Patterico's Pontifications


Genius Halbig Opponents: We Can Prove the Subsidies Existed All Along, with This Argument: First, Assume the Subsidies Existed All Along. And Then . . .

Filed under: General — Patterico @ 7:30 pm

You think I’m kidding, right? Yeah, well, I’m not:

Of the many pro-Obamacare arguments that government lawyers are making to save the law from the Supreme Court, one stands out as particularly tailored to winning the crucial vote of Justice Anthony Kennedy.

The argument is about federalism, long a guiding light for the Reagan-appointed jurist whose vote both sides are working to win in King v. Burwell, a case before the Court that threatens to blow a hole in Obamacare.

“There’s no question that Justice Kennedy regards federalism as a central value in the Constitution,” Michael C. Dorf, a law professor at Cornell University and former clerk for the justice, told TPM in an email. “Accordingly, he typically votes to sustain challenges to very expansive views of federal power.”

Specifically, the law’s defenders say it would violate states’ rights for Obamacare to deny subsidies for residents of some three-dozen states without a clear warning. Nowhere in the law were states told that eligibility for premium tax credits would hinge on them setting up state-run exchanges, as opposed to letting the federal government handle it.

Remember: these are the same people who mock Jonathan Adler as a “Halbig twoofer” — a term of derision designed to suggest Adler’s arguments are so stupid that they are similar to the views of people who think our government was behind 9/11. And yet these people all argue, in a herd, that you can’t “deny” something that was never authorized to begin with, without a “clear warning” that the provision you never authorized, was never authorized.

This “argument” ignores what seems to me to be a very, very simple point: the subsidies were never authorized. It can’t be unconstitutional to “take them away” — because they were never authorized to begin with.

Put another way: the argument attempts to prove that the subsidies really existed all along, by first assuming they were there all along, and then arguing that, if you assume they were there all along, it is illegal to take them away — therefore they must have been there all along.

You see what is happening there, right? They are assuming the very thing they are trying to prove. In dismantling a Scott Lemieux post recently, I made this point briefly and in passing, saying:

That’s like me saying that, in this dispute between you and me concerning who owns the book sitting on this table, I win — because if you say it’s yours, you’re taking it without permission, and it’s illegal to take books from people without permission. Some people call this “begging the question.” I call it rank stupidity.

This has nothing whatsoever to do with “federalism” — and anyone concerned about federalism will be consoled by the fact that the states can establish their own exchanges any time they like.

Anthony Kennedy will not be fooled. These people are truly desperate. And pathetic. Honestly: these arguments are just pathetic.

31 Responses to “Genius Halbig Opponents: We Can Prove the Subsidies Existed All Along, with This Argument: First, Assume the Subsidies Existed All Along. And Then . . .”

  1. Ding. I think that ends the blogging for the night.

    Patterico (9c670f)

  2. I was thinking the same thing myself.

    JWB (6cba10)

  3. Why would you expect anything other than stupid from Talking Points Memo? That’s your first mistake.

    daleyrocks (bf33e9)

  4. I was thinking the same thing myself.

    What do you mean — you were thinking the same thing I said in the post, or you were thinking that ends the blogging for the night?

    Patterico (9c670f)

  5. daley,

    But look at all the people they contacted and quoted. Not one person points out that they are arguing in a circle, and assuming the very thing they are trying to prove?

    Not one?

    Patterico (9c670f)

  6. “But look at all the people they contacted and quoted.”

    Patterico – Ima do my carlitos impression. I categorically dismiss that website. I did not want to hurt my brain by clicking on the link, but will if you insist.

    daleyrocks (bf33e9)

  7. R.I.P. Bob Simon, CBS News/60 Minutes correspondent

    Icy (d53060)

  8. I’ve sometimes wondered what it must be like to be a citizen of a half-crocked nation like Mexico, Greece, France or Argentina. Of how sane and sensible people living in such places can stand to deal with their fellow citizens and the government all around them. Wonder not, since the US is moving closer and closer to a time when its people will be able to enjoy that experience 24/7, 365 days a year.

    Mark (c160ec)

  9. No one ever warned me about taxes. Not once have I received a letter from the US government saying: “If you earn money you will owe taxes.” And yet they take them. Unconstitutional! Because I say so!

    Kevin M (25bbee)

  10. I think that if the Court wants to favor the government, it will not reach the statutory construction issue. It will hold that the challengers have no standing to challenge the spending component since no Constitutional rights are infringed, and to any extent that the Obamacare “tax” is imposed or threatened, that challenge is barred by the Anti-Injunction Act.

    nk (dbc370)

  11. Did you know that Congress can pass a law retroactively cancelling a tax break that you relied upon in some previous year, and then requiring you to pay back taxes?

