, the United States District Court for the Eastern District of Virginia granted summary judgment in favor of the Virginia Attorney General, striking the individual mandate from the PPACA’s remaining enactments.[60] The court rejected the federal government’s promulgated justifications under the Commerce Clause, the Necessary and Proper Clause, and the taxation power of the General Welfare Clause.[61]

Central to the court’s General Welfare Clause analysis was its conclusion that Congress had failed to affirmatively exercise its taxation power when it enacted Section 5000A.[62] The court took note of the “unequivocal denials” by Congress and the President that the mandate was a tax.[63] The express statutory language, “there is hereby imposed on the taxpayer a penalty” also helped to convince the court.[64] Moreover, in the PPACA’s legislative history, early drafts referred to the consequences of noncompliance to be a “tax,” but the amended version replaced the word “tax” with “penalty” in the context of the individual mandate.[65] Other tax-related provisions of the amended PPACA, however, did not receive such a substitution.[66] Accordingly, the court inferred the swapping of words as a “conscious and deliberate” manifestation of legislative intent to utilize the Commerce Clause power rather than the taxation power.[67] The court was unimpressed with the federal government’s argument that placing the mandate under the “miscellaneous excise taxes” category of the Internal Revenue Code evinced an intent to utilize the taxing power; it cited I.R.C. Section 7806(b), which expressly clarifies that placement of a legislative enactment within the tax code is not an implication of congressional intent to impose a tax.[68]

Also persuasive was Virginia’s contention that the mandate, in substance, operated as a penalty as opposed to a tax because perfect compliance therewith would result in no additional revenue.[69] The court considered the consequence of noncompliance to have “become ‘a mere penalty with characteristics of regulation and punishment’” rather than a tax.[70] Because it was enacted as a penalty “in form and substance,” the court concluded that the mandate could only be vindicated if tied to a constitutionally enumerated power aside from the General Welfare Clause.[71] Since the government’s attempts to present Section 5000A as a valid exercise of the commerce power failed, it could not be salvaged under the taxation power.[72]

b. Florida ex rel. Bondi v. U.S. Dep’t of Health & Human Servs.

In Florida ex rel. Bondi v. United States Department of Health & Human Services, the United States District Court for the Northern District of Florida similarly struck down the mandate for reasons analogous to those of the Cuccinelli court.[73] Of even greater significance, however, was the Bondi court’s ruling that the mandate was inseverable from the other provisions of the PPACA, thus rendering the entire act unconstitutional.[74] In so deciding, the court acknowledged the seriousness of undoing an entire act in addressing one unconstitutional provision therein.[75] The court employed a two-part test established under Supreme Court jurisprudence as a means of determining severability: first, whether other provisions within an act can continue to function in the absence of the unconstitutional portion and, second, whether Congress would have even enacted the surrounding provisions in the absence of the nullified part.[76] Despite recognizing the satisfaction of the first prong, the court did not believe that the PPACA would have been passed but for the inclusion of the individual mandate.[77] Critically absent from the Act was a severability clause, which expresses the intent to allow all remaining provisions to stand should any one be stricken.[78] More importantly, an earlier version of the bill did indeed contain a severability clause, which was conspicuously removed from the final enactment.[79] The final nail in the coffin of severability was the government’s concession that the individual mandate was essential to the success of the PPACA’s other health insurance reforms.[80]

The significance of the Bondi decision lies not only in its evisceration of the individual mandate but also in its possible elimination of other politically divisive PPACA provisions that, viewed individually, are perfectly constitutional.[81] The Act’s detractors would nonetheless be well advised to keep the champagne corked for the time being. Despite containing an assortment of consistently-articulated maxims,[82] the Supreme Court’s severability jurisprudence provides inadequate guidance.[83] Though difficult to predict, the tipping point against severability of the individual mandate may have been crossed due to the PPACA’s sheer enormity. Considering the paramountcy of universal participation in the insurance market to the success of other PPACA provisions, particularly the ban on denying coverage based on preexisting conditions,[84] one could reasonably argue that Congress would not have passed the remainder of the Act without the individual mandate.

c. The Taxation Power Debate

Since the Cuccinelli and Bondi courts did not believe that the taxation power had been exercised,[85] neither decided whether Congress could have passed an individual mandate through such means. From the sidelines, however, tax scholars have robustly debated the extent of the tax power’s limits.[86] Of course, one can do little more than speculate as to the likely outcome of litigating these sundry theories, especially in light of the historically unprecedented nature of a provision that taxes the failure to engage in commercial activity.[87] Briefly surveying these arguments, however, may prove worthwhile in the event that a court does decide whether the mandate is defensible under the tax power.

First, it is useful to dissect whether the individual mandate is a direct tax subject to apportionment requirements.[88] Although the matter is far from resolved, for the sake of brevity, this analysis will assume that apportionment is still required for direct taxes other than income taxes.[89] Courts commonly recognize three taxes as direct: capitation taxes (i.e. a fixed tax upon mere existence), taxes on real property, and taxes on personal property.[90] Some tax law scholars such as Professor Steven J. Willis and Nakku Chung assert that the mandate is a capitation or other direct tax because it taxes the failure to act, which resembles existence as opposed to an affirmative activity.[91] Other opponents of the mandate doubt that it is likely to qualify as a capitation tax because the amount of the penalty is not fixed, but rather varies based on a variety of factors.[92] One of these opponents tenders a particularly novel argument suggesting that the mandate imposes “a negative tax on property – i.e., the non-ownership of property” (health insurance) and is hence a direct tax.[93] Counterarguments to subjecting the mandate penalty to apportionment focus primarily on challenging the continued viability of the apportionment requirement itself.[94]

