The Thin Line Between Taxes and Mandates
Saved under News & Politics
Tags: Alton Railroad, Davis, Franklin D. Roosevelt, Helvering v. Davis, Owen Roberts, Payroll tax, Social Security, United States
There is a good reason why the line is murky between an individual mandate to purchase insurance and a tax. Politicians laid out this semantic shell game for us back in the 1930’s.
FDR indeed viewed Social Security as an “insurance program,” and therefore a mandate to pay into it is no different than the mandatory purchase of an insurance contract. Constitutional purists, however, believe that the federal government does not have the authority to mandate the purchase of products- the danger of which conservative Justice Anton Scalia pointed out with his “broccoli” analogy- and “products” are precisely what insurance vehicles are. To circumvent this reality, proponents of the mandatory purchase of Social Security’s old-age, unemployment, and disability insurance have often argued that the purchase functioned as a “payroll tax.”
But when the mandatory purchase of “old-age insurance” was packaged as a mandatory “payroll tax” in 1935, the Court understood it to be clearly unconstitutional in the decision on Railroad Retirement Board v. Alton Railroad.
The decision was a ruling on the Railroad Retirement Act of 1934, which was, simply, Social Security on a smaller scale. The Act “ordered all railroad workers into a compulsory government pension program funded by a payroll tax apportioned between them and their employers.”
By a margin of 5-4, the Railroad Retirement Act was struck down “on the ground that it exceeded federal authority under the commerce clause.” Justice Owen J. Roberts, the Court’s swing vote at that time, delivered the majority opinion and called the Act a “naked appropriation of private property” where the government served the purpose of taking the property of “of one and bestowing it upon another.”
But Justice Roberts had a change of heart in 1937, and ruled to uphold the “old-age insurance” aspect of Social Security. What was different this time around? Did the text of the Constitution miraculously change its form?
No. It was simply decided that the horse-and-buggy concepts of the Constitution were no longer important in 1937. In the case of Helvering v. Davis, which challenged Social Security’s mandatory payroll tax to fund old-age insurance, a stockholder of Edison Electric Illuminating Co. (Davis) argued that the company’s expenditures in complying with the law robbed him of his equity for the purpose of financing the general welfare of the aged, which he believed to be a “power reserved to the states.” He argued that the “payroll tax” was “a new type of tax not listed in the Constitution’s tally of taxes,” and he even cited the 1788 definition of “tax” to “prove how earnest [the founders] were in the belief that the powers not explicitly granted in 1789 could not be created in 1935.”
The government did not even practically cite the Constitution as a reason why this was wrong. It just argued that it was “too inflexible an interpretation” and that “if the country could not expand its interpretation of the Constitution as it stood in 1789 progress would be impossible and it would still be 1789.”
And the Court agreed this time- the Constitution doesn’t matter. Progress does. And what comes later supersedes that which came before. Justice Cardozo wrote the majority opinion on Davis v. Halvering and Steward Machine Company v. Davis, the latter of which challenged unemployment insurance but addressed the same argument- that securing the general welfare of the unemployed is not a federal power granted by the Constitution. Cardozo opines that “it is now settled by decision. The conception of spending power advocated by Hamilton… has prevailed over that of Madison.” He goes on by saying that it is “too late today for the argument to be heard with tolerance that in a crisis so extreme the use of moneys of the nation is a use for any purpose [other] than a promotion of the general welfare.”
If you’ve ever wondered why big-government expansionists hold the belief, “You never want a serious crisis go to waste,” look no further.
Now, there is more to Justice Owen Roberts’ defection, most important of which was FDR’s now legendary scheme to pack the Court with up to six more judges of his appointment- a judicial reformation that would guarantee the constitutional viability of his New Deal agenda. Laughably, FDR’s argument for this power grab was that it would be a step to “save the Constitution from the Court-” yet it was he that sought to transform the document’s intent. To deflect the attack against the Courts, Roberts changed position in a move that has come to be called “the switch in time that saved nine.”
What does this history lesson teach us? It should be obvious. Calling a mandate to purchase insurance a “tax” was little more than a creative means to circumvent constitutional protocol in the first place- and only found to be lawful under intense executive intimidation. To believe that a federal tax can be used for the general welfare of the “potentially unhealthy” today is still a disavowal of the Constitution’s intent.
Obviously, Justices Breyer, Ginsberg, Sotomayor, and Kagan (the latter two being Obama appointees) had no need to deem the mandate a “tax” to uphold it. No amount of deliberation or proof in that archaic document that they are sworn to uphold could convince them that the federal government doesn’t have the right to make Americans purchase a product, so long as ideological whims demand it for a vision of “progress.” Chief Justice John Roberts, however, found that the mandate serves as a tax that benefits the general welfare. And the Supreme Court rulings on Social Security, made for political purpose rather than based upon constitutional merit, would seem to validate that a “tax” can be used for such purpose.
But for Justice John Roberts to defend such a use of federal authority as constitutional clearly signifies that he cares more for the “settled precedent” of his progressive forebears than the words and intent of the Constitution. This is the trait of leftist ideologues like Sotomayor that view the Constitution as an impediment to progress, not a conservative that values the original law of our land that secures our very freedom.
Perhaps we can just call Chief Justice John Roberts’ decision on the issue of the individual mandate “the resolution that further nullified the Constitution.” Because that’s all it did. And the only way to find our way back to the point where our country was led astray by power-hungry progressives is to vote for those representatives dedicated to a conservative purpose in November- conservatives dedicated to repeal the Affordable Care Act in its entirety. And it is not unreasonably dire to say that if we fail to do so, we may not have another such opportunity.