    United States v. Carlton

    So much for the entire argument.

    Kevin M (25bbee)

  12. Carlton had to cough up $600,000 even though he obeyed the law exactly.

    Kevin M (25bbee)

  13. From Kevin’s link:

    “Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. It is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Since no citizen enjoys immunity fromthat burden, its retroactive imposition does not necessarily infringe due process . . . .”

    Next time I tell you the primary concern of the Supreme Court of the United States is the collection of next year’s taxes, you say “Last year’s too”. Ok? These old fogies are all nine of them statists and when push comes to shove the government wins.

    nk (dbc370)

  14. Does anyone want to bet how they will rule?

    Ag80 (eb6ffa)

  15. Re: 6-3 the SC will return a verdict that does not disrupt Ocare.

    As for the Carlton case, I don’t think the present SC would rule that way and if it came up again I think that they would take the course in order to reverse.

    seeRpea (aa8044)

  16. seeRpea–

    It was unanimous. Scalia, Thomas, Ginsberg and Kennedy were on the court and voted for it, albeit not necessarily Blackmun’s reasoning. Do you really think Sotomayor, Breyer or Kagan would vote against the tax man? Your hope is Alito for a dissent.

    Kevin M (25bbee)

  17. The rule is this: Congress cannot impose a new tax retroactively, but may adjust or refine the treatment of an old tax or credit retroactively. And of course the COURT can do so too. The idea that taking back a credit is unconstitutional is wrong and is settled law.

    Kevin M (25bbee)

  18. i reread the Carlton link, slower this time. I still think there is a good chance that this SC would at the least tightened up a bit the provisions needed to beyond “woops, the tax law had a huge loophole”. For of those of you who think the SC should uphold Halig , well i think the following should scare you a bit:

    There is little doubt that the 1987 amendment to §2057 was adopted as a curative measure. As enacted in October 1986, §2057 contained no requirement that the decedent have owned the stock in question to qualify for the ESOP proceeds deduction. As a result, any estate could claim the deduction simply by buying stock in the market and immediately reselling it to an ESOP, thereby obtaining a potentially dramatic reduction in (or even elimination of) the estate tax obligation.

    It seems clear that Congress did not contemplate such broad applicability of the deduction when it originally adopted §2057. That provision was intended to create an “incentive for stockholders to sell their companies to their employees who helped them build the company rather than liquidate, sell to outsiders or have the corporation redeem their shares on behalf of existing shareholders.” Joint Committee on Taxation, Tax Reform Proposals: Tax Treatment of Employee Stock Ownership Plans (ESOPs), 99th Cong., 2d Sess., 37 (Joint Comm. Print 1985); see also 132 Cong. Rec. 14,507 (1986) (statement of Sen. Long) (§ 2057 “allow[s] . . . an executor to reduce taxes on an estate by one half by selling the decedent’s company to an ESOP”). When Congress initially enacted §2057, it estimated a revenue loss from the deduction of approximately $300 millionover a 5 year period. See 133 Cong. Rec. 4145 (1987) (statement of Rep. Rostenkowski); id., at 4293 (statement of Sen. Bentsen). It became evident shortly after passage of the 1986 Act, however, that the expected revenue loss under §2057 could be as much as $7 billion–over 20 times greater than anticipated–because the deduction was not limited to situations in which the decedent owned the securities immediately before death. Ibid. In introducing the amendment in February 1987, Senator Bentsen observed: “Congress did not intend for estates to be able to claim the deduction by virtue of purchasing stock in the market and simply reselling the stock to an ESOP . . . and Congress certainly did not anticipate a $7 billion revenue loss.” Id., at 4294. Without the amendment, Senator Bentsen stated, “taxpayers could qualify for the deductions by engaging in essentially sham transactions.” Ibid.

    from the link KevinM provided.

    seeRpea (aa8044)

  19. the Supreme Court of failmerica is an ugly cowardly gaggle of otherwise-unemployable ivy league trash

    they’re not gonna rock their sweet lil boat

    happyfeet (831175)

