Tuesday night, a federal judge in Washington D.C. ruled that the new healthcare law is constitutional with an important side-note. Judge Kessler is the third judge to do so, while two judges ruled that it isn’t constitutional. Judge Kessler ruled that the individual mandate to buy health insurance within the new law falls under Congressional power under the Commerce Clause of the Constitution. While the Department of Justice largely counts this as a win in their favor (and it is) there is one detail that could cause major problems further down the road.

While the main argument from the Obama administration has been tied to the Commerce Clause, the second argument (and far more popular argument among most academics) is that the new healthcare law’s individual mandate is constitutional since it is an exercise of Congress’s power to tax. As mentioned before, the Obama administration has gone back and forth on this issue constantly; telling the public it is not a tax while Department of Justice officials vehemently insist that it is. Ignoring the administration’s incessant assertions that the “penalty” for not purchasing health insurance is a tax and is therefore constitutional, Judge Kessler is the fifth judge to issue a ruling on this issue and also the fifth judge to rule that is in fact not a tax.

Judges who have ruled that the new healthcare law is or is not constitutional have all agreed, so far, that the penalty is not a tax. These rulings, while substantiating the Obama administration’s public claims about the law may end up being what ultimately gets it struck down in court.  Most everyone agrees that this issue will eventually come before the U.S. Supreme Court, in which case they will ultimately decide the new law’s constitutionality. When the Court considers arguments, a major factor will be whether the penalty is a constitutional tax or not. Over and over, the Obama administration’s lawyers have unquestionably insisted that it is a tax, calling it a linchpin of their constitutionality argument. However, in this scenario, with five federal judges lining up and agreeing it is not a tax, it will be an extremely tough sell for the Department of Justice when the stakes are highest.

Americans for tax Reform has always considered the individual mandate penalty a tax. As mentioned before, this is publicly disputed by the Obama administration but (less) publicly confirmed by the administration’s Department of Justice lawyers. Even with the Obama administration talking out of both sides of its mouth and despite rulings from all five federal judges the facts remain clear:

  • The penalty fits exactly into the dictionary definition of a tax
  • The provision was scored as a tax in the revenue projections from the non-partisan Congressional Budget Office
  • The “penalty” is paid on a person’s IRS 1040 tax form
  • The Affordable Care Act itself references the Internal Revenue Code in its language
  • Most convincingly, the Department of Justice passionately argues in court that the penalty is in fact a tax