Retirement Plan Sales Territory Manager (Irving TX)
NQ Client Services Manager (Private Label) (Lake Mary FL / Dallas TX)
Associate Attorney - Tax (Honolulu HI)
“BenefitsLink continues to be the most valuable resource we have at the firm.”
-- An attorney subscriber
By Alvin D. Lurie
July 9, 2012
On hearing that CNN, in its haste to steal a beat on the competition, on its reading the first few pages of Chief Justice John Roberts' ruling for the majority on the constitutionality of the landmark health care reform legislation, reported that the U.S. Supreme Court, in a 5-4 opinion, had determined that the law was unconstitutional—only to discover on reading further into the opinion that the Court reached exactly the opposite conclusion—this observer was reminded of the time that the Chicago Tribune emblazoned in an oversized headline across all columns of the front page of its paper that DEWEY BEATS TRUMAN in the 1948 election. It was, of course, forced to eat its words shortly later when it turned out that exactly the opposite had occurred.
I admit that should have been constrained from responding to a request for my first impressions of the decision (denominated NFIB vs. Sebelius) before having made the time to read the near-200 pages of the four opinions that comprise the entire report of the nine justices who make up the Court's membership. But it is evident from the paragraphs that follow that I was not so constrained. So my reading of the opinions must await another day, but, until then, I am willing to commit to print some first impressions.
For one thing, it has shocked all the wise-money prognosticators, who were pretty sure that the insurance mandate was dead on arrival, and the only question was what happened to the rest of the law. That was wrong. It was thought by almost everyone—me too—that as Kennedy went, so went the fate of Obamacare. That too was wrong.
The other certainty of the soothsayers was that, Kennedy apart, the Court was split into two cohorts that religiously observed their respective sides of the liberal-conservative divide. Even that was wrong.
Then there was some radical speculation—dismissed as far-fetched by cooler heads—that Chief Roberts might engage in some wholly unexpected maneuvers to preserve both his personal—and the Court's collective—unraveling authority and prestige, in an effort to offset the increasingly widespread belief that the Court had become simply a collection of politicians in black robes. That speculation even went to the extent of suggesting that Roberts might very well pull a last-minute switch to the liberal side if it was foregone that, with Kennedy's possible announcement in chambers to his colleagues that he was voting with the liberals, the Court would deliver a 5-4 decision sustaining the law in any case, thus immunizing Roberts from blame for the decision if his vote merely made the decision 6-3. So, it was hypothesized, Roberts would join their ranks—as improbable as that once seemed—just to give the appearance that he was in charge of a Court as much above politics as he, contrary to what one might have mistakenly assumed from decisions such as Bush vs. Gore and Citizens United, to say nothing of the Court's reaffirmation of the Citizens holding in just the week preceding the NFIB decision, with Roberts in his customary position among the conservatives. That speculation was wrong also, but not as wrong as most observers would have thought, as will momentarily become apparent.
The shock that Roberts provided, when he read the majority decision, was that when Kennedy showed his hand by voting with the conservative bloc, even then Roberts moved to the left to supply the fifth vote for upholding the constitutionality of the law. That seemed totally inconceivable, but not the last of the shocks to follow (although the most upsetting to CNN, one must assume). A shock that seems not yet to have registered on any shock-counting registers was that, far from producing the desired prestige-building for himself and the Court, Roberts' action might have thrown him, if not the Court, into further disrepute, were he to be seen as having engaged cynically in personal legacy-building, motivated not by his legal or social philosophies but by simple, personal aggrandizement. Obviously one cannot be certain of that; and this piece must not be seen as stating otherwise.
One thing is certain: Roberts has certainly in one fell swoop won over a sizeable segment of liberal law professors, lawyers and economists who, before his startling turnabout, saw him as a predictable ideologue (if not worse, in their eyes).
