Taxing Thoughts from Justice Sotomayor

Two years after its enactment, certain pundits still don't understand the basics of ObamaCare.  At The Atlantic on March 29, Robert Wright opined

If the Supreme Court rules against President Obama on the constitutionality of the Affordable Care Act, there's a sense in which he'll deserve it. After all, there was an easy way for him to make the act impervious to this fate, and it wouldn't have entailed a single change in how the program works.

This fix came up in Wednesday's Supreme Court argument when Justice Sotomayor showed that she is indeed a "wise Latina woman" by suggesting the following: Charge every American a health care tax and then hand out exemptions to those who buy insurance. In other words: Just rename the financial "penalty" imposed on those who don't buy insurance. If you call it a tax instead of a penalty, then the "mandate" to own insurance won't be a mandate, and the constitutionality question won't arise.

Mr. Wright is a mite confused.  To begin with, the arguments on the "individual mandate" were heard on Tuesday, not Wednesday.  What Mr. Wright is probably referencing is this exchange, found on page 58 of the transcript:

JUSTICE SOTOMAYOR: Could we have an exemption? Could the government say, everybody pays a shared health care responsibility payment to offset all the money that we are forced to spend on health care, we the government; but, anybody who has an insurance policy is exempt from that tax? Could the government do that?

MR. CLEMENT: The government might be able to do that. I think it might raise some issues about whether or not that would be a valid exercise of the taxing power.

JUSTICE SOTOMAYOR: Under what theory wouldn't it be?

MR. CLEMENT: Well, I do think that --

JUSTICE SOTOMAYOR: We get tax credits for having solar-powered homes. We get tax credits for using fuel efficient cars. Why couldn't we get a tax credit for having health insurance and saving the government from caring for us.

First, the government chose to take over the task of "caring for us"; it's not "forced" to do so.  However, before worrying about tax exemptions and tax credits, we might consider the tax itself.  The tax Sotomayor is proposing sounds like capitation.  Capitation is the ultimate in tax "fairness"; everyone pays, and everyone pays an equal amount.  It's a "head tax."

The Constitution provides for capitation in Article I, Section 9 (4).  But the problem with Sotomayor's tax is that if it were to replace the "individual mandate" and become the central funding mechanism for ObamaCare, it would need to be fairly large: about the size of a health insurance policy, premiums for which have recently averaged out to "$5,429 for single coverage and $15,073 for family coverage."

By replacing ObamaCare's current funding mechanism with an actual tax (where revenue goes into the coffers of the U.S. Treasury), Sotomayor would be exposing millions of Americans to the largest tax hike of their lives.  Her new tax would be more than what many Americans pay in income and payroll taxes combined.  Many Americans wouldn't be able to pay Sotomayor's tax.  If it were large enough to fully fund ObamaCare and if it hit "everybody," Sotomayor's tax would make millions of Americans into tax outlaws.

If Sotomayor's tax were not as large as an insurance premium, then ObamaCare would continue to suffer from the same fatal disease: underfunding.  ObamaCare, as currently configured, is underfunded because the penalty for not buying health insurance is much too low.  The maximum penalty of $2,085 per family is not even close to offsetting the price of a private health insurance policy.  If Congress would raise the penalty for noncompliance up to the price of insurance, then Americans could take ObamaCare more seriously, but it would be even more unpopular.

Of course, Justice Sotomayor may not have intended that her tax be a capitation; she may not truly mean "everybody."  Maybe her exemptions were intended not only for those buying health insurance, but also for the poor and the Amish, whom she may feel shouldn't have to pay as much, or at all.  In which case, the underfunding of ObamaCare would continue.

Mr. Wright is also confused when he contends that Sotomayor's tax "wouldn't have entailed a single change in how the program works."  But Sotomayor's tax would work the opposite of how ObamaCare works.  With Sotomayor, everyone is taxed unless he or she buys insurance.  Whereas with ObamaCare, everyone buys insurance or pays a penalty.  Wright seems to think the difficulties of ObamaCare are merely semantic -- "just rename" the penalty a tax, and our problems are solved.

Mr. Wright might be right, however, about the "constitutionality question" -- if ObamaCare were funded by a dedicated tax like Sotomayor's, its constitutionality probably wouldn't be questioned.

So many pundits are so invested in Obama succeeding that they can't bring themselves to think about the implications of his programs: if ObamaCare were funded by Sotomayor's tax, what would the government do with those who don't pay it?  In America you may be able to get away with murdering your wife, but don't even think about not paying your taxes.

Jon N. Hall is a programmer/analyst from Kansas City.

If you experience technical problems, please write to