I just re-read McCulloch v. Maryland for the first time since the Supreme Court decision on the health care bill was "handed down," and I was surprised to find that the reasoning, though not necessarily the holding, of McCulloch was very arguably hostile to the understanding of the federal taxing power that was employed by Chief Justice Roberts in his opinion. (I should admit up front that other parts of the McCulloch opinion tend to favor holding the taxing power to nevertheless extend beyond the distinctions recognized in McCulloch, so I am not making the claim that McCulloch itself, as a precedent, stands or stood against Chief Justice Roberts' opinion -- the importance of it is that such crucial distinctions were understood and recognized early in the Constitution's existence.)
On its face, McCulloch may seem to have little similarity to the health care case, NFIB v. Sebelius -- it concerns the extent of the power of the states to impose a tax directly and specifically on an enterprise of the federal government (which the Court had just determined to be constitutional), and the extent and contours of the power of Congress to impose taxes was not even considered. However, at several points, the Court recognizes that a tax for certain purposes, or with certain effects and apparent purposes, may differ from other taxes in a crucial legal way.
The part about the power to tax involving "the power to destroy" is well-known, but in the passage above, we find Chief Justice Marshall recognizing that taxes involve not only a power to destroy, but also "a power to control."
The (McCulloch) opinion continues,
The same applies to the issues of NFIB v. Sebelius. Although freedom and individual choice are not made the supreme law of the land by the Constitution (though they are protected by it, to great extent), it can be doubted that the American people intended to subject every aspect of their conduct to the control of the federal government pursuant to the taxing power, just as it can very reasonably be doubted that they intended to subject the power of the federal government to the legislative powers of the individual states. As one ought to intuitively sense, the power to tax is not a power to lay any conceivable amount of tax on any selected person or class of persons (or all people in the United States) and according to any scheme or on any basis that Congress could conceivably choose.
A principle is concerned, here, that I doubt was fully understood and developed at the time of the Constitution's drafting and ratification (and which I am not sure that I fully understand or have fully developed, yet), but it is nonetheless implicated by the Constitution: that the power to tax is a power to raise revenue, and that taxes levied for that purpose and pursuant to that power have certain attributes that distinguish them (and the incidental incentives and disincentives created by them) from taxes which are designed and levied so as to control human conduct as a general matter, or to reward or punish, or to assist or destroy. Exactly what those attributes are, I cannot yet say -- as I admitted in an earlier post, Congress certainly should (and, as a logical matter, must) have a certain degree of discretion in deciding the extent to which it taxes what, and with what exceptions, and what exemptions, deductions, and credits, if any, it will allow, among other details. I do not believe that it can be absolutely indifferent between all interests and all courses of conduct, and I doubt that a default mode or rate of taxation will ever be possible to discern. Nonetheless, there must be outer limits to that discretion, restraining the use of taxes to roughly its proper purpose of raising a revenue (in ways that do not arrogate to Congress power and control that no one has ever validly given to it). Otherwise -- if we cannot recognize anything that satisfactorily divides a tax from a law that mandates or prohibits, so long as the penalty is monetary and the violator is not given a trial -- what prevents Congress from effectively making an ex post facto law, where the penalty is a tax, or a bill of attainder or bill of pains and penalties, so long as the fine or forfeiture involved is characterized as a tax? (Chief Justice Roberts attempted to explain why he accepted the penalty in the NFIB case as a tax, but the reasons he offered focused on forms, not substance.)
Finally, the opinion recognizes the distinction between a general tax which might happen to fall on the bank on the same terms as on everyone else, and one which is imposed specifically on the bank:
Again, it does not necessarily follow from this that the individual mandate, if accepted as a tax, is unconstitutional; it would be necessary to conclude also that such a regulatory tax falls outside the scope of the taxing power. What McCulloch does, however, is stand for the notion that it is possible for the Court to distinguish between taxes which are intended or designed to constrain, restrain, or destroy, on the one hand, and taxes for the purpose of raising a revenue, and the incidental incentives that follow them, on the other.
