In 1919, back when the United States was a constitutional republic, Congress passed a child labor law imposing a 10 percent excise tax on companies that violated it.
A North Carolina furniture maker challenged the law and won. In 1922, the Supreme Court ruled in Bailey v. Drexel Furniture that although child labor laws have a noble purpose, the means – Congress using taxing power as a penalty – was unconstitutional.
This was before Franklin Roosevelt’s court-packing threat in1937 ended the Supreme Court’s resistance to grandiose expansions of federal power. The child labor issue, by the way, was resolved when states enacted laws prohibiting exploitation.
The Drexel decision resurfaced as precedent last year at the Supreme Court in National Federation of Independent Businesses v. Sibelius. That’s where the Roberts court upheld the individual mandate to buy health insurance as an indirect “tax,” and thus upheld Obamacare as constitutional.
The Court ruled that Congress can’t make people buy a product, but that it can tax people who choose not to buy it. Yes, it’s as wacky as the 1942 Wickard v. Filburn ruling, in which a farmer was fined under interstate commerce regulations for raising grain for his own cows. And you wonder how the federal government got so big?
In the Obamacare case, the majority justified the “tax” ploy by saying that the individual mandate didn’t rise to the level of a “punitive penalty” as rejected in Drexel.
The Roberts court did not extend the "tax" finding to the employer mandate.
This brings us to a glimmer of hope that the Court will right the massive wrong of finding Obamacare constitutional. They can do this by ruling for Liberty University, which has sued to overturn the employer mandate on religious freedom grounds. The independent Christian college has several reasons for challenging the employer mandate, but it boils down to the fact that the penalty is so severe that it would bankrupt the college.