How John Roberts saved Obamacare by ignoring Obama’s ‘tax’ argument

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The Supreme Court has upheld the vast majority of President Obama's health care plan, with Chief Justice John Roberts joining the liberal wing of the court to declare the individual mandate a constitutionally permissible tax.

I spoke briefly with Michael Graetz, a professor of tax law at Columbia Law School, who said he wasn't particularly surprised by the outcome, which was actually predicated on a rejection of the administration's characterization of its own health care plan.

"The taxing power is historically quite broad," he said.

Graetz explained the decision this way: "The basic story of course is that there is a mandate, and the penalty for not complying with a mandate is the tax. So you think of it as you either pay the tax, or you buy health insurance.

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"So it's sort of a pay-or-play scheme, is the way the majority has interpreted it. And the taxing power certainly would allow that. I mean we pay taxes for Social Security. Taxes are mandated. They're not voluntary. And the Congress put this in the tax law, in the internal revenue code, so it's not shocking this is what they did." 

In declaring the mandate a tax, Roberts broke with President Obama, who had publicly insisted the law didn't constitute a tax.

Roberts declared that Congress could not force citizens to buy health insurance under the Commerce Clause—agreeing with the four conservative justices on that point—but that the Commerce Clause ultimately didn't matter, because the mandate fell under Congress's power to levy taxes.

Graetz said it wasn't a matter of Roberts', or any of the justices' ideology; it's simply that tax law has always been broadly interpreted.

"Look it's clear that if you structure something like Social Security, that you have to pay in and you get certain benefits, it's a tax," he said. "Or Medicare, part A, the hospital insurance. We all pay in and then at a certain age, we're eligible for the benefits.

"That's clearly constitutional. No one says that's not constitutional. That was upheld long ago. The only question is whether because they didn't call it a tax, that would mean it wasn't a tax," he said. "Obviously Justice Roberts didn't think what the president called it had any legal effect."