Another controversial issue is whether the mandate, if it is an indirect tax, satisfies the uniformity requirement of Article I, Section 8.[95] Critics of the mandate suggest that the mandate is not uniform because the penalty amount differs among the states based on their respective insurance markets.[96] This contention, however, is manifestly incorrect since Section 5000A(c) sets the penalty amount based on a taxpayer’s income or “an amount equal to the national average premium for qualified health plans which have a bronze level of coverage.”[97] At this point, the strongest arguments against the uniformity analysis simply assert that the mandate is not an excise tax at all because it cannot be passed to other parties.[98] Even widely recognized excise taxes that cast doubt upon this definition, such as Social Security and the estate tax, differ starkly from the individual mandate: the former tax actions such as employment and assets transfers, respectively, while the latter taxes complete inactivity.[99] Professor Edward D. Kleinbard takes exception to characterizing the mandate as a direct tax, proposing that the mandate actually taxes the activity of “self-insurance.”[100] Others counter, however, that treating inaction as an affirmative activity could open a Pandora’s box of government intrusion (e.g. taxing failure to floss as “flossing self-insurance”).[101] Extending excise taxes to inactivity would arguably take sin taxes to an unprecedented new level of ridiculousness.

A final matter frequently debated is whether the mandate is actually an income tax under the Sixteenth Amendment and, thus, not subject to apportionment or uniformity requirements.[102] Supporters of the health insurance mandate postulate that it functions as an income tax because it exempts low-income taxpayers and takes other taxpayers’ incomes into account when calculating the penalty for noncompliance.[103] The contrary position asserts that income taxes must tax actual income (i.e. “accessions to wealth, clearly realized, over which the taxpayer has complete dominion”).[104] Moreover, taxing income according to a particular characteristic of the earner that shares no relationship with the income in question does not mean that the characteristic resulted in such income.[105] Granting broad judicial leniency to any tax that just-so-happens to take taxpayers’ incomes into consideration would invite unimaginable abuse.[106]

As mentioned previously, such an anomalous example of taxation cannot be found in any Supreme Court decision. Many legal scholars find no fault in extending the tax power into this terra incognita, viewing it as a largely plenary power inhibited by little more than the political process.[107] Strong policy considerations, however, caution against recognizing the individual mandate as a valid tax. While Professor Kleinbard is correct in noting the reluctance of the judiciary to strike down taxes,[108] lines must ultimately be drawn to prevent taxation as a ruse for circumventing constitutionally enumerated limits to the legislative power. Fortunately, the boundaries need not be completely arbitrary. Instead, traditional constraints such as apportionment and income realization, as discussed above, can and should be applied in order to strike down laws such as the individual mandate that erroneously purport to exercise the tax power. On a final note, Professor Kleinbard uses a creative analogy to kosher cuisine in reminding his readers that a far more aggressive health overhaul (e.g. government-run healthcare or a public option) would be constitutional and, thus, the more modest PPACA should not be objectionable.[109] Assuming arguendo that such provisions would indeed be constitutional, this logic nevertheless overlooks a critical point: attempts to pass a heftier reform bill would have met with more serious political consequences. The President might have failed, as he did with the public option, to garner the support of enough members of Congress for passage. Even if passage were successful, both Congress and the President would face even tougher reelection challenges because of these controversial reforms. While undoubtedly less onerous than a single-payer system, the individual mandate is still quite intrusive. It stands to reason that such shrewd legislative maneuvering is precisely what the constitutional limitations to the taxation power were designed to prevent.

B. Other Contentious Tax Provisions

The PPACA’s health insurance mandates are, by no means, the only controversial tax enactments therein. The following is a non-exhaustive list of new revisions to the tax code that have already created a stir among the American public. While no serious constitutional challenges are likely to arise therefrom, the formidable practical challenges in carrying out these provisions should, ideally, give pause to future attempts to tax for purposes outside the raising of revenue.

1. Form 1099 Reporting Requirements

After December 31, 2011, Internal Revenue Code Section 6041 will require all taxpayers engaged in a trade or business to file a Form 1099 with regard to any person or business with whom the taxpayer purchases goods totaling $600 or more over the course of the taxable year.[110] Needless to say, this will be a significant change to Section 6041, which currently only requires Forms 1099 to be filed for payments amounting to $600 or higher made for “rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income.”[111] This amendment was designed to increase revenues (a projected $17.1 billion over ten years) to pay for healthcare reform by decreasing taxpayers’ opportunities to inflate their reported deductions and also hindering taxpayers’ efforts to conceal income.[112]

While there are no apparent constitutional problems with the new reporting requirement, practical difficulties with both compliance and enforcement are obvious, prompting criticism from Republicans and Democrats alike.[113] Senator Mike Johanns of Nebraska, for example, has estimated that taxpayers would face a “2,000 percent increase” in required 1099 filings.[114] According to Taxpayer Advocate Service figures, 40 million businesses, including roughly 26 million sole proprietorships, will suffer the new reporting burden and have to keep careful records of purchases of goods from various vendors.[115]

The IRS’s hardship is also likely to be severe. The heightened reporting requirements will, in turn, increase the volume of material that the Service must process far beyond what its current manpower and budget can handle.[116] The added administrative costs necessary to meet this challenge have not been figured into the $17.1 billion that the amendment was designed to raise.[117] Worse yet, an overburdened IRS is more likely to assess erroneous penalties that will be expensive to correct and possibly result in greater turmoil for taxpayers.[118]

Despite widespread discontent, efforts to repeal the new reporting requirement have thus far met with failure. A proposal by Senator Johanns to rescind the amendment to Section 6041 was defeated in September of 2010.[119] Democratic Senator Bill Nelson attempted to minimize the provision’s harmful effects by increasing the reporting threshold to aggregated annual purchases of $5,000 and exempting businesses with less than twenty-four employees.[120] Indeed, this proposal also resulted in defeat.[121] The most recent challenge to the requirement has been put forth by Democratic Senator Max Baucus.[122] Senator Baucus has promised to introduce legislation repealing the change to Section 6041 in its entirety in recognition of businesses’ “need to focus their efforts on creating good-paying jobs—not filing paperwork.”[123] It remains to be seen as to when this legislation will reach the floor and whether it will garner ample bipartisan support to pass.

