Conditional Taxation and the Constitutionality of Health Care Reform

Brian D. Galle, Georgetown University Law Center

Abstract

The recent enactment of major health care reform legislation has brought with it a welter of constitutional challenges to the legislation and its key provisions. Attorneys General in more than a dozen states have already filed suits seeking to enjoin the operation of the statute, arguing that its requirement that most individuals either purchase health insurance or pay a penalty tax exceeds Congress’s enumerated powers. And several prominent scholars have argued similarly that this “individual responsibility requirement” (IRR) ought to be unconstitutional, even if current case law does not clearly require that outcome.

These claims are mistaken because, among other reasons, they take too narrow a view of Congress’s constitutional power to “lay and collect . . . Taxes . . . to pay the Debts and provide for the common Defen[s]e and general Welfare of the United States.” Even if the IRR is not authorized by the Commerce Clause, or by some combination of the commerce power and the Necessary and Proper Clause, it would still fall squarely within Congress’s authority to set the terms on which it will collect revenues. To be clear, I believe that the commerce power permits Congress to require the purchase of insurance, and that, if not, the Necessary and Proper Clause would permit it instead. But for those who disagree, such as Professor Randy Barnett, the taxing power remains as an alternative source of congressional authority.

In brief, my claim is that “conditional” taxes—taxes used to achieve some regulatory end—are not limited only to those purposes covered by Congress’s other enumerated powers. Instead, Congress may condition exemptions from a tax on any criteria it chooses—other than those expressly prohibited by the Constitution, such as restrictions on free speech—so long as it is willing to pay the political price for carving out that exception. This structure exactly mirrors the well-established law of conditional spending.

Part I of this Essay explains why any court challenge to the use of the taxing power would fail. Part II explains why it should.