A Confused Opinion

By RICHARD A. EPSTEIN

THE stunner yesterday was that Chief Justice John G. Roberts Jr., joined by the Supreme Court’s four most liberal justices, wrote the majority opinion that upheld the individual mandate in President Obama’s signature Affordable Care Act, which requires Americans to obtain health insurance or pay a penalty. In an ironic twist, the chief justice simultaneously accepted the conservative argument that Congress’s power to regulate interstate commerce did not include the power to regulate economic inactivity, like a decision not to purchase health care. The court ruled 5 to 4 on that point, with the chief justice joined by the court’s four other conservative justices.

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But what Chief Justice Roberts took from Congress with one hand, he gave it with the other: a broad reading of the taxing power. In the majority opinion, he wrote that since paying a penalty for not obtaining insurance could be seen as a tax, and since “the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” He will no doubt attract praise in some quarters for splitting this baby.

But his decision is wrong. As a matter of constitutional text, legal history and logic, the power to regulate commerce and the power to tax should not be separated. It is not good for the court or the country that the chief justice’s position in such an important case is confused at its core.

Consider first the constitutional text. Chief Justice Roberts refers to Congress’s power to “lay and collect Taxes.” But it’s worth recalling the surrounding language, which notes that Congress has the power to “lay and collect Taxes” only in order “to pay the Debts and provide for the common Defence and general Welfare of the United States.”

Historically speaking, this clause corrected one of the great weaknesses of the Articles of Confederation (the precursor to the Constitution), which had forced Congress to essentially beg the states for the revenues needed to run its business. By giving Congress independent powers over taxation and other revenue sources, the Constitution ended that dependency. But as a quid pro quo, the Constitution also restricted the use of these revenues to classical public goods — benefits that must be given to all citizens, if given to any — like paying off national debts and paying for the nation’s defense. General welfare, mentioned in parallel with these two phrases, is best read as covering only matters that advance the welfare of the United States as a whole. The redistribution of income, or “transfer payments” among citizens, like those mandated under the Affordable Care Act, doesn’t qualify for taxation in this originalist reading of the Constitution.

Through the early 20th century, the Supreme Court was cognizant of this tight relationship between the power to regulate an activity directly and to the power to tax it. The basic idea relies on a simple economic insight: taxation and regulation are close substitutes, so a limitation on one power matters little if the other power is still available. There is no practical difference between ordering an action, and taxing or fining people who don’t do that same thing. If the Constitution limits direct federal powers, it must also limit Congress’s indirect power of taxation.

In his opinion, Chief Justice Roberts didn’t come to grips with the two critical early Supreme Court cases that set out the relationship between the powers of regulation and taxation — a relationship that survived the New Deal revolution in understanding the Commerce Clause. In the Child Labor Tax case of 1922, the Supreme Court refused to uphold a tax equal to 10 percent of the net profits of any firm that shipped goods into interstate commerce if the firm used child labor anywhere in its plants. Chief Justice William Howard Taft noted that the court’s earlier decision in Hammer v. Dagenhart (1918) forbade Congress to use its commerce power to prohibit outright the shipment of ordinary goods across state lines because they were made in factories that used child labor. A heavy tax, the court argued, could not be used to mount an end run around this constitutional obstacle to its own power.

The same point was reinforced in 1936 in United States v. Butler, which struck down a tax on agricultural commodities because it sought to achieve the then unconstitutional regulatory aim of reducing the total acreage in agricultural production. After the 1942 case Wickard v. Filburn, when the Commerce Clause was held to permit such regulation, the tax became just as permissible as direct regulation. Wickard expanded the scope of federal power, but it did nothing to upset the constitutional parity between the taxing and commerce powers.

Chief Justice Roberts has ignored this fundamental principle: If direct regulation is beyond the scope of the Commerce Clause (as he held), then taxation as an indirect route to the same regulation should be off limits as well (as he failed to hold). This is a baby that should not be split. His attempt to do so undermines his ruling, the court and the Constitution.

Richard A. Epstein is a professor of law at New York University and a senior fellow at the Hoover Institution.