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Gaius Famius

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The Fatal Flaw in the

Hobby Lobby Case

by Gaius Famius

Published February 16, 2014

[Note:  The following article was written with long consultation and review by a practicing, bar-admitted tax attorney, who has requested to remain anonymous in order to protect his practice from retaliatory persecution by the IRS.]

The Hobby Lobby case, which is similar to over seventy other cases in the court system, was chosen by the United States Supreme Court to represent all of these cases for the Supreme Court's ruling.

There is an HHS mandate, part of the Obamacare law interpretation and implementation, that mandates all employers of a certain size, both profit and non-profit, to provide certain basic required medical benefits, which HHS has determined will include the availability of contraceptives and abortifacient drugs.

The Hobby Lobby lawsuit, filed by the owners of Hobby Lobby, the Green family, maintains that they cannot support the distribution of abortifacient drugs because abortion violates their religious beliefs.  If they do not provide this medical benefit to all of their employees, the Green family and Hobby Lobby face fines of 1.3 million dollars a day, which would eventually bankrupt the company.

The medical benefits in question are legally approved in the United States, and available through various channels.  The legality of abortifacient drugs is not being challenged, only whether or not the Green family will be forced to pay for health insurance for their employees that provides these abortion causing abortifacient drugs.

There is no doubt that the Greens are a very religious family, carrying the practice of their religion into all aspects of their life, including how they run their business.  However, Hobby Lobby is not a religious organization with a religious purpose, but is a for-profit business.  Hobby Lobby employees are not required to adhere to the Green family's religious beliefs as a condition of employment, nor is the dissemination of the Green family religious beliefs a part of their job duties.

This distinction is very important and separates the Hobby Lobby case, and similar cases, from the lawsuits filed by specifically religious organizations.  In fact, Hobby Lobby, by federal law, under the Equal Employment Opportunity Act, cannot discriminate in the hiring of those who hold religious beliefs that oppose the Green family, and with the size of the Hobby Lobby company (approximately 13,000 employees), it almost certainly employs persons who do not agree with the Greens that it is morally wrong to use or pay for abortifacient drugs, and in fact are looking forward to the provision of this federally required employment benefit.

While everyone is looking at the Hobby Lobby case as an issue of religious freedom, the Supreme Court has already defined the Obamacare debate as one of taxes.  The required, federally defined medical insurance individual mandate on all Americans has already been upheld by the Supreme Court on the basis that the ACA (Obamacare) is a tax, and that the federal government has the authority to require all Americans to pay taxes.

A sub part of the ACA requires all employers of 50 or more employees to provide this required medical insurance for their employees or face a daily fine that can total substantial amounts of money.  If employees do not receive ACA compliant medical insurance from their employers, then the individual mandate requires them to buy it on their own.  The HHS contraceptive and abortifacient mandate is part of the HSS regulations defining exactly what benefits the employers are required to provide to their employees.  

The Hobby Lobby lawsuit does not dispute the fact that HHS has the legal authority to define the requirements of ACA compliant medical insurance, but only disputes that certain items are being included in the requirements which the Green family objects to for religious reasons.

Per the Supreme Court's previous ruling that the entire ACA is a federally required tax, the requirement that employers provide ACA compliant medical insurance is therefore itself a tax on the employer and falls into the category of an employment tax, such as Social Security, Medicare, etc.  

Employment taxes are paid by the employer, either completely, or partially with additional withholding from the employee's paycheck.  Either way, the tax is filed and the check written by the employer. Employment taxes must be paid by ALL employers, whether non-profit or for-profit, without exception.  If the employer fails to withhold the employee's portion of a tax, then the employer is liable for the entire amount.

Look at your paycheck and you will see several examples of employment taxes, such as Social Security (Federal Insurance Contribution Act or FICA), Medicare, and unemployment taxes.  In fact, Medicare is a type of health insurance, albeit one that is far more limited in scope than the ACA, but it is a required line item withholding on the paycheck of all Americans.  Neither are there any limits on how large the Medicare withholding tax can be.

Healthcare is now seen as an employer responsible TAX, in the same manner as Medicare, FICA, etc.  

