Heads up: long post. I have some thoughts on the Roberts Court’s ruling concerning the IRS’ tax credits.
Chief Justice John Roberts again rewrote the Patient Protection Affordable and Care Act to suit what he thought it should say rather than staying within the bounds of what it actually says. In these comments I’ll leave aside Roberts’ guiding principles that health plans that are independent of the risk being transferred are, somehow, insurance plans; that possession of a health plan is a universal so good it must be mandated; and that the folks who need a health plan the least—the healthy—must also be required to possess such a plan. Those matters have been well addressed elsewhere. I’ll confine my remarks to his position on the IRS’ tax credits.
What the ACA actually says regarding State Exchanges and IRS’ tax credits is this [emphasis added in both cites]:
The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—
the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State [under the ACA]
and
The term “coverage month” means, with respect to an applicable taxpayer, any month if—
as of the first day of such month the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State [under the ACA]
It really is quite explicit and clear. Eligibility for the tax credits is only through enrollment in a State Exchange: Federally established exchanges simply do not count. Nevertheless, as Roberts noted [citations omitted],
the IRS Rule provides that a taxpayer is eligible for a tax credit if he enrolled in an insurance plan through “an Exchange,” which is defined as “an Exchange serving the individual market…regardless of whether the Exchange is established and operated by a State…or by HHS[.]”
Now comes the first of Roberts’ non sequiturs:
The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep “economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly.
Indeed. However, it’s irrelevant. As he admitted, the money’s availability is an economic and political question; it most assuredly is not a legal one. This is no matter for the Court to involve itself.
Roberts then laid out three things he held must be true in order to reach his ruling:
First, the individual must enroll in an insurance plan through “an Exchange.” Second, that Exchange must be “established by the State.” And third, that Exchange must be established “under [42 U. S. C. §18031].”
For the first, Roberts turned to this bit of pseudo-logic:
State Exchanges and Federal Exchanges are equivalent—they must meet the same requirements, perform the same functions, and serve the same purposes. Although State and Federal Exchanges are established by different sovereigns, Sections 18031 and 18041 do not suggest that they differ in any meaningful way. A Federal Exchange therefore counts as “an Exchange” under Section 36B.
Notice that: Roberts has conflated “equivalent” with “equal,” or “the same as,” and he has minimized the critical distinction that renders them not at all the same: that the Exchanges were established by different sovereigns. The first is in part a straw man: no one was arguing the two different Exchanges were not equivalent enough to satisfy the “must have a health plan” requirement. The conflation and the minimization are absolutely necessary, though, to support disregarding the plain language of the ACA: an Exchange established by the State.
Thus, the first of his three things which must be true to support his opinion has failed, and so the rest of his argument fails, as well.
Let’s proceed, anyway, to the second of his three things which he has said must be true for his argument to be true.
As we just mentioned, the Act requires all Exchanges to “make available qualified health plans to qualified individuals”—something an Exchange could not do if there were no such individuals.
…
And that’s a problem: If we give the phrase “the State that established the Exchange” its most natural meaning, there would be no “qualified individuals” on Federal Exchanges.
Of course it cannot: none qualified means none qualified. Full stop. By definition, then, “if there are no such individuals” then the Exchange has achieved its duty of 100%. There is not the first syllable of an obligation created in ACA that requires a State or a State’s Exchange to manufacture qualified individuals out of the æther where none exist naturally. Neither is there the first syllable of an authorization crated in the ACA for a Federal Exchange to manufacture such individuals in a State’s stead.
This problem arises repeatedly throughout the Act.
Yes, it does. So much so that the problem must be taken at face value: it is not a problem but the repeatedly stated intent of the ACA. Indeed, the Supreme Court already had ruled on this sort of question in a prior case—oddly health care related, also—Brown v Gardner, wherein Justice David Souter, writing for the Court, quoted a rule laid out in Russello v US, a rule now well-established (except, apparently, in the minds of the Roberts Court):
Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.
Where Congress included particular language concerning credits in one section of the ACA but omitted it in another section of the same Act, and where Congress included particular language concerning Exchanges in one section of the ACA but omitted it in other sections of the Act, the Court must presume that Congress acted intentionally and purposely in that disparate exclusion.
