Over at Volokh Conspiracy, Professor Orin Kerr has taken to defending the individual mandate on supposedly libertarian principles. Professor Kerr, a Cato Constitution Day participant and an excellent defender of civil liberties, argues that the individual mandate preserves our liberties better than a top-down, government-controlled program à la Medicare. He writes, “If the courts conclude that the mandate approach is unconstitutional, then the more market-oriented approach to benefits would be ruled out. Congress would have a choice: Don’t mandate benefits, or else mandate using a 1960s Great Society government monopoly model.”

While I have the utmost respect for Professor Kerr, his analysis here is woefully mistaken. First of all, I will only mention what my colleague Michael Cannon has tirelessly pointed out: ObamaCare will throttle the operation of a free market in numerous ways. It will not only stifle innovation, it will likely result in the evacuation of insurance providers from the market as they get caught in a “death spiral” caused by the simultaneous mandatory insurance of the sick while healthy individuals increasingly choose to pay the fine rather than purchase health coverage. Richard Epstein has also argued that ObamaCare’s regulatory controls on health insurance providers will “systematically strip[] the regulated health-insurance issuers of their constitutional entitlement to earn a reasonable rate of return on the massive amounts of capital that they have already invested in building out their businesses,” thus converting “health insurance companies into virtual public utilities.” Or, in the words of Cannon, “Compulsory health insurance enables, and ultimately would require, politicians and government bureaus to control nearly all aspects of health care and medical practice.”

But perhaps the most insidious thing about ObamaCare is precisely the aspect that Professor Kerr seems to fall for: This is a government take-over clothed in market-based rhetoric. This take-over has been facilitated by nearly a century of constitutional misinterpretations that have left us with the “choice” between one unconstitutional system, a single-payer health care system, and another, the “market reform” of the individual mandate. Professor Kerr, like so many others, has been taken in by the façade of choice and markets. But this façade not only has political significance, it has constitutional significance.

The mandate was partially passed in order to avoid the political accountability that a tax increase would have engendered. Rather than taking your money through properly authorized political channels, Congress decided to further pervert the Commerce Clause in order to save their jobs. Thus, they chose to compel its citizens to purchase a product from a private company. While there is no constitutional provision that proscribes “constitutional avoidance,” misinterpreting the enumerated limits of federal power, as the Court has repeatedly done since the New Deal, encourages such constitutional run-arounds.

The Founders were very wary of a government that had unchecked power to take property from its citizens or laws that compelled citizens to give their property to another. After all, taxes—the Sugar Act, the Stamp Act, the Declaratory Act, the Townshend Duties, the Tea Act—had been instrumental in incubating the Revolution. Therefore, taxation is treated very seriously in the Constitution.

Properly understood, the General Welfare Clause—“Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States”—allows taxes to be collected only in pursuit of the enumerated powers of Congress and only for the “general,” rather than the “specific” (that is, special interest), welfare. Moreover, Article I, Section 7, Clause 1 of the Constitution commands that “All Bills for raising Revenue shall originate in the House of Representatives[.]” During the debates in Philadelphia, Benjamin Franklin expressed “that it was always of importance that the people should know who had disposed of their money, & how it had been disposed of. It was a maxim that those who feel, can best judge. This end would, he thought, be best attained, if money affairs were to be confined to the immediate representatives of the people.” During the Convention, even the clause that allowed the Senate to add amendments to bills of revenue that originated in the House (a clause which eventually found its way into the Constitution) was opposed by those who thought that no form of taxation should be entrusted to a representative body that was not directly accountable to the people (at the time the Senate was chosen by the state legislatures).