2. Taxation of “Cadillac Plans”

Beginning in 2018, a special tax will be imposed against certain “high cost” employer-sponsored health insurance plans.[124] This provision taxes at forty percent whatever “excess benefit” is derived therefrom.[125] In general, the “excess benefit” is the difference between the annual cost of an employer-sponsored policy and $10,200 (for “self-only coverage”) or $27,500 (for coverage that is not “self-only”).[126] Insurance is considered “self-only” unless the plan covers one or more beneficiaries, other than the employee himself, and the coverage does not favor or disfavor the employee over other beneficiaries.[127] Cadillac plans purchased by self-employed taxpayers also fall within the tax’s reach.[128] The $10,200 threshold, however, is raised by $1,650 for “employees engaged in a high risk profession,” limited to law enforcement, fire, ambulance/paramedic response, longshore work, agriculture, construction, forestry, and fishing.[129] Likewise, the $27,500 limit for coverage that does not meet the “self-only” definition is elevated by $3,450.[130] Identical threshold increases also apply to “qualified retiree[s],” defined to include taxpayers age fifty-five and older, ineligible for Medicare, and “receiving coverage by reason of being a retiree.”[131]

This tax was enacted largely for the purpose of incentivizing employees to choose lower-cost plans that require greater out-of-pocket contribution and, accordingly, encourage medical frugality among employees and their medical service providers.[132] One practical drawback, however, is the troubling likelihood that employers who replace Cadillac plans with more modestly-priced employer-sponsored coverage will not increase wages by the cost difference.[133] Also bothersome is the lengthy delay between the tax’s enactment date and its effective date, which has been criticized as illustrating “the palpable reluctance of President Obama and the members of the 111th Congress to force their constituents to confront the tax on ‘Cadillac’ plans any time soon.”[134]

To date, there is no widely-publicized challenge to the Cadillac plan tax, nor is such a contest hypothetically plausible. Unlike the individual mandate, Section 4980I’s statutory text and its legislative history evince an unequivocal intent to impose an “excise tax.”[135] Since this tax cannot reasonably be argued to be a capitation tax or other recognized direct tax, and it fits within the commonly-accepted definitions of an indirect tax, it need only be uniform.[136] Regardless of whether the Cadillac plan represents wise tax policy, it is indeed uniformly applied to the states and, thus, passes constitutional muster.[137]

III. Higher Medicare Taxes for the Wealthy

In order to raise revenue as a means of offsetting the new healthcare plan’s costs, higher Medicare taxes will be imposed upon wealthy taxpayers beginning in 2013.[138] The new legislation will amend Section 3101(b) to include an additional tax of 0.9 percent on all income in excess of $200,000 or $250,000 for joint filers.[139] The year 2013 will also usher in a 3.8 percent Medicare tax on investment income in excess of $250,000 for joint filers, $125,000 for married filing separately, and $200,000 “in any other case.”[140] While such a tax undoubtedly invites political controversy, it fits squarely within America’s progressive tax system, the criticism of which is beyond the scope of this article.

IV. The Tanning Tax

Section 5000B of the Internal Revenue Code imposes a ten percent excise tax on “indoor tanning service[s].”[141] Unlike most tax provisions of the PPACA, the tanning tax took effect just months after passage, reaching full force as of July 1, 2010.[142] This seemingly run-of-the-mill sin tax nonetheless poses some unique difficulties.[143] The Treasury Regulations, for instance, exempt membership payments to health clubs that provide access to tanning beds from Section 5000B’s reach.[144] Tanning salons have sought to take advantage of this loophole by reincorporating as fitness clubs.[145] Furthermore, tanning service providers subject to Section 5000B must file quarterly a Form 720,[146] estimated to take approximately thirty-six hours to finish.[147]

The tanning tax seems to comfortably fit the mold of a garden-variety excise tax.[148] An interesting, albeit quixotic, constitutional concern has been mentioned nonetheless.[149] The argument seemingly extends Adarand Constructors, Inc. v. Pena to the federal government’s taxation power, subjecting racial classifications therein to strict scrutiny analysis.[150] According to this theory, Section 5000B constitutes a racial classification because it targets an activity undertaken almost exclusively by a specific race.[151] Critics of this idea are quick to point out Supreme Court jurisprudence, which requires equal protection challenges to prove that the law in question was enacted with discriminatory intent rather than merely resulting in disparate impact.[152]

While correct, this observation does not necessarily derail a constitutional challenge to the tanning tax. Discriminatory intent can arguably be inferred from the white race’s lopsided vulnerability to various skin cancers widely believed to result from excessive ultraviolet exposure.[153] A worthwhile point could be made that the new tax was enacted for the purpose of discouraging whites from tanning due to their unique susceptibility to the harmful effects therefrom. Logically, few other plausible reasons could have prompted this legislation since non-whites rarely suffer deleterious consequences from tanning, nor are they likely to even patronize tanning salons. Even if a court agreed with this analysis, however, Section 5000B would probably be upheld as a rare example of a racial classification surviving strict scrutiny. A compelling government interest likely exists in the prevention of skin diseases, in whatever races they commonly manifest themselves. The legislation is also narrowly tailored toward achieving this interest since tanning is neither banned nor restricted but merely taxed at a non-prohibitive rate. Overall, while this potential challenge to the tanning tax is superficially intriguing, it is unlikely to result in victory.

IV. Conclusion

If nothing else, this summary of the tax provisions contained in the PPACA should illustrate the deleterious effects of a constitutionally unlimited taxation power. If left unchecked, the tax power can be used not only to discourage unhealthy behavior, such as tanning, but also to affirmatively require Americans to engage in certain economic activity (e.g. the purchase of health insurance). Given that “[a]n unlimited power to tax involves, necessarily, a power to destroy,”[154] an unfettered tax power could effectively give Congress license to regulate far beyond its enumerated constitutional boundaries through cunningly-drafted Tax Code enactments that have little, if any, effect on raising revenue. The absurdity of this result, alone, should cast suspicion on any assertions that the drafters desired a plenary taxation power.