And so Roberts’ second argument has failed, and so then has his overall argument.
Proceeding to his conclusion from his three points (I’ll not contest his third):
The upshot of all this is that the phrase “an Exchange established by the State under [42 U. S. C. §18031]” is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it is also possible that the phrase refers to all Exchanges—both State and Federal—at least for purposes of the tax credits.
No, the phrase is extremely clear: it applies only to State-established Exchanges. Or else Roberts is saying that this is permissible, also: the phrase “2 + 2” may be limited in its reach to the sum of 4. But it is also possible that the phrase refers to all sums—at least for purposes of Supreme Court Justices. No. As Roberts noted above, the thing is stated often throughout the ACA, and so it’s clearly intended to mean what it says.
Roberts went on in that vein for some distance; I’ll just touch on some highlights.
The Affordable Care Act contains more than a few examples of inartful drafting.
True. Also irrelevant. It’s the Court’s job first, to determine the legitimacy—the Constitutionality—of the law before it, or in the present case, whether the Rule before it comports with the law it’s purported to implement, and if legitimate to apply the law or Rule as it is written. Note that it’s necessary to determine legitimacy, too, based solely on the text of the law or Rule and on nothing else—including the clumsiness with which it might have been written.
[citation omitted] Here, the statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very “death spirals” that Congress designed the Act to avoid. (“We cannot interpret federal statutes to negate their own stated purposes.”).
And yet the ACA’s clearly stated purpose was that tax credits would be available only for health plan purchasers who purchased their plans through a State Exchange—as the ACA said repeatedly. The provision for Federal Exchanges was solely to provide for the availability of health plans for everyone. Had the ACA contemplated the tax credits to be available through Federal Exchanges, also, it would have said so at any of the ample opportunities available for so saying. The Congress chose not to say so.
[emphasis added, citation omitted] When analyzing an agency’s interpretation of a statute, we often apply the two-step framework announced in Chevron. Under that framework, we ask whether the statute is ambiguous and, if so, whether the agency’s interpretation is reasonable. This approach “is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.“
But this is just the agency writing law—filling in gaps in law can only be law-writing—which the Court has previously ruled unconstitutional; law writing is the sole province of Congress. For instance, in JW Hampton, Jr., & Co v United States, the Court held that [emphasis added]
“In determining what Congress may do in seeking assistance from another branch, the extent and character of that assistance must be fixed according to common sense and the inherent necessities of the government co-ordination.” So long as Congress “shall lay down by legislative act an intelligible principle to which the person or body authorized to [exercise the delegated authority] is directed to conform, such legislative action is not a forbidden delegation of legislative power.”
In other words, no gaps in the law. Only the law itself is available to the Rule maker; actual gaps can be filled only statutorily.
Here are some additional thoughts, now on Roberts’ repeated contention that he is able to divine Congressional intent and that divination should supersede the plain text of the law.
Debates in Congress are not appropriate sources of information from which to discover the meaning of the language of a statute passed by that body.
That’s what this Court held in Dunlap v US. We are stuck with, and the Court should adhere to—is obligated by their several oaths of office to adhere to—the plain language of the law before them. And that plain language is quite clear.
Thus, how do we know what Congress actually intended? It’s very clear: by the words in the statute that the Congress passed. Full stop.
Or:
“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”
God save the United States and this Honorable Court, indeed.
The ruling and dissent can be seen here.
Obviously, the comments in your blog are factual and accurate. The Supreme Court now unfortunately consists in the majority of politicians masquerading as jurists. It seems that they are most certainly subject to the influence of the so called “major media” and have a need to be socially correct rather than being limited to their Constitutional function. I am in favor of universal healthcare, but this is NOT the proper course. It only adds another layer of fat which enriches the mega “healthcare corporations”, including insurance companies, and will make it evenly more difficult to unwind when it is finally recognized that it is NOT a politically of financially sustainable manner of providing a necessary service to the public. If and when a rational politician finally campaigns on the platform that EVERYONE should be a beneficiary of public taxpayer supported healthcare will we finally move in the right direction. Now we have a model in which middle income taxpayers are unfortunately FORCED to pay taxes (and sustain ever mounting debt) to provide healthcare (at exorbitant rates by private sector profiteers) for the poor, elderly, veterans, public employees, etc, etc, while they must simultaneously pay for their own healthcare, but receive no benefit. Think about it. If the taxpayers pay for it, then the taxpayers should have direct control and everyone should benefit, not just select groups.
