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Issue Brief #3941 on Taxes and Health Care

May 16, 2013

The Taxman Cometh: The IRS’s Role in Implementing Obamacare

By

The recent admission by the IRS that its employees improperly subjected certain organizations to heightened scrutiny based upon their political affiliation raises troubling questions about the agency’s ability to manage Obamacare in a competent and impartial manner. At a time when doubts are growing about the IRS’s politically biased behavior, Obamacare grants the agency massive new authority to implement its complex and bureaucratic regime.

Trillions in New Taxes

Obamacare contains no fewer than 18 tax increases, including new taxes on medical devices, insurers, and pharmaceutical companies, to name but a few.[1] According to the most recent estimates, those tax increases will raise revenue by at least $1 trillion over the next 10 years—followed by higher sums in future decades.[2]

Moreover, 12 of the 20 tax increases will affect middle-class families,[3] directly violating Barack Obama’s “firm pledge” to families making under $250,000 per year that he would not raise “any of your taxes.”[4]

Gusher of Spending—and Bureaucrats

To implement all of Obamacare’s tax increases, the IRS has needed additional infusions of taxpayer funds. The Government Accountability Office (GAO) estimated that the IRS would spend $881 million on implementing the law from 2010 through 2013 and that, of that amount, the IRS would spend more than half a billion dollars from an Obamacare implementation “slush fund.”[5]

Treasury Secretary Jack Lew recently testified before Congress that the IRS had approximately 700 full-time equivalent staff working on Obamacare implementation.[6] However, in its budget request this spring, the IRS assumed that a force nearly three times that size—1,954 full-time equivalent employees—would work on the law’s implementation in the coming fiscal year.[7]

Complexity for Bureaucrats and Citizens Alike

Obamacare contains what the Treasury’s inspector general called “the largest set of tax law changes in 20 years.”[8] Obamacare is so complex that auditors cannot agree on how many provisions the IRS is charged with implementing. The GAO wrote that the IRS “has responsibilities in the implementation of 47” provisions,[9] while the Treasury inspector general concluded that “at least 42 provisions [of Obamacare] add to or amend the Internal Revenue Code.”[10]

Regardless, the law’s massive changes led the IRS’s National Taxpayer Advocate to worry in 2010—well before the current scandal became public—that she was “concerned about [the IRS’s] ability to administer the new health care credits and penalty taxes in a fair and compassionate way.”[11]

More Intrusions into Americans’ Lives

Obamacare requires all insurance companies to report to the IRS the name, address, identification number, and type of policy purchased by every customer, along with a determination whether the insurance was “government-approved” for purposes of complying with Obamacare’s individual mandate.[12] Likewise, individuals will have to file similar forms demonstrating they held “government-approved insurance” with their tax returns.

Privacy Concerns

At a time when the IRS will receive massive new amounts of personal health information from virtually all Americans, the agency’s ability to manage the health records it already receives has come under scrutiny. The American Enterprise Institute’s Scott Gottlieb writes that “an unnamed healthcare provider in California is suing the IRS and 15 unnamed agents, alleging that they improperly seized some 60 million medical records of 10 million Americans, including medical records of all California state judges on March 11, 2011.”[13] These allegations raise additional concerns about the IRS’s competence to manage the confidential health details of millions of American citizens.

Sound Familiar?

Both the IRS scandal and Obamacare contain similar themes: government overreach, massive intrusions, and bureaucrats granted opportunities to abuse their power in arbitrary and harmful ways. The American people should not be subjected to either.

—Chris Jacobs is Senior Policy Analyst in the Center for Health Policy Studies at The Heritage Foundation.



Show references in this report

[1]Alyene Senger and John Fleming, “Obamacare’s 18 New Tax Hikes,” The Heritage Foundation, The Foundry, August 20, 2012, http://blog.heritage.org/2012/08/20/obamacares-18-new-tax-hikes/.

[2]Congressional Budget Office, cost estimate for H.R. 6079, Repeal of Obamacare Act, July 24, 2012, http://cbo.gov/sites/default/files/cbofiles/attachments/43471-hr6079.pdf (accessed May 16, 2013).

[3]House Ways and Means Committee, “Democrats Have Increased Taxes.”

[4]Barack Obama, speech in Dover, New Hampshire, September 12, 2008, http://www.youtube.com/watch?v=6HE-rGGKksQ (accessed May 16, 2013).

[5]Government Accountability Office, Patient Protection and Affordable Care Act: IRS Managing Implementation Risks, but Its Approach Could Be Refined, GAO–12–690, June 13, 2012, pp. 1 and 5, http://gao.gov/assets/600/591566.pdf (accessed May 16, 2013).

[6]Cited in letter by Representative Charles Boustany (R–LA) to Acting IRS Commissioner Steven Miller, March 21, 2013, http://waysandmeans.house.gov/uploadedfiles/irs_aca_resources.pdf (accessed May 16, 2013).

[7]Internal Revenue Service, Fiscal Year 2014 Budget Justification, p. 169, http://www.treasury.gov/about/budget-performance/CJ14/10.%20IRS%20CJ%20FINAL%20v2.pdf (accessed May 16, 2013).

[8]Treasury Inspector General for Tax Administration, “The Modernization and Information Technology Services Organization Is Effectively Planning for the Implementation of the Affordable Care Act,” September 19, 2011, p. 1, http://www.treasury.gov/tigta/auditreports/2011reports/201120105fr.pdf (accessed May 16, 2013).

[9]Government Accountability Office, Patient Protection and Affordable Care Act: IRS Should Expand Its Strategic Approach to Implementation, GAO–11–179, June 2011, p. 2, http://www.gao.gov/new.items/d11719.pdf (accessed May 16, 2013).

[10]Treasury Inspector General for Tax Administration, “Modernization and Information Technology Services.”

[11]National Taxpayer Advocate, “Report to Congress: Fiscal Year 2011 Objectives,” June 30, 2010, p. 9, http://www.irs.gov/pub/irs-utl/nta2011objectivesfinal..pdf (accessed May 16, 2013).

[12]Patient Protection and Affordable Care Act, Public Law 110–148, Section 1502.

[13]Scott Gottlieb, “Suit Alleges IRS Improperly Seized 60 Million Personal Medical Records,” Forbes, May 15, 2013, http://www.forbes.com/sites/scottgottlieb/2013/05/15/the-irs-raids-60-million-personal-medical-records/ (accessed May 16, 2013).

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