Ultimately, the Court may simply uphold the Eastern District of Virginia’s opinion in Cuccinelli that the taxation power was not intended to be exercised. Alternatively, it might overturn the opinion by holding that Congress had validly utilized its Commerce Clause power. Either avenue would render unnecessary any resolution of the taxation power issues plaguing the PPACA. If, however, the Court decides that the taxation power was indeed exercised and that the Commerce Clause power was exceeded, it will have a unique opportunity to conclusively define the limitations, if any on the tax power. Whether or not the Court’s holding articulates an agreeable result, Americans should be grateful if the conflict is put to rest. Once the People fully comprehend the extent of Congress’s tax power, they will know whether new limitations must be imposed via the amendment process. Acquiring these answers is quite possibly more important than the status of the PPACA itself.

Finally, this article hopefully sheds light on the logistical problems that can result from excessive use of taxes for the purpose of regulation rather than the raising of funds. Even when no Constitutional roadblocks prevent this practice, politicians and their electorate should ponder returning taxes to their revenue-raising role.


* Candidate for J.D. 2011, Gonzaga University School of Law. I wish to thank my wife, Erin Held, who has provided inspiration and companionship, worked tirelessly to enable me to pursue my dreams, and given me a son. You are wonderful!

[1]. Letter from Benjamin Franklin to M. Le Roy (Nov. 13, 1789), in 10 The Works of Benjamin Franklin 410 (Jared Sparks ed., Boston, Hilliard, Gray, & Co. 1840) (“[N]othing can be said to be certain, except death and taxes.”).

[2]. See, e.g., I.R.C. § 5701 (West 2002 & Supp. 2010) (imposing excise taxes on the sale of tobacco products); I.R.C. § 5001 (2006) (imposing excise taxes on the sale of alcoholic beverages).

[3]. See, e.g., I.R.C. § 170 (West 2002 & Supp. 2010) (deductions for charitable contributions), amended by Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296.

[4]. See Roger Russell, Former Commissioner Blasts IRS’s Social Mission, AccountingToday.com (Oct. 15, 2010), http://accountingtoday.com/news/Former-Commissioner-Blasts-IRS-Social-Mission-55981-1.html. Former IRS Commissioner Mortimer Caplin argues that the IRS’s “social mission” has exceeded the service’s capabilities. Id. (“[This social mission] tends to move the IRS from its basic responsibilities, which is to help raise the revenue of this country . . . . IRS personnel are people with accounting, economic, and investigative abilities. The new programs require them to carry out other functions for which they’re not qualified.”).

[5]. Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (to be codified as amended in scattered U.S.C. titles).

[6]. See J.P. Freire, 16,500 More IRS Agents Needed to Enforce Obamacare, Wash. Examiner (Mar. 18, 2010, 2:00 AM), http://washingtonexaminer.com/blogs/beltway-confidential/16500-more-irs-agents-needed-enforce-obamacare.

[7]. In the interest of brevity, the Commerce Clause challenges to the healthcare legislation will not be discussed.

[8]. See, e.g., The First Presidential Debate, N.Y. Times, Sept. 26, 2008, http://elections.nytimes.com/2008/president/debates/transcripts/first-presidential-debate.html (“I make sure that we have a health care system that allows for everyone to have basic coverage.”).

[9]. See Roll Call Votes, 111th Congress – 1st Session, U.S Senate, http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=111&session=1&vote=00396 (last visited Jan. 22, 2010).

[10]. See Scott Brown Wins Mass. Senate Race, N.Y. Post, Jan. 19, 2010, http://nypost.com/p/news/national/polls_closed_in_mass_senate_race_fl4whM3SjQ41TYEvwx3jbJ.

[11]. See id.

[12]. See Carrie Budoff Brown & Glenn Thrush, Pelosi Steeled W.H. for Health Push, Politico (Mar. 20, 2010, 8:55 PM), http://politico.com/news/stories/0310/34753.html. Among the most controversial provisions in the AHCAA were a proposed “public option” government-run insurance plan, an additional surcharge on taxpayers making more than $500,000 annually (or $1,000,000 for married joint filers), and a national insurance exchange. See Health-Care Reform: How the Bills Stack up, Wash. Post, Dec. 24, 2009, http://washingtonpost.com/wp-srv/special/nation/health/compare-health-plans-2009/.

[13]. See Sheryl Gay Stolberg & Robert Pear, Obama Calls for ‘up or down Vote’ on Health Care Bill, N.Y. Times, Mar. 3, 2010, available at http://nytimes.com/2010/03/04/

[14]. See Final Vote Results for Roll Call 194, Office of the Clerk, U.S. House of Representatives, http://clerk.house.gov/evs/2010/roll194.xml (last visited Jan. 22, 2011); Roll Call Votes 111th Congress – 2nd Session, U.S. Senate, http://senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=111&session=2&vote=00105 (last visited Jan. 22, 2011); see also Breaking – Reconciliation Bill Posted, Politico (Mar. 18, 2010), http://politico.com/livepulse/0310/BREAKING__

[15]. See Sheryl Gay Stolberg & Robert Pear, Obama Signs Health Care Overhaul Bill, with a Flourish, N.Y. Times, Mar. 23, 2010, http://www.nytimes.com/2010/

[16]. See Obama Signs Health Care Reconciliation Bill, Seattle Times, Mar. 30, 2010, http://seattletimes.nwsource.com/html/politics/2011476026_apusobamapreview.html.

[17]. See infra Part III.

[18]. See Nina Owcharenko, Op-Ed., Obamacare Won’t Hold down Costs, Wash. Times, Nov. 10, 2010, http://washingtontimes.com/news/2010/nov/10/owcharenko-obamacare-wont-hold-down-costs/.