Similarly, Article I, Section 9, Clause 7 stipulates that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

As St. George Tucker, one of the most influential legal scholars of the founding generation, wrote in 1803:

All the expenses of government being paid by the people, it is the right of the people, not only, not to be taxed without their own consent, or that of their representatives freely chosen, but also to be actually consulted upon the disposal of the money which they have brought into the treasury; it is therefore stipulated that no money shall be drawn from the treasury, but in consequence of appropriations, previously made by law: and, that the people may have an opportunity of judging not only of the propriety of such appropriations, but of seeing whether their money has been actually expended only, in pursuance of the same; it is further provided, that a regular statement and account of the receipts and expenditures of all public money shall be published from time to time. These provisions form a salutary check, not only upon the extravagance, and profusion, in which the executive department might otherwise indulge itself, and its adherents and dependents; but also against any misappropriation, which a rapacious, ambitious, or otherwise unfaithful executive might be disposed to make. In those governments where the people are taxed by the executive, no such check can be interposed. The prince levies whatever sums he thinks proper; disposes of them as he thinks proper; and would deem it sedition against him and his government, if any account were required of him, in what manner he had disposed of any part of them. Such is the difference between governments, where there is responsibility, and where there is none.

Finally, the Takings Clause of the Fifth Amendment also demonstrates a concern that government officials would take property to either enrich themselves or to enrich politically powerful interest groups. In short, all the provisions listed above make it clear that the Framers intended the forced taking of property to be above board, on the books, and as politically accountable as possible. As Justice Scalia once wrote:

The politically attractive feature of regulation is not that it permits wealth transfers to be achieved that could not be achieved otherwise; but rather that it permits them to be achieved “off budget,” with relative invisibility and thus relative immunity from normal democratic processes.

Nevertheless, like most politicians, the administration has shown that both its rhetoric and its constitutional theories are sharpened with a Machiavellian edge. During the debates over the law, it wasn’t a tax (as President Obama vigorously asserted to George Stephanopoulos). After the law was passed and the public no longer had a say in the outcome, the mandate suddenly became a tax for the purposes of litigation strategy. Although the Constitution doesn’t require government officials to be rhetorically consistent, there is something truly disturbing about the level of constitutional perversion that is occurring here. The avoidance of proper democratic channels of taxation is yet another way in which the mandate is “improper” and, in the words of Chief Justice Marshall, is inconsistent with “the letter and spirit of the constitution.”

Although a nightmare in terms of policy, a single-payer system funded through taxation would, in many ways, be constitutionally preferable to the individual mandate. As Timothy Sandefur writes at the PLF Blog:

Were the system run by the government, inefficient and troubling as that would be, citizens would at least have a general idea whom to blame and how to remedy the situation. Instead, by reaching back to a model that pre-dates even the Progressive era reforms that the administration likes to evoke in its rhetoric, Obamacare manages to achieve something that the Constitution’s founders would have thought utterly deplorable: using government coercion to enrich private industry in the most direct and anti-democratic way conceivable—all while telling the citizens that it’s for their own good.

Couldn’t have put it better myself.

My Washington Examiner column this week looks at the eternal recurrence of a media myth, “the Incredible Shrinking Presidency.” We go through a cycle of media hand-wringing about a weakened presidency virtually every time a president runs into trouble in the polls. The most recent example is the Politico’s September 7 cover story on “The Incredible Shrinking President,” examining “a once muscular presidency’s dramatic downsizing.” (Richard Cohen actually beat them to the punch, a year to the day before the Politico story ran, with “Obama’s Shrinking Presidency.”)

As I write in the Examiner, “it’s a peculiar office, the presidency. Apparently, it keeps shrinking, but — with an executive branch of some 2.1 million civilian employees and counting — it never gets any smaller.” I take a look at the “shrinking presidency” meme during the Bush years:

A little over 10 years ago, the Wall Street Journal ran a column by then-Washington editor Al Hunt with the same title, “The Incredible Shrinking President.”

President Bush was “on the defensive,” Hunt insisted — increasingly weak and irrelevant. Three days later, al Qaeda toppled the twin towers, and, in short order, America had embarked on a seemingly permanent war, with permanently enlarged powers for the commander in chief.

But the shrinking-CINC meme somehow refused to die. After Bush’s Republicans lost the House and Senate in the 2006 midterms, the Economist led with a story on, yes, “The Incredible Shrinking Presidency.” The magazine’s cover featured a caricature of a dwarfish Bush, his head peeking above the top of a cowboy boot.

