Michael F. Cannon

Last week, I discussed the importance of generating additional legal challenges to the IRS’s attempt to tax, borrow, and spend $700 billion, under the rubric of ObamaCare, yet contrary to the clear language of the statute and Congress’ intent. Four lawsuits have already been filed to challenge those illegal taxes and spending. The plaintiffs include two attorneys general, more than a dozen school districts, three private employers and eight individual taxpayers. A ruling for any of these plaintiffs would make the problems with ObamaCare’s decrepit HealthCare.gov web site look like a hiccup.

Last week, there was activity in one of those cases, Halbig v. Sebelius. Tomorrow, there will be hearing on another, King v. Sebelius.


The Patient Protection and Affordable Care Act directs states to establish health insurance “exchanges,” directs the federal government to establish Exchanges in states that do not, and offers subsidies to certain taxpayers who enroll in qualified health plans “through an Exchange established by the State.” (The subsidies are technically tax credits, though they are tax reduction in name only.) The mere availability of those subsidies triggers penalties against individuals under the law’s individual mandate, while the issuance of such subsidies triggers penalties against employers under its employer mandate. In a final rule purporting to implement the law’s tax-credit rules, the IRS announced it would issue subsidies in all states, even the 34 states that do not have “an Exchange established by the State.”

“Legal challenges to the IRS’s attempt to tax, borrow, and spend $700 billion, under the rubric of ObamaCare.”

Jonathan Adler and I explained the problems with that rule in our law-journal article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” This Cato Institute study offers a layman’s version of the arguments.

Michael F. Cannon

Michael F. Cannon is the Cato Institute's director of health policy studies.
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