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roman_mir's Journal: ACA ruling by the SCOTUS 46

Journal by roman_mir

The SCOTUS passed its ruling on the ACA and a large number of people are confused about parts of it, what is really in it substantively one way or another?

Is the ACA mandate really Constitutional? Well, 5 out of 4 justices said that it is, of-course it would be a bad outcome if such a close call was made upon a case deciding whether it is Constitutional for the government to execute people without a trial on a hunch of a president, but that can never happen, or ?

There are many interesting questions raised about ACA, but one is particularly intriguing, how is the mandate to buy insurance from a private company or face a penalty (tax under the SCOTUS ruling) Constitutional?

Also how is ACA Constitutional at all, given that this is a Senate bill and it did not originate in Congress as all bills are supposed to? Well, let's just leave that for later.

So let's examine the interesting points of the ruling:

1. The majority opinion is that the mandate is only Constitutional as a tax. The reason for this is that as a fine, this is unconstitutional, because it is an admission of an attempt to legislate by punitive taxation. The other reason is that the opinion also states that the government cannot use the commerce clause to force people to buy something that they are not buying otherwise. Now, there is a legal precedent for an opposite ruling actually, AFAIC regardless of what SCOTUS said in Wickard v. Filburn, that ruling was wrong and allowing the government to force a farmer to buy wheat when he is not interested in buying it is unconstitutional. But then again, so many people are excited about the ruling of 4 to 5 justices this way, though it clearly could have gone the opposite direction. The question of-course is: should there be so much room given to the SCOTUS justices to maneuver that they could rule one way or another basically on a whim and also because of public pressure? Does this really defend the Constitution or does it actually do something completely opposite?

2. The majority opinion is that this tax is only Constitutional because it is a small tax and ACA does not give authority to the IRS to enforce it by force (garnishing wages or imprisonment). The reason for this is that if the tax was punitive, then the SCOTUS would have to declare it unconstitutional, because it would mean that the government is trying to legislate by taxation what it cannot legislate directly, and this cannot be done. There are plenty of precedents as to why this is illegal, a simple example is prohibition that required an amendment to be passed to the Constitution. Passing an amendment is much more difficult than raising a tax, but still to stop people from consuming alcohol the government could not simply pass a 1,000,000 dollar tax upon sale of a bottle of booze, because this would clearly be a way to prevent people from drinking, which is a legislative move, but to do it with taxes. Taxing is not supposed to be replacement for legislation, and that is why it is very important to understand, that Roberts wrote that the mandate stands as is because the tax (fine) is very low and doesn't actually force anybody to buy insurance.

This means that in principle if the tax (fine) is raised from its current level (and it will have to be raised, otherwise ACA is completely unworkable, everybody who has to pay for insurance under the ACA will cancel insurance and only 'buy' it when they absolutely need to and then cancel again, once done with the bills) so if the tax is raised, the mandate becomes immediately unconstitutional and ACA has to go back to the supreme court!

Of-course in practice it's not going to happen, the lower courts will misinterpret what this is and will rule that raising the tax is constitutional and the SCOTUS will deny hearing it again, so in practice this doesn't matter anymore, they found a loophole to pass ACA and now they won't bother with what they have to do technically to keep it legal, just like how they implemented the income tax (which is still illegal today, it is only legal as a tax on corporate profits, not an 'income' tax and not a personal tax).

3. Majority opinion stated that the mandate tax (fine) is not a direct tax based on a completely faulty notion that it only applies to a small number of people who are currently uninsured and will not buy insurance in the future. This is wrong on many points. First, direct tax means a tax that is forced upon a person directly and that person pays directly to the government. The direct tax must be apportioned to be legal though, that's why Roberts said that this tax is not direct, which makes it something else - excise tax or a duty or import. It's not a duty or import, so it's an excise. But how can this tax be an excise, like a sales tax, if the person who is forced to pay it, is only forced because he is not participating in commerce, he is not buying something (insurance)?

There is a contradiction in the ruling that is glaring, it is amazing people are not seeing it: the SCOTUS found that the commerce clause doesn't apply to make mandate legal, but simultaneously the majority opinion stated that the mandate tax (fine) is not a direct tax, while stating that the commerce clause doesn't apply. Either the commerce clause applies, and thus the excise tax can apply or the commerce clause does not apply, but that means that no excise tax can be levied.

Either it's commerce or it is not commerce, and if it is not commerce, then commerce tax cannot apply, and excise is a commerce tax - tax on the act of buying (well, in this case not buying) something.