During the Clinton administration, Arthur Schlesinger Jr., who coined the phrase “Imperial Presidency,” could be found announcing the institution’s demise—-and sounding almost despondent about it. In an August 1998 New York Times op-ed, “So Much for the Imperial Presidency,” Schlesinger complained that independent counsel Ken Starr had left the executive branch ‘‘harried and enfeebled.’’ Not too long after, the ‘‘harried and enfeebled’’ president carried out a 78-day air war over Kosovo despite Congress’s refusal to authorize it.

This silly meme is, it seems, as resilient as the modern presidency itself. But the truth is, as Yale’s Jack Balkin wrote on the eve of Obama’s inauguration, “in terms of the possibilities of power, the Presidency has never had more tools at its disposal.…This trend in Presidential power building poses enormous risks for liberty whoever occupies the White House.” The presidency isn’t “shrinking”–but it should.

It’s hard to keep track of all the tax hikes that President Obama is proposing, but it’s very simple to recognize his main target — the evil, nasty, awful people known as the rich.

Or, as Obama identifies them, the “millionaires and billionaires” who happen to have yearly incomes of more than $200,000.

Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.

This sounds like a pretty good scam, at least if you’re a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.

That may not matter if you’re trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.

Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.

The most important thing to understand is that the rich are different from the rest of us (or at least they’re unlike me, but feel free to send me a check if you’re in that category).

Ordinary slobs like me get the overwhelming share of our income from wages and salaries. The means we are somewhat easy victims when the politicians feel like raping and plundering. If my tax rate goes up, I don’t really have much opportunity to protect myself by altering my income.

Sure, I can choose not to give a speech in the middle of nowhere for $500 because the after-tax benefit shrinks. Or I can decide not to write an article for some magazine because the $300 payment shrinks to less than $200 after tax. But my “supply-side” responses don’t have much of an effect.

For rich people, however, the world is vastly different. As the chart shows, people with more than $1 million of adjusted gross income get only 33 percent of their income from wages and salaries. And the same IRS data shows that the super-rich, those with income above $10 million, rely on wages and salaries for only 19 percent of their income.

This means that they — unlike me and (presumably) you — have tremendous ability to control the timing, level, and composition of their income.

Indeed, here are two completely legal and very easy things that rich people already do to minimize their taxes — but will do much more frequently if they are targeted for more punitive tax treatment.

1. They will shift their investments to stocks that are perceived to appreciate in value. This means they can reduce their exposure to the double tax on dividends and postpone indefinitely taxes on capital gains. They get wealthier and the IRS collects less revenue.
2. They will shift their investments to municipal bonds, which are exempt from federal tax. They probably won’t risk their money on debt from basket-case states such as California and Illinois (the Greece and Portugal of America), but there are many well-run states that issue bonds. The rich will get steady income and, while the return won’t be very high, they don’t have to give one penny of their interest payments to the IRS.

For every simple idea I can envision, it goes without saying that clever lawyers, lobbyists, accountants, and financial planners can probably think of 100 ways to utilize deductions, credits, preferences, exemptions, shelters, exclusions, and loopholes. This is why class-warfare tax policy is so self-defeating.

And all of this analysis doesn’t even touch upon the other sure-fire way to escape high taxes — and that’s to simply decide to be less productive. Most high-income people are hard-charging types who are investing money, building businesses, and otherwise engaging in behavior that is very good for them — but also very good for the economy.

But you don’t have to be an Ayn Rand devotee to realize that many people, to varying degrees, choose to “go Galt” when they feel that the government has excessively undermined the critical link between effort and reward.

Indeed, if Obama really wants to “soak the rich,” he might want to abandon his current approach and endorse a simple and fair flat tax. As explained in this video, this pro-growth reform does lead to substantial “Laffer Curve” effects.

But you don’t have to believe the video. You can check out this data, straight from the IRS website, showing how those evil rich people paid much more to the IRS after Reagan cut their tax rate from 70 percent to 28 percent in the 1980s.

