What the Supreme Court ruled on health care 'tax'

Story highlights

  • The Supreme Court rejected arguments that the individual mandate involves a "penalty"
  • The mandate "looks like a tax in many respects," Chief Justice John Roberts wrote
  • The Obama administration argued that it's a penalty but also could be viewed as a tax
  • The court said the Anti-Injunction Act does not apply

In its ruling last week on the national health care law, the Supreme Court found that penalties the law places on people who don't buy health insurance count as a tax protected by the Constitution.

The Obama administration had argued that the fees should be considered a penalty. But the government also argued that the individual mandate can be viewed as constitutional under Congress' powers of taxation.

The high court rejected the "penalty" argument.

"The payment is not so high that there is really no choice but to buy health insurance; the payment is not limited to willful violations, as penalties for unlawful acts often are; and the payment is collected solely by the (Internal Revenue Service) through the normal means of taxation," Chief Justice John Roberts wrote in the decision.

The court noted that the law calls for no other punishments for refusal to buy health insurance.

"Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance," the decision said, citing figures from the Congressional Budget Office. "We would expect Congress to be troubled by that prospect if such conduct were unlawful."

Romney, Obama's tax vs. penalty problem
Romney, Obama's tax vs. penalty problem

    JUST WATCHED

    Romney, Obama's tax vs. penalty problem

MUST WATCH

Romney, Obama's tax vs. penalty problem 02:51
Is health care mandate a tax... or not?
Is health care mandate a tax... or not?

    JUST WATCHED

    Is health care mandate a tax... or not?

MUST WATCH

Is health care mandate a tax... or not? 02:36
Obama said mandate isn't tax in 2009
Obama said mandate isn't tax in 2009

    JUST WATCHED

    Obama said mandate isn't tax in 2009

MUST WATCH

Obama said mandate isn't tax in 2009 03:27

What the ruling means to you

But on the taxation argument, the court agreed. The Constitution allows Congress to tax and spend, giving the federal government "considerable influence even in areas where it cannot directly regulate," the decision said.

The mandate "looks like a tax in many respects," Roberts wrote. The money is to be paid by people when they file their tax returns and does not apply to those who pay no federal income taxes; the amount someone owes "is determined by such familiar factors as taxable income, number of dependents, and joint filing status," and the "requirement to pay is found in the Internal Revenue Code and enforced by the IRS."

The high court overturned a unanimous decision by the 11th U.S. Circuit Court of Appeals that the mandate did not impose a tax.

The Supreme Court also ruled that it could proceed with considering the constitutionality of the tax despite the Anti-Injunction Act, which dates back 145 years. The law said lawsuits can't be used to prevent taxing, only to get refunded for taxes already paid. The high court said whether something is a tax for the purposes of the Anti-Injunction Act is Congress' decision -- and since Congress designated the mandate as including a penalty rather than a tax, the law did not apply in this case.

"It is up to Congress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress's choice of label on that question. That choice does not, however, control whether an exaction is within Congress's constitutional power to tax."

The court emphasized that it was not weighing in on whether the mandate is a good idea.

"Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness," the decision said.

How are you affected by the ruling? Share with us on CNN iReport.