Is it a Tax or Not? Obamacare Ties Democrats in Rhetorical Knots

In its attempt to implement it’s healthcare reform bill, better known as Obamacare, the Obama Administration has tied itself in political and rhetorical knots.

When Democrats were attempting to sell the bill to the public they insisted that the individual mandate (the requirement that everyone must either obtain health insurance or pay a penalty) was not a tax. In a 2009 interview with George Stephanopoulos, Obama attempted to refute the argument that this portion of the bill violated his promise not to raise taxes on anyone making less than $250,000.

“For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase,” Obama said in the interview.  “You just can’t make up that language and call it a tax increase. . .  I absolutely reject that notion.”

But after it passed the Obama Administration began to change its tune. Realizing that it was going to face a constitutional challenge the Obama team felt they would be on safer legal ground if they admitted it was a tax increase rather tan attempt to defend it based on the power to regulate interstate commerce.

Constitutionally speaking, this is a smart strategy. The Commerce Clause provides sweeping authority, allowing the government to regulate interstate commerce, a term of art that has come to mean it can regulate any economic activity. But this line of reasoning runs into problems because in the case of Obamacare there is no activity. It’s attempting to punish inactivity by punishing those who choose not to buy health care.

Democrats have sought to get around this problem by arguing that the collective decision not to purchase insurance has impacts that ripple into the economy. Numerous courts have pointed out that by this justification the government could regulate anything. “The government’s struggle to articulate cognizable, judicially administrable limiting principles only reiterates the conclusion we reach today: there are none,” the 11th Circuit Court of Appeals wrote in its decision on the case

The potential for failure has led the Obama legal team to take the much safer approach – argue that Obamacare is a tax, which Congress can exercise to provide for the “general welfare” – even broader language than the Commerce Clause.

The Justice Department has latched on to this argument, pointing out to the court that the individual mandate penalty would raise substantial revenue ($4 billion). It is also collected under the Internal Revenue Code and must be reported on tax returns “as an addition to income tax liability.” Therefore, despite the language of the bill calling it a “penalty” (a word chosen precisely because the Administration didn’t want it labeled a tax), if it walks like a tax and talks like a tax, it’s a tax.

(Of course, this too faces problems. As HotAir’s Allahpundit writes, “If Congress can use its taxing power to steer your money directly to private insurers, then in theory it could force you to fork your money over to any number of congressionally-favored private-sector businesses for not-so-public purposes.”)

But as the Obama Administration is keenly aware, enacting a new tax on the middle class in an election year is not sound political strategy, regardless of the legal merits. That’s why in public they continue to argue that Obamacare’s individual mandate should not be construed of as a tax.

The most recent example came in a hearing on Friday when Office of Management and Budget Director Jeffrey Zients said Obamacare is not a task.

When asked by Rep. Scott Garrett whether or not the individual mandate penalty is a tax that undermines the Obama Administration’s claim that it is not raising taxes for any families under $250,000, Zients seems confused, before eventually saying that the penalty is not a tax.

Zients confusion is understandable. With the Obama Administration completing changing its argument depending on the day and who is listening, it’s tough to keep your story straight. Of course this rhetorical knot could all be saved if Obama would just start being honest with the American people.