Adding to the difficulty is that it is not clear whether legislation will be considered a tax or a penalty if two out of the three “practical characteristics” are met. In the Child Labor Case all three “practical characteristics suggested it was a penalty and in NAB, all three characteristics suggested it was a tax. It is clear in the reasoning of Krieger that even if Congress’s motive is not primarily to raise revenue or if Congress has mixed motives of regulation and revenue raising that the legislation can still be valid.
Therefore, the analysis does not hinge on Congress’s motives but whether the legislation is more analogous to Drexel or NIB in assessing whether the combination of the three “practical characteristics” suggest the legislation is ore like a valid tax or if it becomes an invalid penalty with characteristics of regulation and punishment. In Drexel, Congress enacted the Child Labor Tax Law, which required employers to pay an excise tax of 10% of annual net profits if they knowingly employed child labor. In accord with the Anti- Injunction Act, Drexel paid the tax and was granted a refund after it sued.
NAB upheld the validity of the provisions PACK that required all persons who fail to comply with the mandate that they have health insurance to pay an exaction to the IRS as a valid tax. The first “practical characteristic” of whether the exaction in a piece of legislation is onerous in nature was demonstrated in Drexel but not in NAB. The 10% tax on annual net profits in Drexel was considered to be prohibitory. However in NAB, Chief Justice Roberts noted that the tax for not purchasing insurance was likely to be less than actually purchasing the insurance.
It was still possible to make a “reasonable financial decision” whether or not to comply with the tax in NAB but the penalty in Drexel was prohibitive. The second “practical characteristic” noted by Chief Justice Roberts is whether or not the legislation contains a center requirement. Sciences is usually associated with a criminal action. However, in NIB, Justice Scalia notes, in his dissent that the presence Of a sciences requirement suggests a penalty but the absence does not suggest a tax since “penalties for absolute-liability offenses are commonplace. In Drexel, the Child Labor Tax Law contained a sciences requirement but in NIB, the PACK did not. The third “practical characteristic” is whether the IRS collects the tax. In Drexel, the Department of Labor collected the exaction and in NEFF, the IRS collected the exaction. Collections by the IRS strengthens the argument for a valid tax since it is collected in the same manner as other taxes and collection by a different government agency strengthens the argument for a penalty since it indicates the exaction may be more penal in substance and application.
The potential MOB legislation would be considered onerous in nature and prohibitive since it would exact up to of net profits. The exaction in Drexel was prohibitive when it taxed 10% of profits. Chief Justice Roberts noted that the exaction in NIB might be a “reasonable financial decision” since the exaction might be less than purchasing insurance. The exaction in MOB may be so prohibitory that it forces food producers not to produce unhealthy foods at all.
It may not be a “reasonable financial decision” for food producer to engage in activities where it could not earn a reasonable return. In this way the MOB may function in “substance and application” more like a penalty than a tax. The MOB does not contain a sciences requirement. The presence of a sciences requirement suggest that an exaction is more like a penalty since sciences requirements are usually associated with crimes or other unlawful acts. However, in NIB, Chief Justice Roberts notes that the analysis should focus on the exaction’s “substance and application. It is still possible for the MOB to be more like a penalty than a tax since, as Justice Scalia notes, “penalties for absolute-liability offenses are commonplace. ” The exaction in the MOB would be collected by the Department of Health and Human Services. Since it would not be collected in the same manner as other taxes this supports the argument that the MOB is more like a penalty than a tax. In conclusion, the MOB clearly establishes the first and third “practical characteristics” that Chief Justice Roberts uses to reach his decision in NAB.
If all three “practical characteristics” were met then the MOB would be considered a penalty but it is less clear when only two of the three characteristics are met. Neither Drexel nor NIB discusses the possibility that all three factors may not be met. Additionally, in NAB, Chief Justice Roberts does not define a precise line for the tax-penalty distinction, but notes that a possible tipping point is when an exaction loses its character as a tax and in “substance and application” operates as punishment and regulation.
This suggests that meeting all three practical characteristics” may not be a rigid requirement if the legislation functions more like a penalty in its substance and application. The MOB is more like the invalid penalty in Drexel than the valid tax in NIB. The extreme onerous nature of the MOB in that it exacts up to 15% of profits may not give food producers a “reasonable financial decision” since it is even more prohibitive than the 10% exaction in Drexel.
Additionally, that the IRS does not collect the tax strengthens the argument that it is more penal in that its substance is more like a punishment or regulation. However, the MOB does not contain a sciences requirement but there is significant debate whether the lack of sciences indicates a tax. Accordingly, this characteristic should be given the least weight and the other two characteristics are likely enough for the MOB to be struck down as an invalid use of the taxing power if it were to be challenged after it was passed and a food producer paid the tax in accordance with the Anti-lunation Act.
For the MOB to be constitutional, it must adhere to the limits of Congress’s spending power granted in Art. 1 Section 8. South Dakota v. Dole (1987) presents the current judicial interpretation of the spending power and lays out a five-prong test: (1) the spending must promote the “general welfare”, (2) the condition must be “Unambiguous”, (3) it must relate “to the federal interest in particular national projects or programs”, (4) the condition imposed on the States must not in itself be unconstitutional; and (5) must not be coercive.
The MOB passes the first condition because the bill’s purpose is for the general welfare – the health of the American people and preventing obesity. The bill is created to “combat adult and childhood obesity by scrounging the production and sale of unhealthy foods. ” The second prong of the Dole test is the only prong that would likely pose a problem for the MOB. For the states to receive funding they must implement restrictions of “unhealthy foods” (defined as “highly processed foods high in sugar, fat, carbohydrates or calories. ) Determining what is “highly processed” and “high” in calories is out of the scope of the expertise of the writer and likely most politicians and judicial officers and reasonable people may disagree in that determination as well. Since, the bill lays out no standards or guidelines for determining “highly processed” or “high” then it may be considered ambiguous. Next, the bill is not likely in itself unconstitutional since it doesn’t violate the commerce power or any other constitutional limitations.
Next, this bill has to be related to federal interests in national projects or programs, there have been several federal anti-obesity programs but a current one is the “Healthy Food Financing Initiative. ” Next, the MOB is not coercive towards the states since the condition that the states implement laws restricting children’s access to unhealthy foods is very similar to the condition in Dole squiring a state law that the drinking age be 21 . In conclusion, the validity of the MOB will hinge on the ambiguity of “highly processed” and “high in calories. Since the MOB does not include guidelines for determining those areas and it does not state whether high in calories is the same for all people or different based on other factors like age, weight, activity level, etc. There is no way to determine what foods the MOB applies to in order to restrict access to them. If a survey were to be given to each states legislature of what foods Were “highly processed” and “high in sugars, fats, carbohydrates, and calories” t is likely that the survey would yield widely different results from state to state.
This would mean that the definition of “highly processed” and “high” would be different in different states. One could simply drive to a different state to get foods that were prohibited in another state. The MOB should clearly define these terms through the use of experts in the nutritional field through of the federal government’s regulatory agencies. Without a clear definition or test, massive confusion and litigation is likely to result. Therefore, it is more likely than not that the MOB is not a valid use of the spending power.