By Ryan Ellis
Ever since his name was floated as the front-runner for nomination to the Supreme Court, Brett Kavanaugh’s ample body of decisions has undergone extreme vetting inside conservative journals of opinion. Some of these analyses have been more scholarly (or at least more cognizant of the art of the legal profession) than others.
One of the most resonant debates centers around Kavanaugh’s dissent as a D.C. Circuit Court judge in Seven Sky v. Holder. In that dissent, he did not rule on the merits of the case. Rather, he said that the case could not be heard by the court because to do so would violate the “Anti-Injunction Act.” To quote Kavanaugh: “The Anti-Injunction Act applies here because plaintiffs’ pre-enforcement suit, if successful, would prevent the IRS from assessing or collecting tax penalties from citizens who do not have health insurance. That straightforward chain of logic convincingly demonstrates that the Anti-Injunction Act poses a jurisdictional bar to our deciding this case at this time.”
What Kavanaugh was referring to was the so-called “penalty” for failure to comply with Obamacare’s individual mandate to purchase qualifying health insurance. In so doing, Kavanaugh waded into a conservative family feud as old as Obamacare itself — is this penalty a tax, or not? This question took on increased importance as it was a central justification Chief Justice John Roberts used after the Kavanaugh dissent to rule Obamacare substantially constitutional.
The gripe against Kavanaugh is that he gave Roberts some sort of “playbook” or “blueprint” to find Obamacare constitutional via the former’s dissent in Seven Sky.Critics of Kavanaugh could not be more wrong. As Ed Whelan and others have pointed out, Kavanaugh was not ruling on the merits of the case, but rather on the ability of his court to hear it.
But what about those merits? That’s been lost in the fog of the endless Obamacare repeal war conservatives have been consumed with for nearly a decade. Forgotten in this struggle is the central question of this analysis: Is the individual mandate penalty a tax, or isn’t it?
I approach this as someone who is neither a lawyer nor a healthcare economist. I am, however, an IRS enrolled agent. That means I’m designated by the IRS as one of the top tax experts in the country. I’ve also owned a boutique tax preparation business since 2004, and have dealt with the penalty as both tax policy director at Americans for Tax Reform (which I left at the end of 2015 but was in that role before, during, and after Obamacare’s passage) and as a tax preparer since the penalty came into effect on 2014 tax returns.
It is clear to me, and it should be clear to any other tax expert, that the individual mandate penalty is a tax. It has all the characteristics of one.
The first characteristic is that Congress put the so-called “penalty” right in the middle of the Internal Revenue Code. If you want to look it up, it’s in Title 26, Subtitle D, Chapter 48 of the U.S. Code. It is Section 5000A of the tax code. This is in the “miscellaneous excise taxes” section of our tax code. That tells us that the penalty is, in fact, an excise tax.
The second characteristic is that the penalty tax is calculated, reported, and remitted on the 1040 tax form along with all other income taxes and other taxes reported there. It’s calculated on a worksheet attached to Form 8965 of the 1040 series, and any excise tax due flows to line 61 of the 1040. It’s in the same area of the return where you report things like nanny taxes and self-employment tax.
The third characteristic is that the penalty excise tax is paid to and enforced by the IRS. You pay it along with the rest of your 1040-reportable taxes. The IRS can charge you penalties and interest if you don’t pay it. The only limitation Congress put on this power is that the IRS cannot use criminal penalties, liens, or levies to enforce Obamacare’s individual mandate penalty excise tax. But the ordinary full force of the IRS can and does come down on people who don’t pay it.
Given the facts and circumstances listed above, I would challenge anyone to demonstrate how this section of Obamacare is not a tax.
What does this matter for the constitutionality of Obamacare? I will leave that to the actual lawyers. My only point here is that from a tax perspective, Kavanaugh was not at all unreasonable in saying that this area of Obamacare is a tax. Again, in his own words from the dissent:
The Anti-Injunction Act applies here because plaintiffs’ pre-enforcement suit, if successful, would prevent the IRS from assessing or collecting tax penalties from citizens who do not have health insurance. To be sure, the Affordable Care Act labels its exaction for failure to have health insurance as a tax “penalty” and not as a “tax.” But the Anti-Injunction Act still applies. That’s because the Affordable Care Act requires that the tax penalty for failure to maintain health insurance “be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68” of the Tax Code. 26 U.S.C. § 5000A(g)(1). And penalties under subchapter B of chapter 68 in turn must “be assessed and collected in the same manner as taxes.” 26 U.S.C. § 6671(a). It follows from those two provisions, taken together, that these Affordable Care Act penalties must be assessed and collected “in the same manner as taxes.
Conservatives should not try to be right-wing versions of judicial activists, twisting the facts in order to arrive at a pre-determined ideological outcome. We should let the text of the laws and the facts of the case guide solid decision making. Brett Kavanaugh did that in his Seven Sky dissent, and justifiable anti-Obamacare sentiment should not punish him for it.
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