Viewed as a federally required employment tax, the ACA required healthcare insurance will be seen in the same light as Social Security, Medicare, and unemployment insurance taxes.  Exemptions for any one of these “insurance” programs, and they are all considered to be insurance, are extremely rare and hard to get.  Even the Amish, who do not use or support insurance of any kind, at any time, have been required by the Supreme Court to pay Social Security taxes as employers and are only exempt if they are self-employed, with no employees.  (United States v Lee 455 U.S. At 258)

Otherwise, there are no opt-outs to any of the federally required employment taxes, not even on the basis of religious freedom.  In Lee, the Supreme Court ruled that an Amish employer must pay Social Security employment taxes even though these taxes are a substantial burden on the religious beliefs of the Amish stating, “religious belief in conflict with the payment of taxes affords no basis for resisting the tax.”  Holding that this religious burden is constitutional, the Supreme Court further stated, “This mandatory participation is indispensable to the fiscal vitality of the social security system. … Moreover, a comprehensive national social security system providing for voluntary participation would be almost a contradiction in terms, and difficult, if not impossible, to administer. Thus, the Government's interest in assuring mandatory and continuous participation in, and contribution to, the social security system is very high.”


Continuing, the Court further stated: “The Court has long recognized that balance must be struck between the values of the comprehensive social security system, which rests on a complex of actuarial factors, and the consequences of allowing religiously based exemptions. To maintain an organized society that guarantees religious freedom to a great variety of faiths requires that some religious practices yield to the common good.

Further: “Because the broad public interest in maintaining a sound tax system is of such a high order, religious belief in conflict with the payment of taxes affords no basis for resisting the tax.”

Further: “Granting an exemption from social security taxes to an employer operates to impose the employer's religious faith on the employees. Congress drew a line in § 1402(g), exempting the self-employed Amish but not all persons working for an Amish employer. The tax imposed on employers to support the social security system must be uniformly applicable to all, except as Congress provides explicitly otherwise.”

To understand how this case affects the Hobby Lobby case, simply substitute ACA for Social Security in the quotes about the Lee case above.  Both cases are about a national insurance program intended to be comprehensive and universal.

Federal unemployment taxes are paid 100% by the employer, although Social Security and Medicare are only partially paid by the employer.  The ACA insurance requirement will be paid for by the employer 100%.  

If the Supreme Court follows it's own precedent of ruling that the ACA is a tax, then the ACA HHS employer mandate will be viewed as an employment tax, and following employment tax precedents, there will be no exemptions or opt-outs.  The Supreme Court will ignore the religious freedom arguments with the statement that religious freedom is not freedom from employment taxes.

Employment taxes are levied across the board, not only with for-profit corporations, but also unincorporated proprietors, and non-profit organizations.  For an employer to be able to pick and choose what employment tax requirements they will meet goes against everything that the tax code is based upon.

A number of non-profit organizations have tried over the years to challenge their payment of employment taxes on the basis that they are non-profit and do not have to pay any taxes.  This claim has been made in court and lost.  The results have always been negative with good, otherwise law abiding men sent to jail, church properties seized, and other fines and penalties levied.  One set of taxes that you must absolutely pay are the employment taxes due on each of your employees.

Hobby Lobby, and the other similar cases, are disputing a federally required tax, purely on the grounds of religious freedom.  Tax objections based upon religious beliefs have never been upheld because the government's “compelling interest” in broad based and equal taxes supersede religious freedom on the issue of taxes.

The other item that is being ignored is that the religious beliefs of the Green family, which owns Hobby Lobby, are not transferable to their employees.  In other words, the Green family cannot force their employees to forgo a federally required benefit simply because the Green family is religiously opposed to that benefit.  Adherence to the Green family's religious beliefs is not a requirement to be hired or maintained in a job at Hobby Lobby, and therefore, the employees cannot be required to adhere to the practice of the Green family's religious beliefs.

The government's interest in taxes is a “compelling interest” on the government's part that supersedes religious freedom or non-profit status.  These employment taxes must be paid by everyone, even if they religiously object, or even have a legal non-profit status.

The HHS TAX mandate will be upheld as a TAX because the Supreme Court will see this as a TAX matter, and not as a matter of religious freedom.

