When is a tax not a tax? Ask Chief Justice Roberts

June 28, 2012

If you are like me, you were a bit confused when you first read that the individual mandate was upheld as a tax.Chief Justice John Roberts

Not because I thought that they should have done so under the Commerce Clause, but because of the Anti-Injunction Act (AIA).

The AIA is a quaint little law passed in 1867 that bars legal challenges to taxes before they have taken effect.

Technically, if the mandate really is a tax, the AIA prohibits lawsuits from challenging it until it goes into effect in 2014 – so the challenges should all be dismissed.

Obviously, they weren’t.

So how did Roberts get around it?

He made up a new rule (which he explains in detail on pages 12 and 13 of the opinion):

When Congress labels a tax as a “tax,” it’s a tax for the purposes of the Anti-Injunction Act.

When Congress labels it something else (such as, in the case of the individual mandate, a “penalty”), it’s not a tax.

Except that it still could be a tax for the purposes of the Taxing Clause (if the Supreme Court decides as much).

Translation: Congress decides when its laws can be challenged in court, but the Supreme Court decides when Congress is exercising its Taxing Clause power in its legislation.

Yeah, that doesn’t make any sense to me, either.

What part of left field did this come from?

Roberts was obviously trying to uphold the mandate and the ACA on Tax Clause grounds instead of Commerce Clause grounds in an attempt to limit congressional power (but, as I wrote earlier today, a fat lot of good that did).

So, to answer the question in the title: a tax is a tax when Congress says it’s a tax, but even when it doesn’t say it’s a tax, it could still be a tax – just a different kind of tax.

Yes, this is completely nonsensical, but it doesn’t matter because the Anti-Injunction Act will likely not come up again in major federal legislation for a long time…hopefully.