BREAKING. Donald Trump Renounces His Own Tax Plan
Showing that courage of his convictions that has led him to take numerous positions on every issue, Donald Trump has officially abandoned his own tax planRead More »
[from the diaries]
Supreme Court oral arguments on the Affordable Care Act begin Monday. We can expect a decision either in June or October. I predict June. What will it be? I’ll go out on a limb and predict Unconstitutional by 5-4. My confidence level is under 60%. I would not be surprised at Unconstitutional, 6-3, but the odds are less than 1%. Constitutional at 6-3 has odds, in my opinion, at 30%.
The Court faces five main arguments:
- The case is premature: either no one has standing or the Anti-injunction Act (AIA) precludes it.
- The Mandate violates the Commerce Clause (CC).
- The Act violates the 10th Amendment in general or through Medicaid issues.
- The Penalty violates the taxing power.
- The Penalty enforcement facially denies due process.
The latter two are issues I briefed to the Court. My brief is here.
Contrary to what most people believe, the government must prevail on all five issues. See my discussion here. Opponents must prevail on issue number 1 and at least one other. My predictions and short analysis follow:
1. Standing/AIA: odds of this being the decision basis: less than 5%. It would mean we have no decision, at least to the extent the AIA or lack of standing claim applied. Clearly individual plaintiffs can show current injury and thus standing; however, they have a problem with the AIA. The Court can overcome the AIA in four ways.
2. Commerce Clause: odds of this being the deciding basis: 85%. Odds unconstitutional: 55%. This is the most dangerous area. Striking the Act on CC grounds would be groundbreaking and could foretell overruling Wickard, which would be a good thing. Upholding the Act on CC grounds, unless it is very narrowly tailored, would be very damaging to federalism. It would grant unlimited power to the federal government, checked only by the political system. I have no doubt the Mandate violates the CC: it forces commerce that does not otherwise exist. Potential commerce is not commerce. Then again, potential commerce clearly has a substantial impact on interstate commerce; hence, the government’s position is not without merit, assuming one agrees with the Court’s precedents and agrees they should be expanded.
3. 10th Amendment: odds of this being the reason to strike the Act: 1%. I support the argument; however, I suspect it will have no more than 4 votes. Admittedly, it is not my area of expertise. If the Court focuses on this in the opinion, it means the opponents win; however, I doubt we will see much of this.
4. Taxing Power: odds of this being the reason to strike the Act: 2%. If this forms the opinion basis, odds of opponents’ success are 98% and odds of a 9-0 opinion striking the Penalty are 75% or more. This is the argument I’ve written about extensively, (here, here, and here) and which formed the bulk of my brief (here) to the Court, as well as to three Circuits. One small group briefed it on the other side and their argument was unpersuasive.
The Court is not going to find the penalty to be a duty or impost. Odds of finding it a here-to-fore undiscovered type of tax are less than one in a billion. Odds of finding it to be a uniform excise are very slim: perhaps one in ten thousand. Excises must apply to actions or transactions or uses of property or exercises of privileges. This is not an excise. Viewed with the Mandate, it is not uniform because together they are a function of state and regional markets. Thus, if the penalty and Mandate together are an excise (and they do, in fact, appear in the Excise subtitle of the Internal Revenue Code), they are not uniform, as required by the Constitution.
Odds of the Court upholding the penalty as a 16th Amendment income tax are also slim – much less than one in a hundred. The Court would be subject to ridicule with such a decision, despite what a few academics claim. I predict it will not happen. An increased tax on one’s income because he lacks insurance is no more an income tax than an increased tax on one’s income because he owns land. The latter would undeniably be a Direct Tax and the former is a Capitation/Direct Tax. The Court is very unlikely to rule otherwise.
That leaves direct taxes. The penalty/tax is not apportioned and no one claims it to be. Odds of the Court finding the penalty to be a direct tax but also that the apportionment requirement is no longer binding are close to zero, again despite what many (if not most academics) argue. They claim the 14th Amendment effectively repealed the apportionment requirement. I answer that here. The argument is absurd and Supreme Court justices rarely want to make absurd claims on tax issues, which they tend not to like to rule on. Also, many academics claim apportionment applies only when it is possible. Again, the argument is absurd and rests on out-of-context quotations from an 18th Century minority opinion. Sanctions against those who make such a frivolous argument are more likely than the Court agreeing with the argument. Thus, that argument will not prevail.
Hence, I see a 1.5 to 2% chance of the Court agreeing with me and striking the tax/penalty as an un-apportioned direct tax. If it does so, the Mandate becomes the suggestion and necessarily fails. Not great odds; however, also not unthinkable. I’m not a gambler; however, with those odds, I’d be buying lots of lottery tickets.
5. Due Process: odds of this being the reason to strike the Act: less than 1%. Ultimate chance of success for this argument: 75%. However, I suspect the Court will determine the argument should be deferred to an as applied rather than facial challenge. In layman’s terms, it is arguably premature. I disagree, but I believe that will be the consensus and thus it is unlikely to even reach the opinion, except perhaps in a dissent or concurrence (and a slim chance at that). Essentially, the “collection” procedures presume the taxpayer “guilty,” allow the government to take his money, and then force him to seek and ultimately to sue for a refund, with the burden of proof being on him. The Act (together with existing statutes) provides no realistic opportunity for pre-collection judicial review on the merits. Taxpayers also have virtually no chance for pre-collection judicial review of the sufficiency of administrative review. That surely violates due process.
If the Court approves the Act, the due process problems create what I see as the most frightening aspect of a very disturbing law. I make the argument here and in an upcoming American Journal of Law and Medicine symposium (not available for at least another week in final version and in print, not for several weeks). However, until the due process denial happens to an individual, the Court is unlikely to entertain the argument. Arguably, the government may never attempt to enforce the Act; or, it may seek enforcement only through a civil suit or a criminal penalty for those who fail to pay the civil penalty. [Yes, despite everything you’ve heard, criminal penalties are possible, if not likely. See here]. If the government proceeds with civil suits and criminal penalties, it will necessarily grant due process in those matters. While I believe the civil collection scenario being the sole collection method is highly unrealistic, it is arguably sufficiently possible so as to defer a decision on due process.
We will know a little more after we hear the questions and arguments this week – especially the questions. But it will likely be very little more, as judges and Justices often do not tip their hands. That they ask a question does not indicate they agree with the most likely answer, so be careful reading much into the oral argument and questioning. Unless, of course, the Justices ask about direct taxes, which would be very telling.