Some politicians in Montgomery County, Md. want the county government to take over the provision of electric power from the private Potomac Electric Power Co. (Pepco). One councilman quoted in the D.C. Examiner seems to think the killer argument is that money laid out by the county government has no opportunity cost:

“Pepco pays out … $200 million in dividends,” said Councilman Marc Elrich, D‑at large. “If I’m not paying shareholders dividends, I have $200 million I can invest in infrastructure.”

Surely Councilman Elrich’s insight is too profound to confine to the utility business alone. It suggests that the government — enjoying, it seems, the power to lay out taxpayer dollars with Greece-like insouciance about boring old concepts like “return on investment” — could do better than dividend-paying corporations at almost any business. Why not have it take over the running of fast-food restaurants and dry cleaners too?

As it happens, Pepco has been the target of consumer anger in recent years in considerable part because windstorms in its service area have resulted in prolonged and costly outages. And in the suburbanized Northeast, at least, one of the single most important predictors of severe windstorm outages is the extent to which utilities trim back trees near power lines: well-off counties like Montgomery that prize a leafier, more natural tree canopy pay the price in occasional electric interruption, a phenomenon likewise seen in places like Greenwich, Ct.

So who’s led the opposition in the past when Pepco has tried to accelerate cutting? You guessed it:

Councilman Marc Elrich (D‑at large) says he is considering legislation to stop widespread tree-cutting by Pepco.

There is perhaps no single right way of resolving the trade-offs here, but demagoguing the issue up one side of the street and down the other is almost certainly the wrong way.

As recent events in Wisconsin have demonstrated, public-sector unions are powerful political constituencies that can shape government to their ends. The Service Employees International Union, for example, the defendant in Knox v. SEIU Local 1000, has been ranked by OpenSe​crets​.org as the fifth biggest “heavy hitter” in federal politics in terms of campaign spending.

In 2005, the SEIU initiated a mid-year campaign against two California ballot measures, one that would cap state spending and another that would restrict the use of union dues for political purposes. In states such as California that do not have “right to work” laws, unions are allowed to take dues from non-union workers to finance collective-bargaining activities that, arguably, benefit all employees. Since 1977, however, unions have not been allowed to take dues from non-union members to pay for pure political advocacy without adequate protections for possible dissenters.

To distinguish political money from collective-bargaining money, the Supreme Court requires that a “Hudson notice” be given to all non-union workers. This notice gives non-members the opportunity to challenge political expenditures. But when the SEIU began garnishing 25–33% more wages to fight the California ballot initiatives, it issued no new Hudson notice, effectively forcing 28,000 non-member employees to finance its political speech.

As Judge J. Clifford Wallace wrote in dissent from the Ninth Circuit’s ruling in favor of the SEIU, “it is undeniably unusual for a government agency to give a private entity the power, in essence, to tax government employees.” Now before the Supreme Court, Cato joined the Pacific Legal Foundation, the Center for Constitutional Jurisprudence, and the Mountain States Legal Foundation, on a brief supporting the non-union workers and arguing that the Court should focus not on the extent of the burden Hudson places on unions (as the Ninth Circuit did) but on the paramount reasons why the notice requirements exist in the first place: to ensure that an individual’s right to speak or remain quiet receives the protection it deserves.

As Judge Wallace put it, “the union has no legitimate interest … in collecting agency fees from nonmembers to fill its political war-chest.”

We also highlight the numerous unscrupulous tactics that unions have used over the years that violate the rights of dissenting workers — the same kind of rights that the Ninth Circuit treated with indifference. Finally, in light of the extreme political power that unions enjoy, the Court should find that the only way to adequately protect the rights of dissenting workers is to require that all non-union members must “opt-in” to any garnishment of wages for political purposes.

The Supreme Court will hear the Knox case in early 2012. Here again is Cato’s brief.

Rachel Donadio reports in the New York Times:

COMITINI, Italy — With only 960 residents and a handful of roads, this tiny hilltop village in the arid, sulfurous hills of southern Sicily does not appear to have major traffic problems. But that does not prevent it from having one full-time traffic officer — and eight auxiliaries.