--

It is likely that there will be a situation at some point, when a person will not buy insurance and will be fined under the ACA and will take this to court. Assuming that the lower court would understand what is written in the SCOTUS decision, and assuming that the lower court would care, would want to go after the truth of the matter, this can in principle end up back before SCOTUS (if SCOTUS decides to hear it again, which is probably unlikely).

But if this happens, then the defence must bring forward this argument as well:

The mandate tax (fine) is unconstitutional because it is not a direct apportioned tax, it is not a uniform excise tax and it is not an income tax (an income tax, which is by the way only Constitutional as an unapportioned excise tax on corporate profits, you can read further for the explanation of that.)

These are taxes that can be levied by the US federal government legally:

1. Direct apportioned taxes, capitation and other direct apportioned taxes tax (a tax that applies to a person directly but is apportioned to the States). This means that if the federal government wants to raise taxes, it has to say by how much and it has to then use census data and depending on the populations of different States, apportion them their share. So if California has 12% of population, it would be responsible for 12% of this tax increase. Direct apportioned taxes were introduced by the founders this way in order to try and prevent 2 things:
    a. Fraud in census data, that's because a State could overstate its population to send more Congressmen, Senators to the Washington.
    b. US founders did not like direct taxes, they added that direct taxes had to be apportioned specifically so that poorer States would not always vote for tax increases. If the direct tax is not apportioned, then poorer States would always vote to increse taxes upon richer States, creating wealth redistribution and incentives to increase taxes on the rich (exactly the rhetoric by the government nowadays, that is so much supported by the poorer people). Apportioning direct taxes prevents this problem, because then direct taxes would have to be paid by poorer and wealthier states only depending on the size of their population.

2. Uniform excise taxes. These are indirect, so they can be collected from a person not directly, but through a merchant for example, such as sales taxes. Uniformity requirement means that there should not be special dealings when introducing them, people shouldn't be forced to pay different sales tax depending on their location or religion or race or whatever.

3. The 16th amendment allows for an income tax. This is a special situation, probably 99.9999% of people misunderstand what this is.

Initially the tax was introduced as an indirect tax, but SCOTUS saw through that argument and did not buy it. That's because the government made this argument: this is not a direct tax on people, it is a tax on people's income! In case of rental income, putting a tax on it is equivalent to putting a tax on property, so taxing rent is taxing its source - land and then it's a direct tax on the land owner.

In 1913 the new legislation appeared that stated that any income from any source can be taxed without apportionment. The 1916 Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916) court case stated that income can be taxed without apportionment. BUT this case does NOT state that income can be taxed directly, so from that case, the income tax is an unapportioned indirect excise tax.

In Brushaber the SCOTUS stated that in order to tax income, the income must be separated from its source, because it cannot be a direct tax, because it is unapportioned. So a rent income is not under this decision, because rent is tied to land and to the owner of the land.

Later SCOTUS decisions explained that separating income from source can be done with a corporate balance sheet, which means that the 16th amendment income tax is in reality a corporate profit tax. There is no legal, Constitutional personal income tax, people do not have profit, only corporations do. Profits are all expenses subtracted from all incomes, that's what can be taxed.

This actually is interesting from another perspective, so many people are upset about so called 'loopholes' that corporations have in order to lower their income taxes, but of-course all these so called 'loopholes' have to do with the fact that corporation has so many expenses, and government tries to reclassify various expenses in a way that would prevent them from being subtracted from incomes for the purposes of tax accounting. There is the entire notion of 'capital depreciation' (and the entire false 'scandal' about the 'corporate jets', which depreciate in 5 years instead of 7 years for commercial airliners). But this is total nonsense, as corporation has to buy the equipment and pay for it right away, but it is prevented from subtracting its expense from its income the year it bought the equipment, which often turns the situation into an impossible one, where a company with no profits is forced to take loans to pay income taxes!

So again, the income tax is not an income tax, it is only Constitutional as an excise tax on corporate profits. But this means that the current practice that IRS is involved in - collecting DIRECT UNAPPORTIONED taxes upon PEOPLE'S INCOME is completely unconstitutional, it is precisely the opposite in every way of what was declared as Constitutional by the Supreme Court of USA.

Given this history of behaviour of US government, it is very obvious that since ACA passed with a very narrow definition of how it is Constitutional, in the future of-course it will be enforced in a completely unconstitutional manner.

