Yves here. Big decision when Lambert and I are short on bandwidth, so this is just first impressions. One striking bit is that the Supreme Court left the penalties for not obtaining insurance in place by designating it a tax, but then struck down enforcement mechanisms against states who fail to offer expanded Medicare.
Lambert highlights the fact that this decision undercuts the ability of the Federal government to use tax as a tool to promote social goals. The irony is the Obama administration was already there as far as banks are concerned. We’ve pointed out that the Administration is has refused to use widespread violations of REMIC (the tax rules that give mortgage securitizations their tax-free status) to bring miscreant banks to heel. From a 2011 post:
Now, with the Federal government under enormous budget pressure, shouldn’t the authorities be keen to go after tax cheats? The headline of a Reuters article, “IRS weighs tax penalties on mortgage securities,” would suggest so. But don’t get your hopes up. The lesson is don’t jump to conclusions when big finance is involved.
An overview from the article:
Should the IRS find reason to take tough action, the financial impact could be enormous. REMIC investments are held by pension funds, in individual retirement plans such as 401(k)s and by state and local government entities.
As of the end of 2010, investments in REMICs totaled more than $3 trillion, according to data supplied by the Securities Industry and Financial Markets Association.
In a brief statement in response to questions from Reuters, the agency said: “The IRS is aware of questions in the market regarding REMICs and proper ownership of the underlying mortgages as set out in federal tax law, and is actively reviewing certain aspects of this issue.”
This matter was raised early last year by an attorney I know with IRS, to a senior officer, not in enforcement but familiar with REMIC rules. She immediately understood the importance and nature of the violations being alleged and was keen to proceed. Having had no follow up, the attorney rang again, and the IRS officer took the call, this time reluctantly. She indicated she was not supposed to be taking to him. She said the issue had gone to the White House, where word came back that tax was not going to be used as a tool of policy.
By Lambert Strether. Cross posted from Corrente
Hasty post, as I must fly. Three bits from ScotusBlog that I would like to expand on briefly.
First, here’s the reasoning:
Essentially, a majority of the Court has accepted the Administration’s backup argument that, as Roberts put it, “the mandate can be regarded as establishing a condition — not owning health insurance — that triggers a tax — the required payment to IRS.” Actually, this was the Administration’s second backup argument: first argument was Commerce Clause, second was Necessary and Proper Clause, and third was as a tax. The third argument won.
Second, here are the implications for the role of the State as we have understood it from the New Deal onward; what Phillip Bobbitt would call a change a Constitutional Order:
The rejection of the Commerce Clause and Nec. and Proper Clause should be understood as a major blow to Congress’s authority to pass social welfare laws.
Third, here is the new Constitutional Order:
Using the tax code — especially in the current political environment — to promote social welfare is going to be a very chancy proposition.
Chancy or not — and it will be the precariat that suffers mischance, and not the elite, in any case — that’s what they’re going to do.
Bobbitt defines the “market state” here (quote from The Shield of Achilles):
Whereas the nation-state, with its mass free public education, universal franchise, and social security policies, promised to guarantee the welfare of the nation, the market-state promises instead to maximize the opportunity of the [some] people and thus tends to privatize many state activities and to make voting and representative government less influential and more responsive to the market.
Using the tax code to optimize rental extraction — in this case, by health insurance companies — is the very essence of Cass, Sunstein et al’s. Nudge Theory (via Time). And even if the Hobson’s choice between paying the health insurance weasels and paying the IRS is more like a shove than a nudge, it’s not a solution that the nation-state, as Bobbitt defines it, would adopt. But it is a solution the market state would adopt. After all, you have a choice!
Oh, and all the yammering from career “progressives” about how ObamaCare is a step towards a greater reform, or even single payer/Medicare for All, obscures the central issue: The change in the constitutional order. That’s their job, of course; no harm done if you take no account of their policy decoys.
Gotta go, but FWIW that’s my take.