Tuesday, July 3, 2012

The American Revolution, and the distinction between taxes for the raising of revenue and taxes for the regulation of commerce

It is time that I comment on last Thursday's Supreme Court decision on the health care bill ("for I cannot call it a law"). There are, of course, many things to be said about it, but I'll begin with something that I think cuts to the center of Chief Justice Roberts' misstep.

There is a difference between the use of a tax to raise revenue and the use of a tax to regulate commerce. This was not only well-established when the Constitution was written -- it was an important principle in motivating those who formed the early resistance to taxation of the colonies by Great Britain. The Americans, at the time, objected to the use of taxes by Great Britain for the purpose of raising a revenue without the consent of the colonies, not to the use of taxes for certain regulatory purposes, but they definitely recognized the distinction between the two. In the Declaration and Resolves of the First Continental Congress in 1774, they qualified their objection to taxes (without consent of the colonies) by stating that "from the necessity of the case, and a regard to the mutual interest of both countries, we cheerfully consent to the operation of such acts of the British parliament, as are bona fide, restrained to the regulation of our external commerce, for the purpose of securing the commercial advantages of the whole empire to the mother country, and the commercial benefits of its respective members; excluding every idea of taxation internal or external, for raising a revenue on the subjects, in America, without their consent."

Congress, of course, must enjoy a certain latitude in choosing the basis on which it levies taxes. If Congress were not meant to have discretion in this, I have no idea what scheme of taxation it ought to be forced to resort to by default. Additionally, unless Congress was meant to have discretion, I would have expected the Constitution to have been more specific in the terms by which it granted this power. To some extent, the result must be that Congress has some power, pursuant to its taxing power, to provide incentives and disincentives to certain courses of conduct -- if income is taxed, for example, then it is somewhat less advantageous to earn income; if property is taxed, that reduces the desirability of owning property; if the purchase of certain products is taxed, the incentive to purchase those products is reduced. Nevertheless, it is inconceivable that the power delegated to Congress by those who wrote and approved the Constitution extends its discretion in matters of taxation to the use of taxes to regulate all things. This would be so contrary to the principles, language, history, and structure of the Constitution that the Chief Justice ought to have recognized the absurdity of it in an instant -- I am not even aware of any Antifederalist who objected to the possibility of the use of the taxing power to force people to buy a product.

It is true that long-standing precedents of the Supreme Court have failed to make the necessary distinction between a tax and a fine, but the Supreme Court is obligated to correct its precedents, when necessary, in order to follow the Constitution. In this case, the correction was needed, but the Supreme Court failed to recognize what was established (and declared by the First Continental Congress, even) nearly thirteen years before the Constitution was approved by the Constitutional Convention, and over fourteen years before it took effect. I think that the principle is obvious enough that there is no excuse for this failure.

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