Here’s the complaint filed by fourteen states today against the federal government. Virginia will be filing a separate lawsuit.
Regarding the new law’s “individual mandate” that people must buy government-approved health insurance, I think there’s a decent chance that the Supreme Court might strike it down. If the Court does so, I doubt the Court would even have to address how much power Congress has under the Commerce Clause of the Constitution. Instead, the Court could simply say that Congress made a mistake by including an unconstitutional “capitation” in this legislation (a capitation is a tax on the person rather than a tax on property), and the Court could kindly invite Congress to correct this mistake. Alas, the Senate might lack the votes to do so.
Here’s a summary of the individual mandate penalty:
Senate bill: Those without insurance would pay either $750 per year per person up to $2,250 per family or two percent of household income, whichever is greater. It would be phased-in: $95 in 2014, $495 in 2015, and $750 in 2016 or point-5 percent of taxable income in 2014, one percent of taxable income in 2015, and two percent of taxable income in 2016.
Reconciliation bill: The individual penalty would be reduced from $750 to $695, but the alternative penalty on households would increase. The household income assessment would change from point-5 percent to one percent in 2014, one percent to two percent in 2015, and two percent to 2.5 percent for 2016 “to make the assessment more progressive.”
There is also an exemption for people who fall under the tax-filing threshold or who would end up spending more than 8 percent of their annual income on health insurance. However, I don’t think it would be proper to look at exemptions in order to determine the character of a tax itself. Moreover, suppose that Congress imposes 1000 separate flat taxes on each person in the country, and each of those 1000 taxes has an exemption if it would exceed 8% of income. Surely that cannot render all of the 1000 taxes an income tax, because the tax could total up to 8000% of income.
The Constitution says:
[D]irect Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers (Article I, Section 2)
No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken (Article I, Section 9).
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 or enumeration (Sixteenth Amendment).
The Supreme Court has written the following about the Sixteenth Amendment, In the case of Eisner v. Macomber):
[T]his amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes….This limitation still has an appropriate and important function, and is not to be overridden by Congress or disregarded by the courts.
So, if the Court now says that the individual mandate penalty is a capitation, then Congress could of course change the penalty, e.g. to say that it is a one percent increase in the income tax you owe. Normally, this would be a technicality that Congress could easily correct — if there were 60 votes in the Senate who wanted to correct it.
It’s worth keeping in mind that none of these federal constitutional provisions prevent a state from having an individual mandate to buy health insurance. Also, I doubt that these constitutional provisions even affect the federal government’s ability to have an individual mandate where federal power is plenary, e.g. within the city limits of Washington D.C. Additionally, I don’t think that an individual mandate is necessarily a bad thing on policy grounds, because uninsured people can cost a state lots of money when they show up at hospitals sick or injured. But still the federal government must comply with all applicable constitutional provisions, including the one regarding capitation taxes.