The last—and perhaps most unlikely—shock was Roberts, writing for one of the majority configurations (there were different alignments of the Justices on different issues), sustaining the constitutionality of the law, not on the basis that almost all believed the case would be decided, i.e., the Commerce Clause, but as a "tax," permissible under Congress' authority to levy taxes. Roberts explicitly rejected, with the conservative bloc of the Court, the Commerce Clause foundation in the early part of his opinion. (That indeed is what led CNN into its premature erroneous call.)
Almost no one believed the key to the survival of the Affordable Care Act would lie in the taxing authority. The Congress itself seemed to foreclose reliance on the tax analysis. What was at the core of the case was whether the enforcing mechanism of the insurance mandate, a monetary price to be paid by those whom the law decreed must purchase a health insurance policy but who chose not to do so, was, as Congress described it in the law, a "penalty" or was it a tax. If the former, it could not withstand constitutional challenge, because it could only derive support from the Commerce Clause; and once the Court concluded that it was beyond the reach of that clause, the penalty could not stand independently, unless it could be seen as a tax, and so protected by the taxing power.
The Solicitor General, in the government's brief and oral argument, placed his emphasis on the Commerce Clause. The taxing theory was a rather distant alternative—almost a throwaway position. The President himself had asserted in public utterances that the monetary cost of noncompliance with the mandate was not a tax, for obvious reasons. A tax on millionaires was one thing; but Obama obviously didn't want his signature accomplishment to be seen as a tax on everyone else. Doubtless Congress' use of the "penalty" characterization in the language of the statute was heavily influenced by the White House's sensitivity to the tax-raising label.
For Chief Justice Roberts to place the legality of this major legislation on so tenuous a base as an arguable, at best—if not in fact dubious—wordplay was in itself startling. His leap was even more problematic because he could only get there by confronting the so-called Anti-Injunction Act, which prevents a legal challenge to a tax before the tax goes into effect. This mandate-related impost will not be in effect until the 2014 tax year, and thus could not be attacked until the payment of such 2014 tax liabilities. The Court could obviously have punted, holding that the legal challenge was premature. It elected not to do that. Thus, to hold that this ACA penalty was not a tax for purpose of the Anti-Injunction Act, but was a tax for purpose of testing its constitutionality, might have been seen to some as a bridge too far even for the Supreme Court Chief Justice.
There can be no argument that Chief Justice Roberts crossed that bridge with a deftness that even his critics would have to admire. The opinion is a prime example of adroit lawyering, a veritable tour de force. Lawyers can certainly appreciate the art with which Roberts builds his case. But much of the general public is bound to find unsatisfactory this twisting of the word "tax" to have entirely contradictory meanings when exactly the same economic event is tested under two separate and distinctive legislative enactments in the same litigation by the same judges on the same day, in one with the object of reaching a no-tax conclusion, in the other a tax conclusion.
It's one thing for Humpty Dumpty to tell Alice, "When I use a word, it means just what I choose it to mean—neither more nor less." To this Alice replies, "The question is whether you can make words mean so many different things." Not to be boxed in by such childish logic, Humpty responds, "The question is which is to be master—that's all." The majority opinion does not cite Lewis Carroll. His work, of course, is only literature. The Roberts Rule is a higher authority—the law of the land.
Do you find this shocking?
? A.D. Lurie 2012
Alvin D. Lurie is a practicing pension attorney. He was appointed as the first person to administer the ERISA program in the IRS National Office in Washington. He is general editor of Bender's Federal Income Taxation of Retirement Plans (LexisNexis), a 2-volume treatise, and he is also editor of the annual compendium of articles published under the title New York University Review of Employee Benefits and Executive Compensation (LexisNexis). Mr. Lurie is the first recipient of the Lifetime Employee Benefits Achievement Award sponsored by the Employee Benefits Committee of the American Bar Association Tax Section. He can be contacted at Alvin D. Lurie, P.C. in Larchmont, New York, at (914) 834-6725 or via email: <email@example.com>. He is also of counsel to The Wagner Law Group in Boston.
BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.