The tax (fine) will be raised, because people who do pay for their insurance today will stop paying, because this tax (fine) is so low today compared to the insurance plan payments. There will be some people who will be subsidised under the plan and will not have to pay for insurance, so they will 'buy' their plans with the subsidies. Also the people who actually need insurance to pay them right now, because they are sick, they will obviously 'buy' into insurance, since they cannot be denied due to the pre-existing conditions.

But this means that huge number of people will drop out of insurance, and the only people in it will be a minority of those who didn't have it until now and those who need insurance to pay for their treatment.

Under this scenario, the insurance companies will cease to operate. But of-course what is likely to happen is that the government will bail out the insurance companies with tax (and borrowed and printed) money. In the short term the government may even have an influx of cash because taxes (fines) will be collected from people who had private insurance prior to ACA but would cancel it now and just pay the tax (fine). But in the long run this means that insurance will become extremely expensive because of lack of payers and the government will be bailing out insurance with tax money at the new expensive rates.

So in conclusion, as always is the case, the name of the bill that came out of the government should be fully reversed by 180 degrees in order to understand the real consequences of this legislation.

This is not an 'Affordable Care Act', this is the exact opposite: the Unaffordable Care Act, because if people thought their premiums were going up quickly before ACA, they will be surprised just how good they used to have it.

---
PS:
note that Robert's decision that the mandate tax (fine) is indirect based on the idea that only a small part of the population will pay it faulty in another manner.

For a direct tax to be direct it is unnecessary that 100% of population pays it! People can be exempt from taxes and this means that no tax is paid by 100% of population (this never happens anyway), and thus the logic that the mandate is not a direct tax is faulty, but it can be understood why Roberts declared that, because if he had to admit that the tax is direct, it would immediately be unconstitutional, because it is unapportioned!

---
PPS:
It should be noticed that ACA has various implications to the economy that are not fully appreciated by the businesses yet.

There will be a strong pressure upon the businesses to downsize the workforce, to make sure they do not have over 50 employees. Of-course companies will be dropping insurance coverage, so this is good news if taken out of the context of ACA, because it will provide some boost to people's incomes, as they will have a little more money in their pocket temporarily, that's because as employers will drop coverage, they will have to increase the salaries of their employees by some amount (also this depends if there are any penalties associated with not covering employees under the new ACA plan, because before ACA there were penalties to the employer).

But eventually as companies downsize there will be more unemployment and at the same time the insurance companies will be under pressure because they will lose so many current clients as people and companies cancel their insurance plans plans (it's a 'free ride' with no pre-existing conditions).

Eventually this will lead to a serious problem just because of ACA alone. The large firms that cannot downsize under 50 people quickly will be hit with extremely high insurance premiums all of a sudden, that so many people will cancel insurance and the rates will have to skyrocket.

The large companies will be in a pickle, this WILL mean more outsourcing and more firing and no hiring by large companies at all (and by companies that are at the 50 people threshold).
---

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ACA ruling by the SCOTUS

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  • also note that Robert's decision that the mandate tax (fine) is indirect based on the idea that only a small part of the population will pay it faulty in another manner.

    For a direct tax to be direct it is unnecessary that 100% of population pays it! People can be exempt from taxes and this means that no tax is paid by 100% of population (this never happens anyway), and thus the logic that the mandate is not a direct tax is faulty, but it can be understood why Roberts declared that, because if he had to adm

  • It should be noticed that ACA has various implications to the economy that are not fully appreciated by the businesses yet.

    There will be a strong pressure upon the businesses to downsize the workforce, to make sure they do not have over 50 employees. Of-course companies will be dropping insurance coverage, so this is good news if taken out of the context of ACA, because it will provide some boost to people's incomes, as they will have a little more money in their pocket temporarily, that's because as emplo

    • as employers will drop coverage, they will have to increase the salaries of their employees by some amount

      They don't have to do any such thing. They're already not taking full advantage of the current labor market conditions. During the dot-com years employees took full advantage of the conditions, and I enjoyed large increases in salary. It seems that companies are sitting on so much cash now that they're content to just hold wages stagnant, and are only low-balling new hires who had been unemployed (for t

      • by roman_mir (125474)

        I already replied to some AC above to this, here it is again.
        ---

        Well, what you do NOT in fact understand at all, is that benefits are just part of compensation, they are not in fact mandated by government (until ACA came to town) and thus benefits are simply part of the salary.

