On the first day of health care reform arguments before the Supreme Court, two justices needled a top Obama lawyer for simultaneously calling the fine that will be paid under the law for not purchasing insurance a “penalty” and a “tax.” The confusion arises because of the administration’s argument that the power to enforce the individual mandate is rooted in Congress’ taxing power — but that the mechanism itself is designed to be a penalty, not a revenue-generating policy.
Some history about taxes is necessary. When SCOTUS was deciding whether social security was constitutional, they looked at what the appeals court ruled. The gov’t kept telling the people the taxes were earmarked for SS before collection and said the same thing in front of the appeals court. It was ruled unconstitutional by the court of appeals because of that. However, in front of the Supreme Court the gov’t claimed that the tax was just another tax, and like all other taxes would be put into the general slush fund and could be used for anything. SCOTUS ruled the tax was constitutional but left the question open on whether SS was constitutional. There is a fine line in this country between penalties and taxes, but the distinction is quite clear. Penalties are not taxes. Yes, counties do generate revenue from traffic tickets but their stated purpose in the law is a penalty for vehicle code violations. Since it is a penalty, those funds CAN be earmarked for specific spending (the county road fund) prior to collection because they are not taxes! If they are taxes, they must go into the county general fund. Penalties can go into the general fund too, and every county in CA is allowed to put 50% of all traffic violation penalties into the county general fund by state law. Taxes cannot be earmarked prior to collection; penalties can. See the difference? That’s why this is a critical argument. And on this alone, ObamaCare should be ruled unconstitutional.