The word "penalty" is a noun meaning "a punishment imposed for breaking a law, rule, or contract." The word "tax" is a noun meaning "a compulsory contribution to state revenue, levied by the government." The government wants all Americans to have health insurance coverage. In this case, it incentivizes Americans to have health coverage by imposing a penalty on their tax returns if they are not covered by a health insurance plan. An American can avoid this penalty by complying with the law, and obtaining coverage. (The law also requires health insurance companies to offer everybody coverage at an "affordable" price, regardless of pre-existing medical conditions for which people used to be denied coverage at any price.) Since the penalty is of a financial nature, it increases the taxpayer's effective tax liability that they owe to the government (or reduces their refund). The government has the right in the Constitution to levy taxes, but it's rights to impose penalties on citizens are more limited by the checks-and-balances of the three branches of government (in this case, judicial review by the Supreme Court of a law enacted by Congress and signed by the President). Advocates wanting to repeal (revoke, cancel) this universal health coverage law (and its associated incentive/penalty) wanted to make the point at the Supreme Court that it imposes a "penalty." The government's argument defending the law was that the penalty is really a tax, which is something the government is allowed to do. The Supreme Court agreed 5-4 that it is more a "tax" than a "penalty," so the law stands.