Prior to yesterday, unless you practice Tax Law, you had probably never heard of the Tax Anti- Injunction Act of 1867. I know I had not. Most likely because the Georgia Bar exam no longer covers tax law, thank goodness! If you still have no idea what I am talking about, in all the hoopla of the President’s job speech and new substantial terror threats, you must have missed the news about the Fourth Circuit Court striking down a challenge to the Healthcare Reform Bill’s individual mandate to purchase insurance.
The interesting thing about this round in the judicial ring between States and the Federal Government is that the Court did not even get to the merits of the case. They struck the suit based on the Tax Anti-Injunction Act of 1867. This Act essentially says that before you challenge a tax, you must first pay the tax. The Court’s very interesting reasoning stated that because the individual mandate was a tax and not a penalty, it could not be challenged until it is paid. Since no one has paid for not carrying Health Insurance yet, there is nothing to challenge.
This is the first time this argument has made it into a ruling by the Federal Court on this issue. In fact, the Federal Government actually abandoned this argument because they decided they would rather get a ruling on the merits of the case, than have the case thrown out on a technicality. However, the presiding Judge resurrected it herself. Really this is not a win for either side. What both sides wanted, and needed, was a ruling on the merits by yet a different Federal Judge panel, to bolster their run at the main event- the Supreme Court.
One of the Federal Government’s main defenses in this fight has been that they have a right to implement the individual mandate because of Congress’s Constitutional Power to Tax. The other side argues that the provision is not designed to raise revenue, but to penalize; therefore, it is a penalty and not a tax. The truth is the government is not really sure if it is a penalty or a tax. Certain members of Congress have rejected calling the mandate a tax. The President himself has apparently denied that it is a tax.
The shrewdest legal minds in the Country are likely to spend hours arguing over this issue, which to many seems like semantics. It is hard to imagine that one three letter word- TAX- could make or break a 900 page bill, but that is how the law works. It can be extremely fascinating and also frustrating. Many Americans feel like they are missing the point…..do you?