        When a person negotiates his salary, he also negotiates benefits. If health insurance benefits are removed from the equation, this leaves the company at a point, where it has to either raise compensation by some amount to the employee

        • by Bill Dog (726542)

          So instead of paying for your coverage you will likely get all or some of that money as part of your salary, if you don't, that means you are not a good negotiator,

          That's like saying if you can't find somewhere to fill up the gas tank of your car for less than a dollar a gallon then it means you're not a good negotiator. It's called market forces. In America today (and in the foreseeable future?) there is a glut of labor supply and low demand for add'l labor. The vast majority of us are commodity labor, so

          • by roman_mir (125474)

            That's like saying if you can't find somewhere to fill up the gas tank of your car for less than a dollar a gallon then it means you're not a good negotiator. It's called market forces.

            - you don't get it, you have already negotiated this contract, it included your benefits. If your benefits are cut that means your salary is lower now, because in USA the tax code is such, that companies provide health insurance specifically because it's not taxed as income, but this means it's your salary that is cut, now you'll have to buy health insurance outside of your employment and you have a contract.

            So it's a fairly straightforward arrangement with your employer - he stops the health insurance ben

            • by Bill Dog (726542)

              you have already negotiated this contract, it included your benefits

              We're apparently talking about different things. Maybe it's how you say in contract jobs. In "full-time perm" employment, like most of us have (who even have jobs, that is) there is no specific contract. Either party is free to change the terms, going forward, at any time, and if the other party doesn't agree, then they can sever the employment relationship, at any time.

              Since what you've been saying is predicated on the understanding that t

  • The government attempted to answer "how can we make health insurance cheaper?" and didn't even manage to get that right.

    • by roman_mir (125474)

      yeah, I think the real idea behind this legislation is to create a situation that can be used to blame 'free market capitalism' for the incoming failure of the insurance companies, but of-course there is nothing free market OR even capitalist! about what is done here.

      No capitalist, free market or not, would run his company at a loss, and the provisions of ACA, such as the removal of the pre-existing conditions as part of the qualification for a plan, means that insurance companies from now on will always be

      • by Bengie (1121981)

        yeah, I think the real idea behind this legislation is to create a situation that can be used to blame 'free market capitalism' for the incoming failure of the insurance companies, but of-course there is nothing free market OR even capitalist! about what is done here.

        Out of curiosity, why do you think insurance companies will go under from this? I see no reason why this will be bad for them. The government just mandated that nearly everyone must purchase private insurance. How is that bad for insurance companies? If anything, it dramatically increases their revenue.

    • by gmhowell (26755)

      I wish I could remember when the phrasing was changed from 'health care reform' to 'health insurance reform'. I'm pretty sure it was the summer of 2009, but was it pre or post tea bagger?

      • by Qzukk (229616)

        I don't recall it ever being called "health insurance reform" (e.g. the Affordable Care Act). It's just meant that for a long, long time (remember, obamacare was a huge thing leading up to his election, and I'm pretty sure people talked about the high cost of "health care" - meaning insurance - before then).

        Probably since early 00s when the increase in the cost of health "care" started outstripping inflation by ridiculous amounts. Or maybe when insurance companies ramped up denying patients "care" due to

        • by gmhowell (26755)

          I didn't mean the official name of the act. I was referring to reference to the issue generally and colloquially. At one point, politicians, pundits, and reporters used the phrase 'health care reform'. This switched to 'health insurance reform'.

          But I totally agree with this:

          Whichever way it began, if there's a secret nobel prize for marketing, it's almost certain that whoever convinced the public that insurance === healthcare has received it. An absolute masterstroke.

          (And WTF with the downmod to my original comment? Pretty limp wristed 'argument' there.)

          • by Bill Dog (726542)

            (And WTF with the downmod to my original comment?

            And WTF to your WTF; you called Tea Partiers "teabaggers", numbnuts. When Lefties use crude epithets like that and calling Conservative women "cunts", it's as c/rude as saying that yours is the party of the niggers and fags. And words like these usually incite a troll mod. But I can see how people would be completely desensitized to Leftist^Wmainstream vulgarities.

            • by gmhowell (26755)

              They called themselves teabaggers before the left did. And it's equal to 'niggers' and 'fags'? Next I suppose I'm due a lecture on how persecuted Christians are.

              'Numbnuts'? More of that rational discourse from the right I see.

              • by Bill Dog (726542)

                So now you can't see the point of including a lame epithet in a comment trying to point out that what you did was use a lame epithet? You must be going blind.

                • by gmhowell (26755)

                  So now you can't see the point of including a lame epithet in a comment trying to point out that what you did was use a lame epithet? You must be going blind.

                  It's the frequent masturbation, I'm sure. It serves more purpose than looking for intelligence around here.

