Current Events

Legal Brief In Health Care Law Case

For those of you who are interested, here’s CATO Institute’s final legal brief in the upcoming Supreme Court case on the constitutionality of the individual mandate (the link is to a summary, but you can click below that to the actual brief.)  My prediction, for what it’s worth, is that the Supreme Court will reject the challenge and send plaintiffs to fight this one in the political arena.

  • A much wider issue, from a libertarian viewpoint, is whether an individual has a Constitutional right to reject income tax regulated currencies, such as the one authorized under the Commerce Clause in Helvering v. Davis, one of the three Social Security Cases decided during “the revolution of 1937.” 

    The currently proposed health care act, whether we disagree with only the individual mandate or the entire thing, is basically just an extension of the logic established during the New Deal era, which is that when we don’t demand a property right in our labor, it won’t be taxed as such under the Direct Tax Clauses, but as income under the less restrictive Indirect Tax Clause.

    Anyway, I just quickly skimmed CATO’s legal brief, and in my view it’s well written and proves that the individual mandate exceeds Commerce Clause powers. 

    For a good article which explains why the individual mandate violates the Constitution’s tax clauses, here’s a link to Erik Jensen’s “The Individual Mandate and the Taxing Power:” 

    • Fernando Teson

      Rick, thanks for this. A big issue, of course, is whether we have constitutional protection of property at all. We have the eminent domain clause for land, but if I sell my house and put the money in the bank, my account is not protected at all. Yet property should be fungible. I believe the federal government has constitutional authority, under current precedent, to tax my income at 100%.

      • Fernando, I agree that the current tax/monetary system is incapable of holding property rights. We need lots of lawyers who are willing and able to demand Treasury-Direct currencies for us at our local bank, and commence legal action against anyone who obstructs that right, whether it be bank personnel, the Federal Reserve, or the Treasury Department itself.  

        It’s also my belief that when Treasury-Direct currencies are held by the local bank, the bank owners and operators can be held personally liability for irresponsibly lending it out. Here’s the legal ammunition for lawyers who are willing to do this: 

        There’s no way private banking corporations can block our access to Treasury-Direct currencies under the reasoning contained in McCulloch v. Maryland.

  • Anonymous

    Thanks, Fernando. Let me propose a friendly “gentlemen’s wager,” and I will take the other side. Although I can’t read Anthony Kennedy’s mind either, my guess is that he will not want to eviscerate the concept of federalism in its entirety. Let me suggest a topic for a future BHL post: Does the current system of judicial review advance or retard the realization of the politicazl values that lie at the heart of classical liberalism?

    • Fernando Teson


    • Yes, Mark, that’s an interesting question about judicial review:

      My view is that there’s nothing really wrong with the basic structure of our Constitutional system, in the sense that may adversely affect libertarianism.  It’s just that technology has made the world such a small place over the past century, almost everything we do crosses state or international borders, affects interstate and international commerce in some way, and therefore affects the Commerce Clause.

      So, today, when we talk about judicial review—i.e., how the Supreme Court interprets the meaning of Constitutional words and phrases—we’re almost always talking about how the Supreme Court interprets the Commerce Clause. 

      And it’s usually very difficult for non-lawyers (and most lawyers) to conceive of so many rules and regulations (the key word in the Commerce Clause being “regulate”) being derived from a few words in the Constitution, not to mention that the authority to regulate the entire monetary and welfare system through income taxation is derived from the Commerce Clause:

      “Congress shall have power … to regulate commerce with foreign nations, and among the several states, and with the Indian tribes;” Article 1, Section 8, Clause 3

  • CFV

    This would be of interest here:  Daniel M. Hausman (2011) “A Lockean Argument for Universal Access to Health Care” Social Philosophy and Policy 28: 166-191. 

    • That’s interesting.  I was waiting for someone to make that argument. I’m curious as to how Mr. Hausman reasons that health care professionals are common property. 

      • Why would it entail making health care professionals common property? That’s not how it works in all the other OECD countries.

        I don’t know about a Lockean justification — I’d have to see that worked out — but I believe a Georgist case can be made. I could go into more detail, but I believe the LVT is the perfect, symmetrical, liberty-lovin’, funding source for a universal health care system.

        • Rod, I don’t see much difference between Locke and Henry George, so I don’t see how either would support the idea of access to health care being an extension of their theories that we all have a stake in the earth and its resources.