Eventually, this will be important, because once this legal issue has been given more thought and attention, it will no longer be possible for a Chief Justice of the Supreme Court of the United States to be satisfied that a rule enforced by a fine is nothing more than a tax, simply because it is collected by the IRS, does not observe due process requirements (because it is to be collected "in the same manner as taxes"), does not have a scienter requirement (which, unfortunately, is not as reliably connected with modern penal statutes as the Chief Justice seemed to think -- why would a characteristic that penal statutes tend to have but are not presently required to have, and which nothing prevents a genuine tax from having, help to distinguish a penal statute from a tax?), is of a certain magnitude (the question of the magnitude of tax rates being committed entirely to the discretion of Congress, if anything is ... at least so long as the government is not accumulating an utterly unjustifiable surplus for no legitimate reason, or taxing at rates calculated to bring about our annihilation, for whatever reason), is located in the "Internal Revenue Code" portion of the United States Code, is adjusted in ways which happen to be associated with taxes, right now, or is defended by government lawyers who say that they do not consider nonobservance of the rule to be unlawful -- of which factors, most have more to do with whether Congress thought of the penalty as a tax, or wanted it to be thought of as a tax, than whether it ought to be considered a legitimate use of the taxing power of Article I, Section 8.
On its face, McCulloch may seem to have little similarity to the health care case, NFIB v. Sebelius -- it concerns the extent of the power of the states to impose a tax directly and specifically on an enterprise of the federal government (which the Court had just determined to be constitutional), and the extent and contours of the power of Congress to impose taxes was not even considered. However, at several points, the Court recognizes that a tax for certain purposes, or with certain effects and apparent purposes, may differ from other taxes in a crucial legal way.
"That the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create; that there is a plain repugnance in conferring on one government a power to control the constitutional measures of another, which other, with respect to those very measures, is declared to be supreme over that which exerts the control, are propositions not to be denied. But all inconsistencies are to be reconciled by the magic of the word confidence. Taxation, it is said, does not necessarily and unavoidably destroy. To carry it to the excess of destruction, would be an abuse, to presume which, would banish that confidence which is essential to all government. But is this a case of confidence? Would the people of any one state trust those of another with a power to control the most insignificant operations of their state government? We know they would not. Why, then, should we suppose, that the people of any one state should be willing to trust those of another with a power to control the operations of a government to which they have confided their most important and most valuable interests? In the legislature of the Union alone, are all represented. The legislature of the Union alone, therefore, can be trusted by the people with the power of controlling measures which concern all, in the confidence that it will not be abused. This, then, is not a case of confidence, and we must consider it is as it really is."
The part about the power to tax involving "the power to destroy" is well-known, but in the passage above, we find Chief Justice Marshall recognizing that taxes involve not only a power to destroy, but also "a power to control."
The (McCulloch) opinion continues,
"If we apply the principle for which the state of Maryland contends, to the constitution, generally, we shall find it capable of changing totally the character of that instrument. We shall find it capable of arresting all the measures of the government, and of prostrating it at the foot of the states. The American people have declared their constitution and the laws made in pursuance thereof, to be supreme; but this principle would transfer the supremacy, in fact, to the states. If the states may tax one instrument, employed by the government in the execution of its powers, they may tax any and every other instrument. They may tax the mail; they may tax the mint; they may tax patent-rights; they may tax the papers of the custom-house; they may tax judicial process; they may tax all the means employed by the government, to an excess which would defeat all the ends of government. This was not intended by the American people. They did not design to make their government dependent on the states."
The same applies to the issues of NFIB v. Sebelius. Although freedom and individual choice are not made the supreme law of the land by the Constitution (though they are protected by it, to great extent), it can be doubted that the American people intended to subject every aspect of their conduct to the control of the federal government pursuant to the taxing power, just as it can very reasonably be doubted that they intended to subject the power of the federal government to the legislative powers of the individual states. As one ought to intuitively sense, the power to tax is not a power to lay any conceivable amount of tax on any selected person or class of persons (or all people in the United States) and according to any scheme or on any basis that Congress could conceivably choose.
