The “Alaska Purchase” Is Probably Unconstitutional

As Republican leadership searches for the 51st vote in favor of Cassidy-Graham-Heller, their apparently randomly chosen vehicle for repealing the ACA, rumors abound of a sweetheart deal aimed at securing Lisa Murkowski’s vote. The so-called “Alaska Purchase” would maintain existing premium support credits for those purchasing health insurance on the individual market…but only in Alaska and Hawaii.

They probably can’t do that. Article I, section 8 of the Constitution says “all Duties, Imposts and Excises shall be uniform throughout the United States.” Joseph Story, writing in 1834, thought that the point of that provision was to prevent coalitions of states from ganging up, in Congress, to benefit themselves at the expense of others. While the “uniformity clause” has been watered down over time, it’s still enough to swamp the Alaska Purchase proposal.

The leading recent authority on the uniformity clause is, coincidentally, also a case from Alaska, U.S. v. Ptasynski, 462 U.S. 74 (1983). The upshot is that Congress imposed a “windfall profits” tax on domestically extracted oil, but exempted some “Alaskan oil.” The Court explained that it had historically taken a pretty narrow view of the uniformity clause, allowing Congress to enact a tax that has differential impact across the nation, as long as the tax applies “at the same rate, in all portions of the United States where the subject of the tax is found.” That left open the question whether a tax that on its face imposed different rates on different states could survive.

These distinctions, the Court decided, would be subject to something that looks like elevated scrutiny. “Where Congress does choose to frame a tax in geographic terms, we will examine the classification closely to see if there is actual geographic discrimination,” 462 U.S. at 85. To survive that scrutiny, Congress has to show “neutral factors” that justify its distinction. A purpose to “grant…an undue preference at the expense of other…states” would flunk the test. Id.

Based on that standard, the Court upheld the tax exemption for “Alaskan oil.” It observed that Congress “had before it ample evidence of the disproportionate costs and difficulties-the fragile ecology, the harsh environment, and the remote location-associated with extracting oil from this region.” And, also seemingly importantly, it noted that only about 20% of Alaska’s oil qualified for the exemption, so that the rule also disfavored many Alaskan extractors.

By this standard, the “Alaska Purchase” looks like it’s in trouble. Reportedly, the justification for retaining credits for Alaska and Hawaii is that they are high-cost insurance markets. But they aren’t the highest-cost for health care; that’s D.C. (see, e.g., this summary of per-capita expenses by the Kaiser Family Foundation). Massachusetts and Delaware are very close to Alaska. These kinds of failures of internal logic are often grounds for the Court to find evidence of discriminatory intent. [Edit: If we’re talking insurance costs, not health costs, Alaska has higher reported insurance premiums for marketplace plans, at least, than other states, although Hawaii is middle of the pack, which makes the cost justification for the proposal just nonsensical.]

And, of course, the central premise of the Alaska Purchase is obvious to everyone. The point of the scheme is to ensure that Alaska is a net winner in the massive reshuffling of federal health dollars effected by the CGH bill. Senator Graham’s comments about taking money from “rich blue states” is unlikely to be helpful on that front.

The Uniformity Clause is rarely litigated, and it seems like a provision the Court is reluctant to give much life to. There’s undoubtedly a fun con law I class discussion to be had about whether Courts should make the kinds of policy judgments an expansive reading of the Clause seems to call for. But the Alaska Purchase seems to fall inside the tiny circle of statutes prohibited by even a minimalist reading of the Clause.