Supreme Court holds first hearing on the Affordable Care Act

The Supreme Court today held the first of three hearings on the Affordable Care Act, the health care reform law that 26 states and the National Federation of Independent Business are seeking to overturn.

The main question before the court is whether Congress has the authority to require all individuals to obtain health insurance and to impose a tax penalty on those who don’t comply with the law’s health coverage mandate.

However, Monday’s opening hearing centered on the housekeeping matter of whether the Anti-Injunction Act applies to the tax penalty in the health care law. 

The Anti-Injunction Act states that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” The 1867 law was designed to protect “the financial stability of the federal government” by invalidating lawsuits seeking to prevent taxes from being collected.

“When the Anti-Injunction Act applies, you have to pay the tax or the penalty first and then litigate later to get it back with interest,” explained Robert A. Long, who was appointed by the court to argue in favor of the Anti-Injunction Act’s applicability.

So if the Supreme Court deems that the Anti-Injunction Act applies to this case, then the court’s decision will be postponed until after the Affordable Care Act’s tax penalty takes effect in 2014. But the court seems unlikely to delay its ruling given that the Obama administration has essentially abandoned the Anti-Injunction Act in this case.

That left Solicitor General Donald Verrilli in the awkward position of having to (1) argue that the health mandate penalty is not a tax subject to the Anti-Injunction Act but (2) to defend Congress’ constitutional authority to levy a penalty tax to enforce the coverage mandate. The latter argument will likely play a central role in the government’s defense of the Affordable Care Act.

“General Verrilli, today you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax,” challenged Justice Samuel Alito. “Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?”

“The Court has held in a license tax cases that something can be a constitutional exercise of the taxing power whether or not it is called a tax. And that’s because the nature of the inquiry that we will conduct tomorrow is different from the inquiry that we will conduct today,” Verrilli responded. “Tomorrow the question is whether Congress has the authority under the taxing power to enact it and the form of words doesn’t have a dispositive effect on that analysis. Today we are are construing statutory text where the precise choice of words does have a dispositive effect on the analysis.”

In short, the government argued that since Congress did not specially designate the mandate penalty as a tax, then the Anti-Injunction Act doesn’t apply. However, the government insisted that Congress properly exercised its authority to levy taxes by imposing a tax penalty on those who don’t comply with the health insurance requirement.

Opponents of the health care law argued that the Anti-Injunction Act doesn’t apply in this case because their lawsuit challenges the legal requirement to purchase health insurance – not the tax penalty.

“That is a forced acquisition of an unwanted good. It’s a classic pocketbook injury,” said Gregory Katsas, who represents the private respondents.

Oral arguments will continue tomorrow morning.


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