The government holds that such employment taxes are not taxes upon the organization, but taxes due for each employee that have to be paid regardless of who they work for, to receive insurance benefits that they are “entitled” to regardless of who they have worked for.  As such, there are no exemptions or opt-outs for these employment taxes, even for religious freedom.

Non-profits are exempt from federal income tax, and usually from local property taxes and sales taxes, but they have NEVER been exempt from employment taxes for their employees.

If the courts will not exempt non-profits from the payment of employment taxes, then there is absolutely no possibility of the Supreme Court exempting the for-profit Hobby Lobby from the payment of employment taxes, even for a small portion of them.

Moral and religious arguments against these contraceptives and abortifacients simply don't matter on a tax basis because they are legal and have been approved by the FDA.  HHS has already stipulated that they will be a part of all ACA compliant healthcare plans, whether individual plans or employer plans.  The federal court system does not care about the morality of taxes and simply enforces them across the board.

Ah!, but HHS is not arguing the case on this basis.  Mostly true, because their lawyers are typical government employees and not very competent at their jobs, but that does not mean that they will not get to this point sooner or later, but they will.  

The Supreme Court was ahead of everyone when it ruled that the ACA was a tax.  Neither side had argued the individual mandate on the basis of a tax, and in fact, both sides were opposed to calling the ACA a tax, and yet the Supreme Court did so anyway.  Unlike lower courts, the Supreme Court does not have to limit itself to the technical issues of the case presented to it, but can reach across the entire breadth of law, or even set new precedents for any ruling.

The argument presented here is based upon the Supreme Court's own precedent of ruling the ACA a tax, and by a large precedent of tax law that everyone has ignored.  The Supreme Court can very easily make an even lower jump than they did when they ruled the ACA a tax.

In fact, it is very clear that HHS has failed to understand the enormity and implications of what the Supreme Court ruled under Justice Roberts when it ruled that the ACA is a tax, and the individual mandate is a legal requirement.  Or it could be that this has been the plan all the time and HHS, along with others, are just biding their time until the Supreme Court ruling.

If the Supreme Court rules that the HHS mandate is a legally required mandate under tax law, and that employers cannot pick and choose which portions they wish to pay under their religious freedoms, then this employment mandate actually becomes applicable to all employers, both for-profit and non-profit.  HHS will then be able to do away with it's exemptions for religious organizations, and even very focused religious organizations will be forced to pay this employment tax on all of their employees.

The Supreme court will rule that the HHS mandate must be of “general applicability” for all employees in the pursuit of a “comprehensive insurance system” in the same manner that Social Security is.  The ruling will shut down the loopholes, and shut out most of the exemptions, even those already granted, because any truly comprehensive government program must be uniformly applied with rare exceptions.  Furthermore, the Supreme Court will use this ruling in regards to it's case with the Little Sisters and rule in that case that the HHS mandate must be generally applied to all employers, regardless of religious affiliation.  Employers will be required to provide these specific coverages, so that the policies provided by employers will be on par with the policies available through the exchanges to individuals, ALL of which will cover contraceptives.  In this way, comprehensive healthcare will deliver a government required minimum coverage that is “comprehensive and uniform” for all Americans, whether they get their insurance on an exchange or through an employer.

If the ruling goes against Hobby Lobby, then HHS and the IRS will, following the Supreme Court's guidance, take the next logical step and expand the HHS contraceptive mandate to include all non-profits and religious organizations following the precedent of American law.  It is clear from precedent that any exemptions must be statutorily granted by Congress.  All of the previously granted  exemptions by HHS will be wiped out.  This is almost inevitable.

If hobby lobby loses, then this directly opens the door for converting ACA to a single payer system based upon employment taxes, for any employee, regardless of size of the employer, and there would be no opt out for anyone either individual or employer.  Through this method, the ACA could be turned into a single payer system by HHS regulations and enforced by the IRS without the necessity of repealing or replacing the law by Congress.

We already know, through public statements, that the long term goal is to turn the ACA into a single-payer system, and the ACA was only adopted as compromise legislation.  As such, and based on the way that the law is being constantly changed as the liberals please, then this kind of turnabout should be no surprise, and we should all be prepared for it.

This case could have far worse unintended consequences than the plaintiffs realize.  Instead of finding an exemption for their religious beliefs, the case will be used to impose the contraception mandate upon everyone equally, and to take further steps towards converting the ACA into a single-payer system.