The auxiliaries, who earn a respectable 800 euros a month, or $1,100, to work 20 hours a week, are among about 64 Comitini residents employed by the town, the product of an entrenched jobs-for-votes system pervasive in Italian politics at all levels.

She goes on to explain that much local spending comes from the national government, which is now in dire straits:

But what may be saving Comitini’s economy is precisely what is strangling Italy’s and other ailing economies throughout Europe. Public spending has driven up the public debt to 120 percent of gross domestic product, the highest percentage in the euro zone after Greece’s.

Wow, this is remarkable. The alternative minimum tax (AMT) is one of the most-hated features of the tax code. It is such a nightmare of complexity that even Democrats routinely have supported “patches” and “band-aids” to protect millions of additional households from getting trapped in this surreal parallel tax universe — one that requires taxpayers to calculate their taxes two different ways, with the IRS getting the maximum amount of money from the two returns. (Hong Kong, by contrast, give taxpayers the option of calculating their taxes two different ways, but they’re allowed to pay the smaller of the two amounts.)

Notwithstanding the AMT’s status as arguably the worst feature of the internal revenue code, President Obama apparently wants to double down on this horrific policy by creating a new version of this nightmarish provision.

Here are some excerpts from the Wall Street Journal’s coverage, including a key observation that Obama’s scheme is just another version of the AMT.

The administration’s principle resembles the Alternative Minimum Tax, which was first adopted in 1969 and was intended to hit the superwealthy. The AMT has been hitting an increasing number of the middle class because it wasn’t indexed for inflation, and Congress has continually wrestled with how to get rid of it.

The WSJ article also notes that a glaring inconsistency in the White House’s rhetoric. the plan is supposed to be a “very significant” tax hike, but doubling the tax burden on millionaires would only raise $19 billion per year. In other words, the Administration’s class-warfare rhetoric is probably just cover for a tax hike that actually will hit a lot of people with far more modest incomes.

The proposal also could apply to a broader selection of taxpayers—all households with incomes of more than $1 million. Those earners are expected to pay an average of $845,000 this year, according to the nonpartisan Tax Policy Center. Assuming the households in the group of 22,000 pay that amount, even doubling their tax burden would raise just $19 billion a year at a time when deficit reduction is being measured in trillions of dollars. That doesn’t take into effect any change in taxpayer behavior prompted by a new tax regime. A senior administration official said that depending on where the minimum rate is set, the plan could be a “very significant” revenue raiser. The official wouldn’t provide details. …Some conservative economists say such a proposal could put a drag on capital markets and ignores the fact that many companies have already paid tax on the income before it is distributed to owners as dividends or capital gains.

The New York Times, to its credit, provides a fair description of the issue (including a much-needed acknowledgement that Warren Buffett may not have been honest and/​or accurate), and also suggests that Obama may be proposing to replace the existing AMT with this new version (though that presumably would negate its impact as a revenue-raiser).

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House on Monday. Mr. Obama’s proposal is certain to draw opposition from Republicans, who have staunchly opposed raising taxes on the affluent because, they say, it would discourage investment. It could also invite scrutiny from some economists who have disputed Mr. Buffett’s assertion that the megarich pay a lower tax rate over all. Mr. Buffett’s critics say many of the rich actually make more from wages than from investments. …The administration wants such a tax to replace the alternative minimum tax, which was created decades ago to make sure the richest taxpayers with plentiful deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class.

Actually, the AMT also hits lots of middle-class families since having kids is considered a “preference” for tax purposes.

But that’s just an insult layered on top of injury. What makes Obama’s new scheme so destructive is that it would (though the White House has not explained the details) somehow classify dividends and capital gains as “preference” items — even though everyone acknowledges that such income already is double taxed!

In other words, Obama claims to be concerned about jobs, but he is proposing a big tax hike on the saving and investment that is necessary to create jobs. Amazing.

Regular readers will recognize this video about Obama’s class-warfare tax policy. But if you haven’t seen it, five reasons are presented to explain why it will backfire.

But look at the bright side. At least accountants and tax lawyers (and don’t forget bankruptcy specialists) will get more business if Obama’s plan is implemented.