King v Burwell – it was all about the SCOTUSCare tax after all

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King v Burwell - it was all about the SCOTUSCare tax after all

By Steve Eggleston

Unless you’ve been in a cave the last 2 days, you know that the Supreme Court once again rewrote what Jus­tice Antonin Scalia has taken to call­ing SCO­TUS­Care to judi­cially extend tax sub­si­dies for pur­chas­ing health insur­ance to the poor and mid­dle class pur­chas­ing insur­ance on federally-​established insur­ance exchanges. Much has been made over said sub­si­dies, with the Con­gres­sional Repub­li­cans pre­em­tively say­ing that had the let­ter of the law been applied and said sub­si­dies on the federally-​established exchanges been struck down, they would rush in to “tem­porar­ily” allow those sub­si­dies to hap­pen through 2017.

How­ever, the case itself was never about the sub­si­dies them­selves, but rather the penalt…er…taxes that those sub­si­dies allowed to be applied. Indeed, both the major­ity opin­ion writ­ten by Chief Jus­tice John Roberts and the dis­sent writ­ten by Scalia admit that it is all about the tax, and in Roberts’ case, pre­serv­ing what he trans­formed from a penalty to a tax.

As Scalia points out, the phrase “Exchange estab­lished by the State” appears innu­mer­able times through­out the law. Indeed, it expressly defined the word “State” as “each of the 50 States and the Dis­trict of Columbia”.

The goal of lim­it­ing the sub­si­dies to those in states where the state set up the exchange rather than the fed­eral gov­ern­ment was to put polit­i­cal pres­sure on the states to be the prover­bial bag­men for the fed­eral gov­ern­ment by offload­ing the cost of the exchanges from the fed­eral gov­ern­ment to the states. That the Democ­rats failed in their attempt to black­mail the states into becom­ing their bag­men (a wise fis­cal deci­sion, as those states that set up, or tried to set up, their own exchanges are find­ing to their peril) is not some­thing for the IRS, or six Lawgivers-​In-​Black, to “cor­rect”, espe­cially when the Repub­li­cans said that they would do the “cor­rect­ing” on at least a tem­po­rary basis.

The elim­i­na­tion of said sub­si­dies in states with federally-​established exchanges would, in a plain-​text read­ing of the law, also elim­i­nate the threat of the indi­vid­ual non-​insurance tax for every cou­ple, vir­tu­ally every multi-​member fam­ily, and most sin­gle peo­ple mak­ing between 100% and 400% of the poverty level in those states as the cost of the second-​cheapest “sil­ver” insur­ance plan would rise to above 8% of their income. Sim­i­larly, the two types of employer non-​insurance tax are pred­i­cated on at least one “full-​time” employee (that is, one who worked at least 130 hours in a given month) get­ting sub­si­dized cov­er­age, with the elim­i­na­tion of the sub­sidy elim­i­nat­ing the lia­bil­ity of those employ­ers oper­at­ing solely in those states.

Roberts, in defend­ing his 2012 dec­la­ra­tion that the indi­vid­ual tax is indeed a tax, admits that result would cause great finan­cial harm to the over­all SCO­TUS­Care scheme. Again, the role of a judge, even a Supreme Court Chief Jus­tice, is not to save the other branches of fed­eral gov­ern­ment from bad finan­cial bets through judi­cial rewrites of law, espe­cially since Con­gres­sional Repub­li­cans vowed to do just that.

I guess we could count our­selves “for­tu­nate” that my darker pre­dic­tion of Roberts and his fel­low Lawgivers-​In-​Black find­ing a way to keep the taxes fully-​intact while strik­ing down the sub­si­dies didn’t hap­pen. On the other hand, given the Con­gres­sional Repub­li­cans were going to fully-​cave (though sup­pos­edly tem­porar­ily) on the issue of sub­si­dies, I doubt that allow­ing them to keep the fig leaf of Kabuki The­atre Oppo­si­tion will much mat­ter. It will sim­ply take a bit longer for them to do the expan­sion of SCO­TUS­Care that they pre­vi­ously did for Social Secu­rity (thrice) and Medicare.

By Steve Eggleston

Unless you’ve been in a cave the last 2 days, you know that the Supreme Court once again rewrote what Justice Antonin Scalia has taken to calling SCOTUSCare to judicially extend tax subsidies for purchasing health insurance to the poor and middle class purchasing insurance on federally-established insurance exchanges. Much has been made over said subsidies, with the Congressional Republicans preemtively saying that had the letter of the law been applied and said subsidies on the federally-established exchanges been struck down, they would rush in to “temporarily” allow those subsidies to happen through 2017.

However, the case itself was never about the subsidies themselves, but rather the penalt…er…taxes that those subsidies allowed to be applied. Indeed, both the majority opinion written by Chief Justice John Roberts and the dissent written by Scalia admit that it is all about the tax, and in Roberts’ case, preserving what he transformed from a penalty to a tax.

As Scalia points out, the phrase “Exchange established by the State” appears innumerable times throughout the law. Indeed, it expressly defined the word “State” as “each of the 50 States and the District of Columbia”.

The goal of limiting the subsidies to those in states where the state set up the exchange rather than the federal government was to put political pressure on the states to be the proverbial bagmen for the federal government by offloading the cost of the exchanges from the federal government to the states. That the Democrats failed in their attempt to blackmail the states into becoming their bagmen (a wise fiscal decision, as those states that set up, or tried to set up, their own exchanges are finding to their peril) is not something for the IRS, or six Lawgivers-In-Black, to “correct”, especially when the Republicans said that they would do the “correcting” on at least a temporary basis.

The elimination of said subsidies in states with federally-established exchanges would, in a plain-text reading of the law, also eliminate the threat of the individual non-insurance tax for every couple, virtually every multi-member family, and most single people making between 100% and 400% of the poverty level in those states as the cost of the second-cheapest “silver” insurance plan would rise to above 8% of their income. Similarly, the two types of employer non-insurance tax are predicated on at least one “full-time” employee (that is, one who worked at least 130 hours in a given month) getting subsidized coverage, with the elimination of the subsidy eliminating the liability of those employers operating solely in those states.

Roberts, in defending his 2012 declaration that the individual tax is indeed a tax, admits that result would cause great financial harm to the overall SCOTUSCare scheme. Again, the role of a judge, even a Supreme Court Chief Justice, is not to save the other branches of federal government from bad financial bets through judicial rewrites of law, especially since Congressional Republicans vowed to do just that.

I guess we could count ourselves “fortunate” that my darker prediction of Roberts and his fellow Lawgivers-In-Black finding a way to keep the taxes fully-intact while striking down the subsidies didn’t happen. On the other hand, given the Congressional Republicans were going to fully-cave (though supposedly temporarily) on the issue of subsidies, I doubt that allowing them to keep the fig leaf of Kabuki Theatre Opposition will much matter. It will simply take a bit longer for them to do the expansion of SCOTUSCare that they previously did for Social Security (thrice) and Medicare.