[NOTE: This post has been UPDATED]
“No taxation without representation!” Hmm, that sounds familiar; where have we heard it before? Oh, right. Yesterday was the Fourth of July. It must have been hanging around in the air in the aftermath of numerous patriotic speeches. It should hang around a bit longer, and be taken more seriously than it has been by those in Congress who purport to represent us and Supreme Court justices who purport to “interpret,” not rewrite, what Congress does.
President Obama, Harry Reid, Nancy Pelosi and their Democratic acolytes all vociferously insisted, time and again, that Obamacare was not a tax. They no doubt feared, no doubt correctly, that if it were seen as a massive tax increase it would be massively unpopular and would not pass. So they presented its lynchpin, the individual mandate, as a penalty for bad behavior, not a tax. Who knows? They may have even believed what they said, although that did not stop the administration’s lawyer from arguing that the Court must uphold it as a tax.
Now comes Chief Justice Roberts, with the four liberals by his side, deciding that what the President proposed and what the Congress thought it was passing was unconstitutional, but what all denied they were doing passes muster as a tax. Thus the Chief Justice has succeeded in doing what the mightiest empire in the world could not force down the throats of a few of its far-flung colonies, impose taxation without representation. As Hans Bader of the Competitive Enterprise Institute wrote the day it was decided, the Court’s decision “undermines political accountability.” Much in the manner of King George, our Government has decided to tax us even though none of our representatives voted for a tax.
It is always useful to remember — but especially so around July 4 — that it was precisely a debate over what is a tax and what is a regulation that was at the very core of the dispute that ultimately led to American independence. As Richard Samuelson, a historian at California State University, San Bernadino, explains in a superb blog post, the Sugar Act of 1764 was an “innovation” that is directly relevant today.
This was the first such regulation that was imposed for the purpose of raising revenue, rather than for the purpose of trade regulation. Previously, all such laws that imposed a charge did so to encourage certain behavior, and discourage other behavior. The purpose of imposing a high charge on the importation of foreign molasses was to make its use prohibitively expensive. So too with other such charges imposed by Parliament on trade within the empire. But this tax was created as a tax–its stated purpose was to raise revenue. Others would follow in its wake.
In other words, the Americans distinguished between a tax and a penalty according to the purpose of the law. The nature of the thing was defined by its ends, not the means employed to that end. A cynic might say that Parliament could have avoided all that difficulty if they simply changed the name of the bill, and claimed that the bill, like its predecessor, was designed to promote the purchase of British molasses. But the purpose of the bill, the colonists realized, was not merely a matter of labeling. They held that it was implicit in the structure of the bill itself. In other words, the colonists held that Parliament had the legal right to regulate trade in the empire, but not to impose taxes on colonists who had no representatives in Parliament. Taxation without representation was tyranny.
Then, as now, those who saw the power and reach of government as essentially unlimited couldn’t understand what all the fuss was about. Samuelson explains:
Like many commentators today, some did not understand the distinction that the colonists were making. To them, raising revenue by law was, by definition, taxation. In his classic book about the American Revolution, The Glorious Cause, Robert Middlekauff notes that George Grenville, the minister who pushed for the Sugar Act, and, a year later, the Stamp Act, “could not ‘understand the difference between external and internal taxes.’ Nor could he understand the difference between legislation and taxation.” The colonists, however, understood the difference completely. A tax raised revenue for the purpose of paying the bills of the government, and any impact it had on the behavior of His Majesty’s subjects was incidental. A regulation existed to control or influence behavior, and any revenue it raised was incidental.
The argument about the Sugar Act grew from an argument about the nature of law, and of government. Tories like Grenville thought that Parliament was sovereign. It had, in the words of the Declaratory Act, the right to make law “in all cases whatsoever.” That being the case, the purpose of a law had no bearing on its legality. There was no inherent limit on government. The colonists disagreed. They thought teleologically about law. That is, they thought about the ends of government. To them, government existed to serve certain purposes, and that its powers were related to those purposes. Personal liberty being impossible without the security of property, taxes could not be raised without one’s consent, or the consent of one’s duly appointed representative. Living in an expansive empire, they were willing to accord Parliament the right to make regulations for the good of the whole, but Parliament had no right to manage the internal affairs of the colonies, or to raise taxes on them without their consent. A couple of decades later, this logic led the Constitutional Convention to decide that all tax bills should originate in the House of Representatives.
Finally, the colonists, as Samuelson correctly notes, granted Parliament virtually unlimited power to regulate the affairs of the British empire, but having learned from that experience the Constitutional convention explicitly and emphatically refused to grant anything approaching that authority to Congress. The Constitution they wrote, for example, was quite specific about what sorts of taxes Congress was allowed to pass; that’s why the Sixteenth Amendment was necessary to provide Congress the power to levy an income tax directly on citizens.
It would no doubt have shocked Madison and his peers to learn that today supposedly educated lawyers and judges who recognize that Congress has no authority to regulate inactivity or to compel commerce nevertheless believe Congress was granted the power to tax a product not bought and that judges can convert a regulatory penalty into a tax by simply deeming it so.
Someone should remind Chief Justice Roberts of Lincoln’s famous question, “If you call a tail a leg, how many legs does a dog have?” The answer, since CJ Roberts seems to be in the dark on this question, is of course four, since calling a tail a leg doesn’t make it one.
UPDATE [July 6]
For powerful arguments generally defending the Roberts opinions, see Roberts Didn’t Expand Government’s Taxing Power by Sean Trende and Roberts decision didn’t open floodgates for ‘compulsion through taxation’ by Randy Barnett.