Eric, looks like we ran out of reply room again.
As far as direct Federal administration of welfare payments, we have such programs already (see: SSI).
As far as the 5th Amendment, I was referring not to the takings clause, but to the due process clause, which has been interpreted by the Supreme Court to impliedly force equal protection onto the Federal government. See, for instance, Bolling v. Sharpe.
The premium subsidies are not washed through the state government though. They’re directly calculated on your form 1040, and act as a reduction of the income tax you owe to the Federal government.
I don’t think in this case that we’re particularly talking about equality of opportunity versus outcome. We’re talking about whether the federal government can apportion benefits to individuals differently solely because of the law of the state where they reside.
The propriety of those benefits in themselves is a policy question to be decided by the political branches.
Social Security payments aren’t welfare, though; the program is a (government mandated) retirement program whose payouts are closely (if not perfectly) tied to the recipient’s work and income history. That a citizen’s payments in go right out to a current retiree rather than held for the benefit of his own future retirement would make for an interesting discussion, but that’s another mechanical thing. SSI is a glorified deferred income payment scheme, not welfare.
It’s also the case (wrongly I claim) that the government doesn’t need to honor that arrangement; it can withhold payments from any individual of whom it decides to disapprove. See, for instance, Flemming v Nestor.
Regarding the IRS’ tax credit rule under the ACA, the question of whether the Feds can issue those subsidies only to citizens of some states doesn’t seem a violation of any part of the Constitution: the Court already held the ACA constitutional, albeit not directly, by holding the Individual Mandate constitutional. The Court also didn’t consider the whether striking the Rule in the present case would render the ACA unconstitutional in its rationale for holding the Rule to be proper, not even by saying, as the Court often does, that it didn’t need to reach the constitutionality question (which you pointed out above had been raised) because it had already reached the legitimacy of the Rule.
And on that note, I have to get back to work–it’s still the middle of the week….
Thank you for the interaction; I really do learn things from this sort of interaction, and I did so here, too.
Eric Hines
You’re confusing SSI with Social Security Retirement. SSI is a program called Supplimental Security Income. It is given to disabled and elderly people who have very low incomes and assets. No prior work history is required to be eligible. SSI is a welfare program in the strictest sense of the term.
Anyway, enjoy your work (I need to get back to it too – these patent searches won’t do themselves).
Peter (since we’re out of embedding room…),
I also note that the government didn’t think that a useful argument to make.
Eric Hines
They did at page 58 of the respondent’s brief where they say:
Treasury’s interpretation is the only one consistent with the even more fundamental canon that federal tax laws are “to be interpreted so as to give a uniform application to a nationwide scheme of taxation” rather than in a manner “dependent upon state law.” Burnet v. Harmel, 287 U.S. 103, 110 (1932) ); accord United States v. Irvine, 511 U.S. 224, 238 (1994); Lyeth v. Hoey, 305 U.S. 188, 194 (1938).
http://sblog.s3.amazonaws.com/wp-content/uploads/2015/01/14-114-Respondents-Brief.pdf
Yeah. And since the question concerned tax credits and not tax collections, the Court properly ignored that bit as irrelevant.
Eric Hines
Assuming arguendo that tax credits aren’t just changes in income tax rates, would Congress be empowered under the equal protection precedents of the 5th Amendment to extend a directly federally administered welfare payment to citizens of some states, but not others, based on laws passed by those citizens’ state governments?
That hasn’t anything to do with whether the narrow matter of whether the IRS’ tax credit rule is legitimate. I’m also unclear on how the Takings Clause (?) relates to the Federal government giving things to a citizen rather than taking things from a citizen.