The government has decreed, and been sustained by the Supreme Court, that healthcare is a necessity that everyone requires, just as social security is, and everyone is required to pay into it, and all employers must pay their share.  If the government decrees that everyone is entitled to certain items in their healthcare, including abortifacients, then it is a tax requirement, and not an issue of religious freedom.  The government's “compelling interest” in ensuring that everyone have a certain minimum level of healthcare is superior to the religious beliefs of organizations or individuals, and under the American system, must be adhered to.

Religious freedom is not the supreme right of the land, and is a subordinate right.  As such, religious freedom will be subordinate to the government's power to tax for the benefit of each individual.

The fatal flaw of the Hobby Lobby case is that the Green family is basing their stand against abortion and abortifacients on their right to religious freedom when the right to religious freedom, under the United States Supreme Court, is subordinate to the federal government's power to tax.  Therefore the right to life is subordinate to the federal government's power to tax.  Once passed and upheld by the Supreme Court, a tax may not be challenged under any religious or conscientious objection, but can only be changed by the legislative action of Congress.

The ACA has already been ruled a tax, and exemptions for any individuals or corporations can only be granted at the federal government's benevolence, with no exemption being a right unto itself.

Pro-lifers have based their pro-life position on a flawed foundation, that of religious freedom.

The fatal flaw of the Hobby Lobby case (and related cases) is that it subverts the right to life and places it under religious freedom, when in reality, without the right to life, it would be impossible to have religious freedom, as we are quickly learning the hard way.

The right to life is the right upon which all of our others rights are based, and is neither subordinate to, nor derived from, any other right, neither does the federal government have any moral right to limit, restrict, or tax the right to life.

The right to life is not a religious freedom issue.

Our right to life is not derived from our religious beliefs.

Our religious freedom is derived from our right to life.

Our right to life is derived from the fact that we are human and it is written into our DNA.  It does not matter if you are Catholic, Christian, Hindu, Muslim, Atheist, Undecided, or Uninformed. You still have the right to life.

By reversing the order of priority of these rights, the right to life, and freedom of religion, the right to life is greatly endangered and put at risk.

In order to defend freedom of religion, we must first defend the right to life, regardless of religion.

What if I am one of the atheist or secular persons who is pro-life and owns a company and does not want to pay for abortifacients?  I cannot claim a religious exemption.  My only appeal is directly to the right to life itself.

What if I am religious and pro-life, but not associated with or a member of any of the organized religions or denominations recognized by the federal government and do not want to pay for abortifacients?  I cannot legally claim a religious exemption.  My only appeal is directly to the right to life itself.

In order to stop the government's funding of abortion in all forms, then the arguments for the right to life must be based upon the right to life as our supreme right, superseding all other rights, including those of the government, and not be based upon the right of religious freedom which is not our supreme right.

As long as the defense of the right to life is based upon weaker rights such as religious freedom, then the right to life will always be restricted and limited under these other rights such as religious freedom, which is then subordinate to the government's substantial interest in taxation.

We would be very surprised if the Supreme Court did not uphold the HHS mandate as a legitimate tax under the ACA, and just as they upheld the individual mandate, punt the issue back to Congress essentially saying, “If you don't want this tax mandate, then change the law.”

Even if Hobby Lobby wins, then the pro-life movement will have been severely restricted to only being able to stand on religious freedom, which of necessity excludes large numbers of non-religious pro-lifers, and excludes religious pro-lifers that do not have the provable religious associations of the Green family.

The fatal flaw of the Hobby Lobby case is that while everyone else is arguing about religious freedom, an activist court will follow it's own precedent regarding ruling the ACA a tax, and will reframe the issue as a purely tax issue, and will set the parameters that HHS and the IRS need to follow in order to enforce as a tax.

The net result will be to not only uphold the employer mandate, but to extend it to covering all employees, regardless of type or size of employer.  The ruling will also open the way for directly converting the ACA to a single-payer system without having to repeal, replace, or modify the law through Congress.

Everyone was caught off guard by the Roberts' Court first ruling that converted the ACA to a tax.  That is no excuse for anyone to be caught off guard again if the Supreme Court also treats the Hobby Lobby case as a matter of taxes, and not religious freedom.

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