Taxing and Spending Power

Question 1

Test to distinguish a tax from a penalty (Drexel Furniture-cited by NFIB)

Answer 1

1) Is the amount proportional to the infraction?
2) Is there a scienter (Knowledge of wrong doing) requirement?
3) Do the proceeds go directly to the IRS?

Question 2

The federal government can impose conditions on grants to states if:
South Dakota v. Dole (1987)
(Regarding Federal Act that withheld federal highway funds from states that did not raise drinking age to 21)

Answer 2

1) Congress is acting for the general welfare
2) The conditions are clear
3) They are related to the purpose of the spending program
4) They do not violate another part of the Constitution

Conditions may not be overly coercive.

Question 3

NFIB Spending Power

Answer 3

Imposting a condition of withdrawing 100% of Medicaid for failure to comply with changes to the program is an unconstitutional use of the spending power because it is overly coercive. (Gun to the head analogy)

Question 4

NFIB Taxing power

Answer 4

Congress has the authority to regulate health insurance through a tax imposed on individuals who do not have or purchase health insurance.