A principle is concerned, here, that I doubt was fully understood and developed at the time of the Constitution's drafting and ratification (and which I am not sure that I fully understand or have fully developed, yet), but it is nonetheless implicated by the Constitution: that the power to tax is a power to raise revenue, and that taxes levied for that purpose and pursuant to that power have certain attributes that distinguish them (and the incidental incentives and disincentives created by them) from taxes which are designed and levied so as to control human conduct as a general matter, or to reward or punish, or to assist or destroy. Exactly what those attributes are, I cannot yet say -- as I admitted in an earlier post, Congress certainly should (and, as a logical matter, must) have a certain degree of discretion in deciding the extent to which it taxes what, and with what exceptions, and what exemptions, deductions, and credits, if any, it will allow, among other details. I do not believe that it can be absolutely indifferent between all interests and all courses of conduct, and I doubt that a default mode or rate of taxation will ever be possible to discern. Nonetheless, there must be outer limits to that discretion, restraining the use of taxes to roughly its proper purpose of raising a revenue (in ways that do not arrogate to Congress power and control that no one has ever validly given to it). Otherwise -- if we cannot recognize anything that satisfactorily divides a tax from a law that mandates or prohibits, so long as the penalty is monetary and the violator is not given a trial -- what prevents Congress from effectively making an ex post facto law, where the penalty is a tax, or a bill of attainder or bill of pains and penalties, so long as the fine or forfeiture involved is characterized as a tax? (Chief Justice Roberts attempted to explain why he accepted the penalty in the NFIB case as a tax, but the reasons he offered focused on forms, not substance.)
Finally, the opinion recognizes the distinction between a general tax which might happen to fall on the bank on the same terms as on everyone else, and one which is imposed specifically on the bank:
"This opinion does not deprive the states of any resources which they originally possessed. It does not extend to a tax paid by the real property of the bank, in common with the other real property within the state, nor to a tax imposed on the interest which the citizens of Maryland may hold in this institution, in common with other property of the same description throughout the state. But this is a tax on the operations of the bank, and is, consequently, a tax on the operation of an instrument employed by the government of the Union to carry its powers into execution. Such a tax must be unconstitutional."
Again, it does not necessarily follow from this that the individual mandate, if accepted as a tax, is unconstitutional; it would be necessary to conclude also that such a regulatory tax falls outside the scope of the taxing power. What McCulloch does, however, is stand for the notion that it is possible for the Court to distinguish between taxes which are intended or designed to constrain, restrain, or destroy, on the one hand, and taxes for the purpose of raising a revenue, and the incidental incentives that follow them, on the other.
Eventually, this will be important, because once this legal issue has been given more thought and attention, it will no longer be possible for a Chief Justice of the Supreme Court of the United States to be satisfied that a rule enforced by a fine is nothing more than a tax, simply because it is collected by the IRS, does not observe due process requirements (because it is to be collected "in the same manner as taxes"), does not have a scienter requirement (which, unfortunately, is not as reliably connected with modern penal statutes as the Chief Justice seemed to think -- why would a characteristic that penal statutes tend to have but are not presently required to have, and which nothing prevents a genuine tax from having, help to distinguish a penal statute from a tax?), is of a certain magnitude (the question of the magnitude of tax rates being committed entirely to the discretion of Congress, if anything is ... at least so long as the government is not accumulating an utterly unjustifiable surplus for no legitimate reason, or taxing at rates calculated to bring about our annihilation, for whatever reason), is located in the "Internal Revenue Code" portion of the United States Code, is adjusted in ways which happen to be associated with taxes, right now, or is defended by government lawyers who say that they do not consider nonobservance of the rule to be unlawful -- of which factors, most have more to do with whether Congress thought of the penalty as a tax, or wanted it to be thought of as a tax, than whether it ought to be considered a legitimate use of the taxing power of Article I, Section 8.
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