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Supreme Court Concocts "Rational Tax Test" in Health Ruling

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Supreme Court Concocts "Rational Tax Test" in Health Ruling

Upholds Purchase Mandate as Tax While Congress, President Insist It Is Not

Washington, D.C., June 28, 2012 – Statement by CEI Senior Fellow Gregory Conko:

In enacting the health care individual purchase mandate, Congress and President Obama insisted that the measure was not a tax. Unfortunately, the Supreme Court refused to take them at their word. But at least the Court did not uphold the mandate as a legitimate exercise of Congress’s power to regulate commerce. Doing so would have granted government essentially unlimited authority over every aspect of the lives of Americans.

But the decision to uphold the mandate as a tax is troubling, like the Court’s prior commerce clause jurisprudence. Under the so-called “Rational Basis Test,” the Court has refused to question due process or equal protection violations when Congress’s reason for enacting the law might be “rationally related” to a legitimate government interest. Under that test, however, Congress does not have to explain why the law was “rational” as long as the Supreme Court can substitute its own rationale. Today’s decision says Congress does not need to call a regulation a tax—Congress and the President can even insist it is not a tax—if the Supreme Court can rationalize it as one: the Rational Tax Test.

Today’s decision gives ObamaCare a temporary reprieve. But an overwhelming majority of Americans have made clear that they do not want this health care law. Two years ago, then-House Speaker Nancy Pelosi insisted that Congress had to “pass the bill so that you can find out what is in it.” Well, Americans have now seen what’s in ObamaCare, and they want to see it repealed and replaced.

It was a dereliction of duty for the Supreme Court to uphold the individual purchase mandate. But eliminating the mandate alone would not have been enough. ObamaCare has been called a “government takeover” of American health care. But the sad truth is that, even before ObamaCare, federal and state government programs were already in direct control of close to half of all U.S. health care spending. In addition, private health insurance has for decades been subject to extensive state and federal regulation governing who must be covered and how.

In a very meaningful sense, government took over health care long ago. That has to change if health care reform is to be successful.

The core problems in America’s health care system – high and rising prices, lack of consistent and reliable access for millions, rampant cost shifting, and an inability to distinguish between effective and ineffective services or between high and low quality, to name just a few – stem primarily from existing government interventions in the market for health care and health insurance. It will take more than some minor tweaks to repair America’s health care system, and returning to the status quo won’t be enough. Congress should now commit to a major overhaul that will cure the system’s endemic flaws.

Real reform will require dismantling the layers of overlapping regulatory fixes imposed from Washington over the past decades. In addition to streamlining entitlement programs, Congress should eliminate the tax disincentives that push individuals into employment-based insurance, scrap federal and state rules that dictate health plan design, open up competition among health care providers across state lines, and put more purchasing power in the hands of individuals.

Statement by CEI Senior Counsel Hans Bader:

This is a perverse decision that allows politicians to avoid political heat by denying that something is a tax in order to pass it, as Obama and Congressional leaders did, when they pretended they had kept Obama’s pledge not to raise taxes on anyone making less than $250,000 a year. By doing so, it undermines political accountability, despite the fact that ensuring such accountability was a chief purpose of the Constitution.