by Jeff Matthews

In the various lawsuits brought by states to challenge the validity of ObamaCare, an over-arching issue concerns the limit, if any, of Congressâ€™ powers under the Commerce Clause.Â However, there are more arguments in play.Â One of them deals with Congressâ€™ power to tax.Â This issue has been discussed in Virginia vs. Sebelius by way of the federal district courtâ€™s Memorandum Opinion on Defendantâ€™s (Sebeliusâ€™) Motion to Dismiss.

In the case, Virginia asserts that Congress is not Constitutionally-authorized to enact ObamaCare.Â Sebelius filed a motion to dismiss against Virginia, on the grounds that Virginiaâ€™s complaint does not state a valid cause of action.Â While the Commerce Clause issues are more widely-discussed, little discussion has been dedicated to the taxation issue which is equally important in the decision as to whether or not ObamaCare is Constitutional.

There is no doubt that Congress has the power to levy taxes.Â Â However, as to the Commerce Clause, there are many who doubt that Congress, for example, has the power to direct that people must, pursuant to its Commerce Clause authority, put on both socks before putting a shoe on either foot.Â Â If Congress cannot force people to do this pursuant to the Commerce Clause, then, perhaps it has another means at its disposal â€“ this being its power to levy taxes.Â Â So, the argument goes, based on a long line of cases from the U.S. Supreme Court.

Suppose Congress passed a law â€œlevying a tax of $50.00 against each person, for each instance in which said person fails to don both socks before donning the first shoe.â€Â Â (Okay, I know this is a very hyperbolic example, but read on).Â While such attempts to regulate would be, we hope, impermissible under the Commerce Clause, what about Congressâ€™ power to tax?Â After all, this hyperbolic measure is, indeed, a tax-raising mechanism.

This taxation argument is very much in play in the challenge to ObamaCare.Â Â Its mandate assesses penalties on individuals who fail to obtain approved health insurance policies, and toward this end, it is being argued that it is a revenue-raising mechanism authorized pursuant to Congressâ€™ power to levy taxes.

Throughout our history, there has been an on-going conflict in doctrines between Congressâ€™ general power to tax and the limitations of its regulatory authority under the Constitution.Â Â These competing doctrines are anything but novel.

In 1950, the Supreme Court issued its opinion in U.S. vs. Sanchez.Â Â At issue was a federal tax on marijuana.Â Â A transfer tax was imposed of $1.00 per ounce if the transfer was authorized in writing by the Secretary of the Treasury, and if the transfer was not so authorized, then, the tax was to be $100 per ounce.

The Sanchez opinion delves into the tension between Congressâ€™ taxing power and the limitations of its regulatory authority.Â Â Discussing this tension between the doctrines, the Court wrote:

It is obvious that [the statute], by imposing a severe burden on transfers to unregistered persons, implements the congressional purpose of restricting traffic in marihuana to accepted industrial and medicinal channels. Hence the attack here rests on the regulatory character and prohibitive burden of the section as well as the penal nature of the imposition. But despite the regulatory effect and the close resemblance to a penalty, it does not follow that the levy is invalid. First. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. Sonzinsky v. United States, 1937, 300 U.S. 506, 513-514, 57 S.Ct. 554, 555-556, 81 L.Ed. 772. The principle applies even though the revenue obtained is obviously negligible, Sonzinsky v. United States, supra, or the revenue purpose of the tax may be secondary, Hampton & Co. v. United States, 1928, 276 U.S. 394, 48 S.Ct. 348, 72 L.Ed. 624. Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate.

In essence, the proposition was thus put forth that, even though Congress might not have authority to regulate marijuana pursuant to its Commerce Clause power, it has a more general power to tax.Â And if the effect of the tax incidentally has a regulatory effect over something Congress may not regulate, this regulatory effect will not impair Congressâ€™ general authority to levy taxes.Â Thus, in essence, Congress has been deemed to have an indirect power to regulate through its power to prescribe tax policies.

However, compare the Sanchez case to U.S. vs. Butler, a 1936 case where the Supreme Court struck down the 1933 Agricultural Adjustment Act, noting that it created a tax for the purpose of regulating that which Congress had no power to regulate â€“ namely intrastate agriculture (think â€œpre-Wickard vs. Filburn and the switch in time that saved nineâ€).Â Â In Butler, the Court wrote:

In the Child Labor Tax Case, 259 U.S. 20, 42 S.Ct. 449, 66 L.Ed. 817, 21 A.L.R. 1432, and in Hill v. Wallace, 259 U.S. 44, 42 S.Ct. 453, 66 L.Ed. 822, this court had before it statutes which purported to be taxing measures. But their purpose was found to be to regulate the conduct of manufacturing and trading, not in interstate commerce, but in the states-matters not within any power conferred upon Congress by the Constitution-and the levy of the tax a means to force compliance. The court held this was not a constitutional use, but an unconstitutional abuse of the power to tax. In Linder v. United States, supra, we held that the power to tax could not justify the regulation of the practice of a profession, under the pretext of raising revenue.

These two opinions provide a general summary of the state of the law, as held by the Supreme Court, with regard to whether or not Congress may effectively regulate beyond its jurisdiction by using its taxing power.Â Â The rule of law is:

Congressâ€™ power to tax cannot justify the regulation of matters beyond its regulatory authority under the pretext of raising revenue, and

A tax statute by Congress will not necessarily fall because it â€œincidentallyâ€ regulates activities which Congress might not otherwise be empowered to regulate.

Confused?Â Â Donâ€™t be.Â This is not rocket-science.Â The language is clear â€“ yes, even in both cases.Â Â What is really happening is that the Supreme Court is making up shâ€¦.tuff as it goes.Â Â You cannot have a Constitutional rule of law with inconsistent, flexible rules like these.

And so, I ask, why is it of any use to rely on anything the Supreme Court says?Â There is no mysticism there.Â No greatness.Â Â No awesome enlightenment.Â Just pure shâ€¦.tuff.

Jeff Matthews [send him email] is a practicing attorney in Houston. He graduated from the University of Texas, School of Law in 1993 and was licensed that year.

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