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Lecture commemorates Constitution Day

Carolyn Huytra | Wednesday, September 19, 2012

Students and faculty gathered Monday to commemorate Constitution Day with “The Health Care Decision and the Lost Generation of Child Labor Reform,” a lecture given by Barry Cushman, the John P. Murphy Foundation Professor of Law at Notre Dame.

The talk focused on the decision of the Supreme Court made in the case of National Federation of Independent Business v. Sebelius, more commonly known as the case involving the constitutionality of the Patient Protection and Affordable Care Act (ACA).

“The particular provision of the Act that was challenged was the so-called ‘individual mandate,’ which will require persons without health insurance to acquire ‘minimum essential coverage’ by 2014, or else make a ‘shared responsibility payment’ to the Internal Revenue Service,” Cushman said.

The main question rested on whether the individual mandate could be considered an exercise of Congress’ Commerce Power. Cushman said the majority of the Supreme Court ruled that the individual mandate was not in fact a legitimate exercise of the Commerce Power but rather a shared responsibility payment under the exercise of Congress’ taxing power.

“Chief Justice [John] Roberts and the dissenting justices agreed that the central question was whether the Act imposed a ‘true tax,’ or instead imposed a ‘penalty’ for failure to comply with a congressional directive,” Cushman said.

Cushman’s lecture then turned to the necessity to discern between true taxes and regulatory penalties. In order to do this, he focused on the late-19th and early-20th centuries to provide background information.

“At that time, Congress frequently sought to achieve regulatory objectives it could not attain through its commerce power by imposing excise taxes that were designed to discourage disfavored activities,” Cushman said.

The Supreme Court soon became wary of Congress’ increased use of taxing power when commerce power could not provide the desired results. The Supreme Court and Congress would finally butt heads in a child labor employment case in 1922, Cushman said.

This is in response to the 1916 Keating-Owen Child Labor Act which, Cushman said, “prohibited interstate shipment of articles produced by firms that employed children” under certain ages.

“The Child Labor Tax did not make the employment of child labor unlawful; it did raise revenue. It did not in fact prevent the employment of child labor, and its proponents did not think that it could be salvaged by lowering the rate, by a more narrow tailoring of the tax … or by moving enforcement entirely into the Department of the Treasury,” Cushman said

The Child Labor Tax was, however, still considered an unconstitutional penalty. In order to explain this Cushman turned to the arguments of Thomas Reed Powell, then a Professor at Columbia Law School.

“Powell credited [Chief Justice William Howard] Taft with fully recognizing that the distinction between a tax and a penalty was a matter of degree … [and] fully agreed with Taft that a decision upholding the tax would have led down a slippery slope to plenary congressional authority,” Cushman said.

Cushman added that Powell read the Child Labor Tax Case as establishing the proposition that the values of federalism could be preserved in taxing power jurisprudence only through the application of a standard rather than through enforcement of a rule.

This view ties into the more current health care decision in which the dissenting justices took the shared responsibility payment as a penalty, not a tax, since it “imposed an exaction as punishment for an unlawful act,” Cushman said.

In drawing a distinction between a tax and a penalty, Cushman noted that the Supreme Court had to determine if the ACA was claiming it was illegal for people to fail to uphold minimum health coverage.

Cushman said that this confusion was due to the way in which the statute was drafted. Had Congress called the “penalty” a “tax” in the first place and clarified that failure to purchase insurance was not itself illegal, the imposition would have been clearly constitutional.

“Justice Roberts characterized the shared responsibility payment as one that ‘makes going without insurance just another thing the Government taxes, like buying gasoline or earning income,'” Cushman said.  

This seems simple enough, but is rather more complex when compared to the past rulings on child labor, he said.

“It is only where the exaction was coupled with a detailed and specified course of conduct, as in the Child Labor Tax Case, that the Court has held the exaction to be a penalty rather than a true tax,” Cushman said.

One can argue that the current shared responsibility payment of the ACA does not qualify as a tax under the Child Labor Tax Case, and then should be considered a penalty, he said.

“If that understanding is correct, then the Roberts Court may just have tacitly overruled the Child Labor Tax Case and its progeny,” Cushman said.

A second possibility, Cushman said, is that Powell and his contemporaries misread the Child Labor Tax decision and “a revised measure eliminating one or more of the distinguishing features identified by Chief Justice Roberts” would have stood in the 1920s.

Cushman added that all this is to say that the responsibility payment today can be questioned as to whether or not it actually falls under the Court’s “narrowest interpretations of the taxing power.”

“Either the Court has effectively abandoned the principle established in the Child Labor Tax Case, or child protection advocates of the interwar period were badly mistaken in their assessment of the decision, at the cost of a lost generation of federal child labor reform,” Cushman said.