The Tax Foundation pretends to be non-partisan. Of course we all know that is pretense. Look at the way it has pushed its concept of the so-called "tax freedom day", which misleads everyday Americans into thinking that they are working for months and months to pay taxes, based on the use of "average" tax burdens across every American from Bill Gates to Joe Unemployed and a good deal of uncertainty about just who pays what taxes (like the corporate taxes).
They've done it again in their analysis of the health care decision. See Richard Morrison and Joseph Henchman, Tax Foundation, Guest Opinion, The Tax Flaw in Health Care Ruling, The Hearld News (July 3, 2012).
1. The Tax Foundation builds its conclusion into its description of the givens.
They start out with their conclusion--a definition of taxes as items whose intent is "raising revenue for government spending" and of a "penalty" as "imposed for the purpose of punishing an individual for an unlawful act." Based on that conclusory definition, they conclude unsurprisingly that the ACA's individual mandate is not a tax, because it is a penalty. That kind of argument has the cart leading the horse.
Taxes do increase revenues, but that doesn't mean that they cannot also be used to modify behavior, which is what penalties do. The obvious type of taxes that act as penalties are excise taxes. There is considerable discussion about "sin taxes"--taxes on cigarettes, alcohol, and other commodities or behaviors that are disliked. If the person engages in the 'bad' behavior, the person pays the tax penalty and at least the government gets some revenue from the misbehavior. If the person is discouraged from engaging in the bad behavior because of the tax penalty, the penalty has done its job and there is more of the desired good behavior. Tax penalties also exist in our current income tax laws--the "singles penalty", as mentioned in a prior post, causes a single person to pay more tax than that person would if married, thus penalizing the person for failure to marry. (Conversely, in situations where there is a marriage penalty, the tax causes a married person to pay more tax than that person would if single, thus penalizing the person for failure to divorce.) And there are many credits and other items that can be seen as simply notational variations on a penalty. For example, the greater tax that childless couples pay than couples of the same income with children pay can easily be viewed as a tax penalty for not having children.
2. The Tax Foundation tries to raise fears of a bad impact for states
The Tax Foundation's next argument is the old "slippery slope" problem (and depends on the success of their first, unsuccessful, argument). Since it claims the tax versus penalty distinction is "vital", and there are local and state government revenue sources that are not generally thought of as taxes, the Foundation also claims that the Supreme Court's purported broadening of the concept of tax could mean those state and local items must also be treated as taxes for state law purposes, and this could mean that they will be subject to different procedural rules for taxes rather than the procedural rules under which they were passed.
This appears beyond silly. What it does mean for states is that a state like Massachusetts, that had already passed a state health care law with a mandate similar to the ACA's mandate, can rest assured that it is not an unconstitutional form of tax.
3. The Tax Foundation misunderstands the relationship between the Commerce Clause and the Taxing Power
The Foundation didn't want the mandate upheld, and the right-wing is fighting hard for a much narrower view of the Commerce Clause with the idea of preventing progressives from undertaking needed national policies. The Court found the Commerce Clause didn't extend to the mandate, a conclusion which seems extraordinarily weak to me and which I predict will be overturned by another Court within thirty years.
But the Commerce Clause doesn't decide the case, because the taxing power is even broader than the Commerce Clause power. And Roberts rightly recognized that. This was not a "twisting [of] the traditional and historic meaning of a tax" but rather the expected and predictable analysis based on the traditional and historic understanding of the taxing power.
4. The Tax Foundation raises the "direct" tax issue
Tax academics have devoted a lot of discussion to consider what would be a direct tax that had to be apportioned among the states. Calvin Johnson, Professor at the University of Texas, wrote an interesting book looking into the history of the Constitutional Convention as motivated in large part by a desire to get around the weak taxing power of the ARticles of Confederation, which required requisitions from the states to allow a strong taxing power in the federal government. the passage of the income tax amendment--contravening any need for apportionment--pretty much left the direct/apportioned taxes as an archaic category.
The article cclaims that the mandate can't fall within the income tax since it is a flat tax. But of course everyone knows that the Tax Foundation and every other right-wing organization thinks that a flat tax on income is constitutional.
The Tax Foundation is quite simply wrong in suggesting that this is a "new" definition of tax.
(By the way, the Tax Foundation also attributes the entire opinion (and the purported "new definition") to Chief Justice Roberts. He was the author of the opinion for the Court, but the opinion represents the views of a majority of the Supreme Court Justices. It is not just Roberts' opinion. )