          I haven’t read Daniel Hausman’s essay (I’m too cheap to rent it), but here’s the abstract:

          “This essay defends the controversial and indeed counterintuitive claim that there is a good argument to be made from a Lockean perspective for government action to guarantee access to health care. The essay maintains that this argument is in some regards more robust than the well-known argument in defense of universal health care spelled out by Norman Daniels, which this essay also examines in some detail. Locke’s view that government should protect people’s lives, property, and freedom–where freedom is understood as independence and self-determination–justifies government action to ensure access to health care, because (roughly), just as individuals cannot protect themselves from crime and foreign invasion, so individuals are unable to provide for their own health care. Defense from disease is as important as defense from crime, and–although this is arguable–government action to guarantee access to health care does not itself undermine freedom.”

          • Rick, I’m not saying that it’s a direct extension of that theory. But among Georgists, those who are committed to the principle of public collection of ground rents, the question remains, What do you do with the revenue?

            George himself didn’t dwell on the topic much but when he did talk about it he just assumed that the revenue would fund government to do the things governments normally do. He talked about public works, infrastructure, and social programs. Your basic classical liberal agenda. At the other end of the spectrum are the geo-libertarians who generally advocate for direct cash redistribution as a Citizen’s Dividend.

            The difference in opinion hangs to a certain degree on whether you view such funds as properly being, on the one hand, a common pot of money to be utilized by “society” as a whole, or, on the other hand, whether it belongs to each of us equally and severally. In other words, does the land — and therefore the rent — belong to everyone equally or no one in particular? If you read George carefully, he seems to lean to the “no one in particular” side.

            Personally, I prefer the “everyone equally” formulation. My primary reason for that is political and directly relates to the BHL project. For all but the hardest-baked anarchist types, there’s a set of government functions that are relatively non-controversial; defense, police, courts, etc. We can argue about how and how much but most would agree that these are legitimate functions. (If you’re reading this and disagree; well, I’m not talking about you, and you’re not part of “most”, not even most libertarians in my experience.) The things that righties and lefties spend most of their time hassling over are the welfare functions, services to individuals. And the argument basically boils down to Why should/shouldn’t I be forced to pay for your “X”? Education, health care, disability, retirement security; what economists would call transfer payments.

            Well, serious estimates by Georgist economists put the actual cash value of economic rents at somewhere between 25% and 33% of GDP. That’s a lot of dough. Upwards of $12K to $20K per capita in the U.S. I’ve done some back-of-the-envelope calculations and I would propose that be used to establish individual welfare accounts for each person. Withdrawals could be used to pay for education of your choice, age adjusted premiums for health care of your choice (including a public OPTION), disability insurance program, and a retirement pension. And it’s all funded from YOUR money and under YOUR control. Unlike SS, it’s even inheritable as a lump sum if there’s a balance at death so it would also function as a component of a life insurance program.

            You see, rather than bicker about whether “taxation is theft” and “why should I pay for your ‘X'” I would prefer to change the conversation to talk about those revenues that really AREN’T the “fruits of your labor”, namely ground rents, and how we can take a lot of this controversy off the table.

          • Yes, I think both Locke and George were of the view that the commons or “commonwealth” was owned by “no one in particular,” without a positive “everyone equally” duty to provide such things as universal health care. 

            Also, Locke has been seriously been misrepresented by our current legal system as supporting extensive property rights in land and intellectual property (not to mention extending those dubious rights by corporations, which have unlimited legal life), but the emphasis of Locke and George was on maximizing utility of natural resources for the benefit of all, minimizing waste and preventing “tragedy of the commons:”

            Also, I don’t think government will ever have a problem with having too much revenue, such as that obtained by a prospective Georgist land value tax, but to quote from the Beatles’ “Taxman,” government should always avoid implying: “Don’t ask us what we want it for if you don’t want to pay some more.”

            For example, I think the Supreme Court had it right in Helvering v. Davis (1937), when it called the Social Security tax on employee wage income “a special income tax,” where “special” meant “specific” or “earmarked.”

          • Joshua Katz

            Harry Pollard frequently mentions that he’d rather collect the rent and toss it into the sea than not collect it.

          • Sorry to get back on this so late. Yes, that’s because of the desirable economic effects of continuous “spot” pricing of site rent and other natural resource costs.

            Also, Fred Foldvary, who strongly leans Austrian, emphasizes that privatized rent is a huge subsidy to landholders and that subsidies are as economically distorting as taxes.