  20. The federalism argument is inspired in large part by Spending Clause precedent. Under that precedent, SCOTUS analogizes Congressional programs to private contracts. The “strings” attached to an offer of federal money have to be clear, the Court reasons, because it would be unfair to impose requirements on the states that accept the offer if those requirements weren’t obvious at the time the offer was accepted. But this case presents an odd fit for that kind of argument, for two reasons: first, the Court would only consider the Spending Clause argument if it first concludes that the statute is unambiguous on the question of subsidies (i.e., if it concludes that the statute is clear). Second, the states that are complaining are states that have rejected the federal government’s offer. This is not an unanticipated burden on those who accept the offer, but a benefit that (unexpectedly or not) accrues only to those that accept. The analogous situation would be a contract offeree arguing that the offeror must perform some provision of a rejected contract because the provision was unknown at the time of the offeree’s rejection.

    mtphrs (35d718)

  21. The thinking of the Supreme Court os a mystery to me. I see them rule with the Statists on some egregious issue like Kelo v. New London, and then they basically tell the Statist Gun Control quacks to go climb a tree. I don’t think there’s any way to predict which way they will rule on any subject, unless you believe in ouija boards.

    C. S. P. Schofield (848299)

  22. Peak government is not sustainable.

    DNF (3642e1)

  23. 19. I get the impression the J-branch is the least expensive leg of government.

    It’s sumthin anyway.

    DNF (3642e1)

  24. the Supreme Court of failmerica is an ugly cowardly gaggle of otherwise-unemployable ivy league trash

    they’re not gonna rock their sweet lil boat

    I could not have said it better myself.

    nk (dbc370)

  25. after kelo, I’m afraid, the will find the ‘right to arm bears’ NFIB and Hollingsworth has confirmed that view

    narciso (ee1f88)

  26. “then they basically tell the Statist Gun Control quacks to go climb a tree.”

    Unavoidable consequence of Warren vs DC in my opinion. Trying to tell people ‘sorry, cops aren’t obligated to protect you and the government can legally prevent you from obtaining self defense devices’ wouldn’t have gone over well.

    And despite its flaws, the NRA still swings a mean stick in Congress. Add to that the smaller, more dynamic 2E groups like GOA, SAF, and the various state-level orgs, and even SCOTUS might blink.

    Toastrider (4c0340)

  27. Kelo was an affirmation of crony capitalism dating back to Commodore “if you have to ask you can’t afford it” Vanderbilt who used eminent domain through his paid-off politicians to run his railroads through other people’s properties.

    By the time Heller came to the Supreme Court, 48 states allowed concealed carry in some form, 38 in a “shall issue” way. Enough to ratify a Constitutional amendment. The robes bowed to the hard political and popular reality.

    nk (dbc370)

  28. From the TPM link:

    “It would be astonishing if Congress had buried a critically important statewide bar to the subsidies under this landmark legislation in subclauses setting forth the technical formula for calculating how much the subsidy should be,” the brief, led by Solicitor General Donald Verrilli, said.

    Buried? Like in the operative clauses of the law? Are the states going to argue we did not bother to read how the law worked before making our decisions? Seriously? That is their argument. Since we didn’t read how it worked you can’t take away from our citizens how it has been misimplemented?

    This is the same Donald Verilli who has such a stellar record arguing in from of the SC.

    daleyrocks (bf33e9)

  29. The states’ rights argument — unusual in this instance because it is typically used against the federal government, not in defense of it — was made in a brief filed by 23 attorneys general in states ranging from California and New York to North Dakota and North Carolina.

    The desperate “we were too stupid or lazy to read or understand how the law worked” argument is incredibly being made by 23 state attorney generals to deflect taxpayer ire over their incompetence and the potential of losing their subsidies.

    daleyrocks (bf33e9)

  30. 29. Seems a lock to me.

    DNF (3642e1)

  31. It’s not unconstitutional anyway to take away subsidies without a clear warning.

    The only federalism argument is that it not good political practice, but that’s not the same thing as unconstitutional. This is a political fairness argument, not a legal one. The fault here would be the fact of a widespread misinterpretation of a law. The proper forum for this argument is Congress.

    I can’t see how it could even be unconstitutional to revoke clearly authorized tax credits, not wrong tax instructions, except as an ex-post facto law, but it’s well known precedent that the ex-post facto clause does not apply to taxes, or any kind of civil matters.

    The Supreme Court sometimes does delay the effective date of some rulings. For instance, when it discovers a new right for criminal defendants, it often does not make that retroactive except for the particular case in front of them. But I don’t think they’ve ever done that with taxes, or even tax credits, which benefit the taxpayer.

    Maybe the Halbig opponents could get something like this: The tax credits are invalid, but no one’s return should be re-examined. Somebody can check the law, what happened when a court said a certain tax break was not valid. Usually, I think it’s up to the IRS to go after people to re-file.

    Sammy Finkelman (e806a6)

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