[19]. See 42 U.S.C.A. § 300gg-1 (West 2003 & Supp. 2010); 26 C.F.R. § 54.9815-2704T (2010); 29 C.F.R. § 2590.715-2704 (2010); 45 C.F.R. § 147.108 (2010).

[20]. What’s in the Bill, Wall St. J., Mar. 22, 2010, http://online.wsj.com/article/

[21]. See Provisions of the Affordable Care Act, by Year, HealthCare.gov, http://healthcare.gov/law/about/order/byyear.html (last visited Jan. 29, 2011).

[22]. See id.

[23]. See id.

[24]. See id.

[25]. See infra Part III.

[26]. See U.S. Const. art. I, § 8, cl. 1. (“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;”); U.S. Const. amend. XVI (“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census of enumeration.”).

[27]. See U.S. Const. art. I, § 9, cl. 4 (“No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”); U.S. Const. art. I, § 2, cl. 3 (“Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.”); U.S. Const. art. I § 8, cl. 1 (requiring that certain taxes be applied uniformly among the states).

[28]. See U.S. Const. art. I, § 2, cl. 3. For a spirited historical argument that tax apportionment is a relic of America’s slavery era, and the notorious three-fifths compromise thereunder, see Bruce Ackerman, Taxation and the Constitution, 99 Colum. L. Rev. 1 (1999). Professor Ackerman further argues that Section 2 of the Fourteenth Amendment, in revoking the three-fifths compromise, tacitly jettisoned the accompanying tax apportionment requirement. See id. at 27. Not all scholars, however, agree with Professor Ackerman’s analysis. See generally Joseph M. Dodge, What Federal Taxes are Subject to the Rule of Apportionment under the Constitution?, 11 U. Pa. J. Const. L. 839 (2009). It is interesting to note, however, that the Sixteenth Amendment was enacted in response to the Court’s two decisions in Pollock v. Farmers’ Loan & Trust Co., namely (Pollock I), 157 U.S. 429 (1895), and (Pollock II), 158 U.S. 601 (1895), both of which invalidated a federal income tax as an unapportioned direct tax. The text of the Sixteenth Amendment specifically mentions the apportionment requirement in providing an exception to it for federal income taxes, thus acknowledging its continued existence. Had the drafters intended to eliminate the apportionment requirement altogether, they should have specifically done so. Based on this plain text, I believe that the apportionment requirement remains valid.

[29]. See Erik M. Jensen, The Apportionment of “Direct Taxes”: Are Consumption Taxes Constitutional?, 97 Colum. L. Rev. 2334, 2341 (1997).

[30]. Id.

[31]. See U.S. Const. art. I, § 8, cl. 1; see also The Head Money Cases, 112 U.S. 580, 594 (1884) (“[A] tax is uniform when it operates with the same force and effect in every place where the subject of it is found.”).

[32]. See Spreckels Sugar Ref. Co. v. McClain, 192 U.S. 397, 413 (1904) (“[D]istinctions [are] often very difficult to be expressed in words, between taxes that are direct and those which are to be regarded simply as excises.”); see also Dodge, supra note 28, at 842-43 (proposing a “‘middle of the road’” between the extremes espoused by Professor Jensen and Professor Ackerman). Those who favor Ackerman’s reasoning do not believe that a distinction between direct and indirect taxation is even necessary since the Fourteenth Amendment allegedly removed the apportionment requirement. See Ackerman, supra note 28, at 28.

[33]. See Jensen, supra note 29, at 2393-94 (quoting Thomas M. Cooley, A Treatise on the Law of Taxation 5 (Chicago, Callaghan & Co. 1876).

[34]. See Kang Beng Hoe, The Role of Excise as a Sin Tax, Star Online (Jan. 19, 2010), http://biz.thestar.com.my/news/story.asp?file=/2010/1/19/business/5496890&sec=business.

[35]. For a handy flow chart useful in analyzing the constitutionality of a tax, see Ruth Mason, Just How Broad is the Tax Power?, Jotwell (Dec. 1, 2010, 7:30 AM), http://tax.jotwell.com/just-how-broad-is-the-tax-power/.

[36]. 42 U.S.C.A. § 18092 (West Supp. 2010).

[37]. I.R.C. § 5000A(a) (West Supp. 2010).

[38]. I.R.C. § 5000A(f)(1)(A), (C).

[39]. See I.R.C. § 5000A(d)(2)-(4).

[40]. I.R.C. § 5000A(e)(1)(A), (B)(ii). Members of Indian tribes are also exempt as are individuals whom the Secretary of Health and Human Services considers to be suffering “hardship” in acquiring coverage. I.R.C. § 5000A(e)(3), (5).

[41]. I.R.C. § 5000A(c)(2)(A). This amount is phased in at $95 for the year 2014, raised to $325 in 2015, increased to $695 in 2016, and adjusted for inflation each year thereafter. See I.R.C. § 5000A(c)(3)(B), (D).

[42]. See I.R.C. § 5000A(c)(2)(B). The percentage of income is also phased in, beginning at one percent in 2014, increasing to two percent in 2015, and increasing to 2.5 percent for all subsequent years. See I.R.C. § 5000A(c)(2)(B).

[43]. See I.R.C. § 36B(a) (West 2011).

[44]. I.R.C. § 36B(b)(2).

[45]. See I.R.C. § 36B(c)(1)(A).

[46]. I.R.C. § 36B(c)(2)(C)(i)-(ii).

[47]. For information regarding the cost-sharing reduction, see Patient Protection and Affordable Care Act, Pub. L. No. 111-148, §§ 1402, 1411, 124 Stat. 119, 220-31 (2010) (to be codified at 42 U.S.C. §§ 18071, 18081).

[48]. See I.R.C. § 4980H(a) (West 2010).

[49]. See I.R.C. § 4980H(b)(1)(B).

[50]. I.R.C. § 4980H(c)(2)(A), (B)(i)(II).

[51]. See I.R.C. § 4980H(b)(1).

