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The momentous decision of the U.S. Supreme Court to uphold the constitutionality of the Patient Protection and Affordable Health Care Act (PPACA) took sides in a long-running dispute about whether taxation can legitimately be used for purposes other than raising revenue for the government. The context was the imposition by Congress of a monetary penalty on individuals who refuse to buy health insurance. Opponents of the Act argued that calling this levy a tax added nothing to its constitutional validity since "the noncompliance penalty . .. does not meet the historical criteria for a tax" because "the clear purpose of the assessment is to regulate conduct, not generate revenue for the government." On the other hand, the Federal Government argued that taxation has frequently been used for regulatory purposes, and that "[i]t 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." In his controlling opinion for the U.S. Supreme Court, Chief Justice Roberts took the latter view, writing that while "the essential feature of any tax [is that] it produces at least some revenue for the Government," "taxes that seek to influence conduct are nothing new," citing Justice Story for the proposition that "the taxing power is often, very often, applied for other purposes, than revenue." Indeed, Roberts went further and stated that "[e]very tax is in some measure regulatory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed." Is this view correct?


Reprinted from Beyond Economic Efficiency in United States Tax Law, 2013, 183-90, with permission of Kluwer Law International.

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