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In the Supreme Court's decision in National Federation of Independent Business v. Sebelius, 132 S. Ct. 2566 (June 28, 2012), the Court determined the constitutionality of the most controversial provision of the Patient Protection and Affordable Health Care Act of 2010 (P.L. 111-148, also known as "Obamacare"). The individual mandate that requires all people have health insurance or pay a penalty was held constitutional and valid under the power of taxation. In the majority opinion, Chief Justice Roberts states, "It is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance." National Federation, 132 S.Ct. at 2608. Justice Roberts went on to explain that while the federal government does have the power to tax those without health insurance, neither the Commerce Clause nor the Necessary and Proper Clause would protect a mandate that compelled people to purchase health insurance. National Federation, 132 S.Ct. at 2573. Although the Supreme Court's decision addressed only the individual mandate, the Court upheld the Act's other provisions with some limits on Medicaid expansion.
While the Supreme Court's decision has been praised by some, opponents have vowed to repeal the Act. Ultimately the use of a tax to influence behavior is not particularly controversial or innovative. In my opinion, one of the most interesting aspects of taxation is the ability to utilize a tax to influence a change in behavior. If the Act does withstand attempts at repeal, it will be interesting to gauge the effectiveness of the tax on those without health insurance as the mandate is implemented. The new health care reforms are generally to take effect in 2014 (some are effective sooner, while some not until 2018), though the results of the November election may affect the implementation schedule and determine the Act's future validity.
In prior commentaries I have addressed a few new significant provisions added by the Act and it is worth a reminder here of these upcoming changes:
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For quality Tax & Accounting research resources, visit the LexisNexis® Store