      • by roman_mir (125474)

        What is your point?

        The health care is expensive because of government money and regulations in it through everything, from Medicare to patents to FDA to inflation.

        People didn't have a problem paying for MOST of their care out of pocket for a long time, all of a sudden Medicare came along and nobody is able to pay for medical care out of pocket anymore, does it not seem at least STRANGE to you?

        Insurance actually used to be insurance, it was affordable. A buck or 2 per month per family is not a terrible price

        • by gmhowell (26755)

          My point is that the goal changed. A secondary point is that he who controls the language controls the thinking.

          And finally, pre Medicaid, medicine was just a hair or two above the leeches and trepanning level of quality. Costs have risen inordinately and it's by no means solely due to malpractice premiums.

          • by roman_mir (125474)

            So who controls the language and why would you allow your thinking to be controlled in that way?

            Secondly, you are mistaken. The computer you are using to post this proves my point, not yours. The technology and material science that goes into producing this as well as the mobile phone you have proves my point not yours.

            Technology gets cheaper not more expensive with time while it gets more sophisticated and powerful.

            Now imagine if government was getting involved in trying to ensure that 'everybody had acc

  • You danced around the whole judicial corruption issue. SCOTUS judges are there to decide whether things are Constitutional or not. They are not there to:
    * Decide what they think is best for America at the time, or
    * Decide what would be best for public perception of the Court, or
    * Decide where they think America should be Progressing to, or
    * Fall down on their checks-and-balances role and roll over for the other branches, or anything else.

    Roberts and the Leftist wing have demonstrated that they can't/won't d

    • by roman_mir (125474)

      No, you are right, the point of SCOTUS is to protect the Constitution, not people not gov't, not legislature. I showed that they find loopholes not to protect the Constitution but to help the current administration and they do it probably for all sorts of corrupt reasons, from money, to populism.

      SCOTUS has failed, but it's been a failure for over 100 years now.

  • Try telling people what the role of SCOTUS is [slashdot.org] and they will tell you that what SCOTUS says is Constitutional is Constitutional because SCOTUS says so.

    They disregard the glaring contradictions in the decisions (as shown in this journal entry above the case is with declaring that commerce clause does not apply, but excise tax does).

    They insist that SCOTUS must interpret the Constitution and 'read between the lines' (it is all in that thread linked on top of this comment).

    They cannot grasp that the SCOTUS has

    • by Reziac (43301) *

      "All of a sudden from a very SPECIFIC interpretation of the law, the law is expanded and now the government has broad powers..."

      Yes, and that gave us the regulatory nightmare we have today, which led to Obamacare and kindred expansions of government into private life.

      "You should not examine legislation in the light of the benefits it will convey if properly administered, but in the light of the wrongs it would do and the harm it would cause if improperly administered."
      -- Lyndon Johnson, 36th President of th

  • The Obama's administration is constantly in the media insisting that the mandate tax is not a tax, they insist it is a penalty.

    As a penalty, the ACA is unconstitutional, period, case closed. That is because SCOTUS only allowed ACA to stand because of mandate fine being a tax.

    An unconstitutional law does not need another SCOTUS decision to be struck down, local courts and States should refuse to uphold it, because specifically ACA is only constitutional if mandate is a tax, and since the government claims i

  • So disappointing. Given that a link to this appears in your .sig and you have mentioned it several times lately, I was hoping for more. Or perhaps, less. Yes, you are correct that much of came out was a pantload. Unfortunately, you waste a lot of time ranting about income taxes. Ask Richard Hatch, Wesley Snipes and countless others whether or not it is unconstitutional. I bet you pay yours every year (quarter, whatever). It's a lost fight and a poor argument. Heck, just for kicks, I like to argue that John

    • by roman_mir (125474)

      Ask Richard Hatch, Wesley Snipes and countless others whether or not it is unconstitutional

      - it is unconstitutional, but it doesn't matter, the Constitution is tossed out the window. That's my point, that's why I use income taxes as an example to explain that in this case it is not going to matter that in reality the ACA is unconstitutional, because with income taxes it doesn't matter, the system is set up to avoid the entire question. The point is exactly that once a narrow subset of the law is found Constitutional, then the law is used in a manner that is not Constitutional and the system doe

      • by gmhowell (26755)

        I think SOME of your questions are interesting. That is why I find the balance of your post sad. Because it could have been so much more.

        As far as better analysis? Both volokh and scotusblog have provided that in spades.

%DCL-MEM-BAD, bad memory VMS-F-PDGERS, pudding between the ears

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