[52]. See Randy Barnett, White House Concedes Individual Mandate is Not Severable, The Volokh Conspiracy (Dec. 9, 2010, 6:42 PM), http://volokh.com/2010/12/09/white-house-concedes-individual-mandate-is-not-severable/.

[53]. See I.R.C. § 5000A(g)(2) (West Supp. 2010); Sandra Block, IRS Lacks Clout to Enforce Mandatory Health Insurance, USA Today, April 30, 2010, http://www.usatoday.com/money/perfi/insurance/2010-04-29-healthirs28_CV_N.htm.

[54]. Block, supra note 53.

[55]. See id.

[56]. See id.

[57]. See id.

[58]. See 42 U.S.C.A. § 300gg-1(a) (West 2003 & Supp. 2010).

[59]. The first successful challenge to the individual mandate’s constitutionality was decided on December 13, 2010, in Virginia ex rel. Cuccinelli v. Sebelius, 728 F. Supp. 2d 768 (E.D. Va. 2010).

[60]. See id. at 790. The court, however, refused Virginia’s request to strike all of the PPACA’s provisions as a result of the individual mandate’s unconstitutionality. See id.

[61]. See id. at 788. In brief, the court refused to recognize a power to require participation in interstate commerce under Commerce Clause jurisprudence and, in turn, denied refuge under the Necessary and Proper Clause since the individual mandate was not enacted in accordance with a constitutionally enumerated power. See id. at 782. But see Liberty Univ., Inc. v. Geithner, No. 6:10-cv-00015-nkm, 2010 WL 4860299, at *11 (W.D. Va. Nov. 30, 2010) (upholding the individual mandate under Congress’s Commerce Clause powers). Since the Liberty Univ. court regarded the mandate as a valid exercise of the Commerce Clause power, it did not address its constitutionality under the taxation power. See id.

[62]. See Cuccinelli, 728 F. Supp. 2d at 786.

[63]. Id.; see also Jonathan H. Adler, Administration Now Says Individual Mandate is a “Tax”, The Volokh Conspiracy (July 18, 2010, 12:26 AM), http://volokh.com/2010/07/18/administration-now-says-individual-mandate-is-atax/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+volokh%2Fmainfeed+%28The+Volokh+Conspiracy%29&utm_content=Netvibes; George Stephanopoulos, Obama: Mandate is Not a Tax, ABC News (Sept. 20, 2009, 9:00 AM), http://blogs.abcnews.com/george/2009/09/obama-mandate-is-not-atax.html.

[64]. Cuccinelli, 728 F. Supp. 2d at 786 (emphasis added) (quoting I.R.C. § 5000A(b)(1) (West Supp. 2010)).

[65]. Id. at 787.

[66]. See id.

[67]. Id. (“‘[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.’” (quoting Duncan v. Walker, 533 U.S. 167, 173 (2001))).

[68]. Id. (citing I.R.C. § 7806(b) (2006)).

[69]. See id. at 785.

[70]. Id. at 787 (quoting Dep’t of Revenue v. Kurth Ranch, 511 U.S. 767, 779 (1994)).

[71]. Id. at 788. (citing Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 393 (1940); United States v. Butler, 297 U.S. 1, 61 (1936); The Child Labor Tax Case, 259 U.S. 20, 38 (1922)). The court disregarded scholarly criticism of the cited cases by noting that all cases remained good law even though they had not been utilized in some time. See id. (“[T]his absence appears to be more a product of the unprecedented nature of the legislation under review than an abandonment of established principles.”).

[72]. See id.

[73]. See Florida ex rel Bondi v. U.S. Dep’t of Health & Human Servs., No. 3:10-cv-91-RV/EMT, 2011 WL 285683, at *33, *41 n.4 (N.D. Fla. Jan. 31, 2011); cf. supra notes 61-63 and accompanying text.

[74]. See Bondi, 2011 WL 285683, at *40. The Cuccinelli court, on the other hand, had held the mandate to be severable from the rest of the PPACA. See 728 F. Supp. 2d at 790. Its analysis, however, was cursory, focusing on the difficulty of accurately determining whether Congress would have passed the other provisions had the mandate not been included in the Act. See id. at 789.

[75]. See Bondi, 2011 WL 285683, at *39.

[76]. See id. at *34-35 (citing Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3161-62 (2010)).

[77]. See id. at *35.

[78]. See id. The court, however, acknowledged that mere absence of a severability clause does not necessarily preclude severability. See id. (citing New York v. United States, 505 U.S. 144, 186 (1992)).

[79]. See id. at *36 (“‘Where Congress includes [particular] language in an earlier version of a bill but deletes it prior to enactment, it may be presumed that the [omitted provision] was not intended.’” (quoting Russello v. United States, 464 U.S. 16, 23-24 (1983))). The court found the lack of a severability clause to be especially revealing in light of several state statutes passed prior to the PPACA condemning the individual mandate and purporting to exempt certain states’ citizens from its reach. See id.

[80]. See id. The court regarded the insurance reform provisions to be the crux of the Act and the key impetus for its passage. See id.

[81]. See id. at *34, *39; see also infra Part III.B.

[82]. See Bondi, 2011 WL 285683, at *37-38 (quoting Ayotte v. Planned Parenthood of N. New Eng., 546 U.S. 320, 329-30 (2006)).

[83]. See id. at *38; see also Kevin C. Walsh, Partial Unconstitutionality, 85 N.Y.U. L. Rev. 738, 750 (2010) (citing Mark L. Movsesian, Severability in Statutes and Contracts, 30 Ga. L. Rev. 41, 68-73 (1995)) (discussing the diverse and conflicting array of criticisms launched against the Supreme Court including both excessive and insufficient reliance on legislative intent); John Copeland Nagle, Severability, 72 N.C. L. Rev. 203, 211 (1993) (criticizing the severability doctrine as speculative, non-textualist, and haphazard).

[84]. See Barnett supra note 52 and accompanying text.