Regarding the equal protections aspect, as far as I know, Congress already does make welfare payments to citizens based on the laws of the citizens’ State. It does it, though, and critically I think, by washing those payments through the State government (and with some pretty extortionate strings attached, say I, but that’s for a different discussion). At least that’s how I understand Medicaid to work regarding the Federal share of the funds.
As a matter of principle (and I don’t know the case law regarding your question, there you have the advantage of me. I agree with the importance of precedent, and I agree, also, that precedent isn’t inviolate), the question comes down to what equality is being protected. If it’s equality of opportunity rather than equality of outcome, then regardless of whether the Federal government should be the first resort or the last for welfare payments (and John Adams held that the Federal government should never be involved in welfare), yes, some people will need more help to get to the starting line than others. Their equality of opportunity is being protected thereby, even if they get more stuff from the government than their neighbor who’s already at the starting line. That demand to help the least of us is an injunction of our Judeo-Christian heritage, and it’s one that our hireling governments at all levels inherit from us.
Even here, though, the federal nature of our social compact, embodied in the 10th Amendment, would argue against direct payments–those funds would have to go to the State’s government for passing on to the citizens of that State IAW that State’s laws, which after all were enacted by those citizens’ elected representatives.
How that would work, how those two paragraphs just above would be reconciled, though, is a mechanical matter, not a principled one. And it seems to me that before we add more layers to our existing welfare machine, or adjust the existing layers, we need to have a Come to Jesus meeting as a nation about what welfare is, and who should get it, and who should be first to provide it and who should be the last.
Eric Hines
This is a little speculative, but I think if we read “exchange established by the State” literally as you perscribe, then the ACA is unconstitutional. And as a matter of constitutional avoidance, we would look to any reasonable interpretation which could possibly save it. In that context, Roberts’ opinion would hold much more water.
There are two relevant clauses, Aritcle I Sec. 8, Cl 1:
“The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States”
and the 16th Amendment:
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”
In both cases, the Constitution is quite clear that Federally imposed taxes are to apply uniformly throughout the United States. A resident of Utah who is identically situated to a resident of New York should pay identical federal taxes. In the case of Art. I sec. 8, it says so explicitly. In the case of the 16th Amendment, the amendment notes that the tax is to be applied without apportionment among the states and without regard to census or enumeration.
Interpreting the statute literally would mean that the New Yorker and the Utahn would pay different federal income taxes despite being identically situated in all pertinent respects. This has equal protection implications under the 5th Amendment as well, since I don’t think there’s a rational basis to discriminate between individual people based on the choice of their state government in respect to health insurance exchanges.
If a statute seems to provide a non-uniform tax, any plausible construction which makes that tax uniform should be constitutionally preferred.
The question here concerns the paying by the Feds of tax credits, not the collection of taxes, to fund the credits or for any other purpose. The taxes collected are collected constitutionally (even the “tax” the Roberts Court found in its Individual Mandate ruling). That they’re not legitimately paid to plan purchasers who bought via a Federal Exchange doesn’t seem to me to violate Aritcle I Sec. 8, Cl 1 or the 16th Amendment.
If the uneven payout from legitimately collected taxes is unconstitutional, then so is our entire welfare system: some Americans don’t get a even penny of welfare payments.
Eric Hines
A paying of a tax credit is functionally identical to collecting taxes at a lesser rate. In both cases, you fill out a form 1040, and are told to pay $X less to the government based on your income and circumstances.
Do you genuinely think that a law saying:
“Residents of New York shall get a tax credit of 10% of their adjusted gross income up to $30,000” is constitutional, but
“Residents of New York shall pay 10% less tax on their adjusted gross incomes up to $30,000 than residents of other states” is unconstitutional?
They may be functionally identical, but they’re not legally so.
Or are you suggesting that the EITC is unconstitutional? All other welfare payments that flow from tax credits are unconstitutional?
Eric Hines
The EITC is available to all taxpayers who qualify on the same terms, regardless of where they reside. If the EITC were withheld from residents of a particular state, I think that would be unconstitutional.
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I was waiting for someone to bring up Humpty Dumpty and was actually a bit surprised that the dissent didn’t.
Not so, which here means I was surprised myself.