So begins the Wall Street Journal editorial, overstating the convergence and — big surprise — setting up a critique of the Chief. His approach to the taxing power, the editors say, is new and scarily unconstrained. They're disturbed that Congress can configure a tax that shapes behavior that it could not simply command, and yet they admit — as they must — that tax law does that all the time. Congress can't compel you to go into debt to buy a house, but you'll pay less taxes if you have a mortgage interest deduction. Congress can't require you to get married, but single taxpayers get stuck with higher tax rates. Why is this new area of taxing so shocking?
Congress has never passed a tax on a lack of gasoline or a tax on a failure to buy gasoline, any more than Congress can regulate inactivity under the Commerce Clause by telling people to buy gasoline or else pay a penalty. The reality is that Washington would love to regulate the ordinary economic choices that used to be beyond its purview, and now it will be able to abuse the ad hoc "tax" permit that the Chief Justice has given it.Will it? Now that everyone's onto this game, the political debate will focus on it. What was unusual in this case was that the opponents of Obamacare were not alerted that the taxing power was the necessary basis for congressional power. Much effort was put into arguing that the commerce power was inadequate, and proponents of the law maintained that it not even serious to argue what has now become the Supreme Court's Commerce Clause doctrine. With the doctrine made explicit, in the future, if Congress tries to regulate individuals for their failure to engage in interstate commerce, everyone will talk about the taxing power. It won't be a stealth power, and it won't be so easy to use.
Moreover, there is a limit on the taxing power as articulated by the Chief Justice: At some point, what purports to be a tax — or what, in litigation, the government attempts to portray as a tax — crosses the line from incentive to compulsion. It actually becomes what Congress called the tax in this case: a penalty. If it's a penalty, Congress is not taxing but regulating, and it will need a power to regulate such as the (now clearly limited) commerce power.
Remember, the reason the so-called "penalty" was deemed a tax was that it was so weak. The amount to be paid to the federal government would usually be "far less than the price of insurance," so that it could often "be a reasonable financial decision to make the payment rather than purchase insurance," especially since the IRS is denied its usual means of enforcing taxes (like criminal prosecution). Roberts said it was a tax precisely because it would not work to compel people to buy insurance. If it worked as compulsion, it really would be a penalty — even if Congress called it a "tax" — and the taxing power would not suffice.
So that's the limit on the taxing power. It doesn't actually work to make people do what Congress wants. Now, it remains to be seen whether the Court will have the nerve to enforce that limitation. What if all the people with relatively low medical expenses make the "reasonable financial decision to make the payment rather than purchase insurance"? It will wreak havoc with the scheme of requiring insurance companies to sell to persons with pre-existing conditions without charging extra. Won't Congress have to up the "penality" until it really does cease to be a non-penalty to get the desired compulsion? When that happens, will the Court draw the line?