[85]. See Bondi, 2011 WL 285683, at *41 n.4. The Bondi court observed that all courts to address the matter, including those that have upheld the mandate, have refused to recognize the mandate as a tax. See id. (citing Goudy-Bachman v. U.S. Dep’t. of Health & Human Servs., No. 1:10-CV-763, 2011 WL 223010, at *9-12 (M.D. Pa. Jan. 24, 2011); Virginia ex rel. Cuccinelli v. Sebelius, 728 F. Supp. 2d 768, 786-88 (E.D. Va. 2010); Liberty Univ., Inc. v. Geithner, No. 6:10-cv-00015-nkm, 2010 WL 4860299, at *9-11 (W.D. Va. Nov. 30, 2010); U.S. Citizens Assoc. v. Sebelius, No. 5:10 CV 1065, 2010 WL 4947043, at *5 (N.D. Ohio Nov. 22, 2010); Thomas More Law Ctr. v. Obama, 720 F. Supp. 2d 882, 890-91 (E.D. Mich. 2010)).

[86]. See, e.g., Steven J. Willis & Nakku Chung, Constitutional Decapitation and Healthcare, 128 Tax Notes 169 (2010); Calvin H. Johnson, Healthcare Penalty Need not be Apportioned among the States, 128 Tax Notes 335 (2010); Edward D. Kleinbard, Constitutional Kreplach, 128 Tax Notes 755 (2010); Steven J. Willis & Nakku Chung, Oy Yes, the Healthcare Penalty is Unconstitutional, 129 Tax Notes 725 (2010); Erik M. Jensen, The Individual Mandate and the Taxing Power (Case W. Reserve Univ. Sch. of Law, Working Paper No. 2010-33, 2010), available at http://ssrn.com/abstract=1683462.

[87]. See Cuccinelli, 728 F. Supp. 2d at 788 n.13 (“If allowed to stand as a tax, the Minimum Essential Coverage Provision would be the only tax in U.S. history to be levied directly on individuals for their failure to affirmatively engage in activity mandated by the government not specifically delineated in the Constitution.”).

[88]. See supra Part II.C.

[89]. For a brief summary of various arguments and counterarguments concerning the apportionment requirement, see supra note 28 and accompanying text.

[90]. See, e.g., Murphy v. IRS, 493 F.3d 170, 181 (D.C. Cir. 2007).

[91]. See Willis & Chung, Constitutional Decapitation and Healthcare, supra note 86; see also Jensen, supra note 86, at 30-38.

[92]. See I.R.C. § 5000A(c) (West Supp. 2010); see also Memorandum of the Cato Institute et al. as Amici Curiae Supporting Plaintiff’s Opposition to Defendant’s Motion to Dismiss at 23-27 Virginia ex rel. Cuccinelli v. Sebelius, 728 F. Supp. 2d 768 (E.D. Va. 2010) (No. 3:10-cv-00188-HEH), 2010 WL 2661287 [hereinafter Cato Institute Memorandum].

[93]. Robert A. Levy, The Taxing Power of Obamacare, Nat’l Rev. Online, Apr. 20, 2010, http://www.nationalreview.com/articles/229577/taxing-power-obamacare/robert-levy?

[94]. See Johnson, supra note 86, at 335; cf. Brian Galle, Conditional Taxation and the Constitutionality of Health Care Reform, 120 Yale L.J. Online 27, 32 (2010) (arguing that the mandate cannot be a direct tax because it is not capable of being fairly apportioned).

[95]. See U.S. Const. art. I, § 8, cl. 1.

[96]. See Willis & Chung, Oy Yes, the Healthcare Penalty is Unconstitutional, supra note 86, at 731 (citing Joel Alicea, Obamacare and the Excise Tax, Nat’l Rev. Online, Sept. 1, 2010, http://www.nationalreview.com/articles/245270/obamacare-and-excise-tax-joel-alicea?page=1.

[97]. I.R.C. 5000A(c)(B) (emphasis added).

[98]. See generally Willis & Chung, Constitutional Decapitation and Healthcare, supra note 86.

[99]. See Cato Institute Memorandum, supra note 92, at 26, 28.

[100]. See Kleinbard, supra note 86, at 761-62.

[101]. See Willis & Chung, Oy Yes, the Healthcare Penalty is Unconstitutional, supra note 86, at 727.

[102]. See U.S. Const. amend. XVI.

[103]. See Kleinbard, supra note 86, at 760 (citing I.R.C. § 5000A(c)(2)(B), (e)(1) (West Supp. 2010)); see also Galle, supra note 94, at 31.

[104]. Willis & Chung, Oy Yes, the Healthcare Penalty is Unconstitutional, supra note 86, at 729-30.

[105]. See id.

[106]. See id. at 730. Willis and Chung illustrate an interesting hypothetical where, under Kleinbard’s broad recognition of income taxes, Congress could salvage an unconstitutional direct tax based on eye color by simply creating a new income tax filing status based on the disfavored eye color and taxing such individuals at a higher rate. See id.

[107]. See Kleinbard, supra note 86, at 757 (“[T]he principal remedy for harsh, oppressive, or stupid tax legislation is to vote the rascals out.”).

[108]. See id. at 757-59.

[109]. See id. at 762 (Kleinbard first recounts a fable about a boy’s bizarre disdain for kreplach dumplings, despite having no qualms about the individual ingredients. He then criticizes mandate’s detractors as comparably irrational, noting that the constitutionality of full-fledged government-run healthcare cannot reasonably be compromised simply by adding individual rights and removing the government as an insurer).

[110]. See Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 9006(b)‑(c), 124 Stat. 119, 855 (2010) (to be codified as amended at 26 U.S.C. § 6041) (adding “amounts in consideration for property” to the existing statutory text).

[111]. I.R.C. § 6041(a) (2006).

[112]. See David S. Hilzenrath, Health-Care Law May Pose Compliance Issues for IRS, Taxpayers, Wash. Post, July 9, 2010, http://www.washingtonpost.com/wp-dyn/content/
article/2010/07/08/AR2010070806092.html; see also Robb Mandelbaum, Will Congress Ease 1099 Requirements in Health Care Bill?, N.Y. Times, (Aug. 9, 2010, 1:43 PM), http://boss.blogs.nytimes.com/2010/08/09/will-congress-ease-1099-requirements-in-health-care-bill/.

[113]. See Guy Benson, Democrats Torpedo Repeal of Harmful Obamacare Provision, Townhall.com, Sept. 15, 2010, http://townhall.com/columnists/GuyBenson/2010/09/15/

[114]. Id.

[115]. See National Taxpayer Advocate Submits Mid-Year Report to Congress; Identifies Priority Challenges and Issues for Upcoming Year, Irs.gov, July 7, 2010, http://www.irs.gov/newsroom/article/0,,id=225270,00.html.

[116]. See Hilzenrath, supra note 112.

[117]. See id.

[118]. See id.

[119]. See Benson, supra note 113.

[120]. See id.

[121]. See id.

[122]. See Trish Turner, Key Democrat Moves to Repeal Part of Health Care Bill, Fox News (Nov. 12, 2010), http://politics.blogs.foxnews.com/2010/11/12/key-democrat-moves-repeal-part-health-care-bill.

[123]. Id.

[124]. I.R.C. § 4980I (West Supp. 2010).

[125]. I.R.C. § 4980I(a)(2).

[126]. I.R.C. § 4980I(b)(1), (3)(C)(i).

[127]. I.R.C. § 4980I(f)(1).

[128]. See I.R.C. § 4980I(d)(1)(D).

[129]. I.R.C. § 4980I(b)(3)(C)(iv)(I), (f)(3).

[130]. I.R.C. § 4980I(b)(3)(C)(iv)(II).

[131]. I.R.C. § 4980I(b)(3)(C)(iv), (f)(2).

[132]. See Editorial, Cadillac Plans, N.Y. Times, Jan. 16, 2010, http://www.nytimes.com/2010/01/16/opinion/16sat1.html.

[133]. See id.

[134]. Edward A. Zelinsky, The Health-Related Tax Provisions of PPACA and HCERA: Contingent, Complex, Incremental and Lacking Cost Controls 9 (Benjamin N. Cardozo Sch. of Law, Jacob Burns Inst. for Advanced Legal Studies, Working Paper No. 301, 2010), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1633556.

[135]. Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 9001(a), 124 Stat. 119, 847-53 (2010) (to be codified at 26 U.S.C. § 4980I).

[136]. See supra Part II.C.

[137]. See id.

[138]. See Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 9015(a), 124 Stat. 119, 870-71 (2010) (to be codified at 26 U.S.C. §§ 3101-3102); see also Peter Grier, Health Care Reform Bill 101: Who Will Pay for Reform?, Christian Sci. Monitor, Mar. 21, 2010, http://www.csmonitor.com/USA/Politics/2010/0321/Health-care-reform-bill-101-Who-will-pay-for-reform.

[139]. § 9015(a)(1)(D), 124 Stat. at 870-71 (establishing a “0.5 percent” rate); Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 10906(a), 124 Stat. 119, 1020 (2010) (to be codified as amended at 26 U.S.C. § 3101) (increasing this rate to “0.9 percent”).

[140]. Healthcare and Education Reconciliation Act, Pub. L. No. 111-152, § 1402(a)(1), 124 Stat. 1029, 1060-61 (2010) (to be codified at 26 U.S.C. § 1411).

[141]. I.R.C. § 5000B(a) (West Supp. 2010). Section 5000B(b) defines “indoor tanning service” as the use of “any electronic product designed to incorporate 1 or more ultraviolet lamps and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning,” but does not include “phototherapy” undertaken “by a licensed medical professional.” I.R.C. § 5000B(b).

[142]. See Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 10907(d), 124 Stat. 119, 1021 (to be codified at 26 U.S.C. § 5000B).

[143]. See Democrats Against ObamaCare: The 1099 Repeal Fiasco, and the Snooki Tax, Wall St. J., Aug. 7, 2010, http://online.wsj.com/article/SB10001424052748703999304

[144]. See 26 C.F.R. § 49.5000B-1T(b)(3) (2010). 26 C.F.R. § 49.5000B-1T(c)(4) defines “qualified physical fitness facilit[ies]” as those “[i]n which the predominant business or activity is providing facilities, equipment, and services to its members for purposes of exercise and physical fitness” based on an all-facts-and-circumstances inquiry.

[145]. See Democrats Against ObamaCare: The 1099 Repeal Fiasco, and the Snooki Tax, supra note 143.

[146]. See Internal Revenue Serv., Instructions for Form 720 (2010), available at http://www.irs.gov/pub/irs-pdf/i720.pdf.

[147]. See Democrats Against ObamaCare:The 1099 Repeal Fiasco, and the Snooki Tax, supra note 143.

[148]. See supra Part II.C.

[149]. N.C. Aizenman, ‘Tan Tax’ Discussions Include Allegations of Reverse Racism, Wash. Post, July 8, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/07/

[150]. 515 U.S. 200, 227 (1995) (applying the Equal Protection Clause of the Fourteenth Amendment to racial classifications by the federal government).

[151]. See Aizenman, supra note 149.

[152]. See id.

[153]. See Dep’t of Health & Human Serv., Ctrs. for Disease Control & Prevention, U.S. Cancer Statistics, Cancer Types Grouped by Race & Ethnicity (2007), available at http://www.apps.nccd.cdc.gov/uscs/cancersbyraceandethnicity.aspx. According to the report, whites harbor nearly six times the odds of acquiring melanoma skin cancer than American Indians or Hispanics. See id. Whites are also approximately twenty-six times more likely to suffer from this disease than blacks or Asians/Pacific Islanders. See id.

[154]. McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 327 (1819).

Comments are closed.