One of the most hotly debated aspects of the new health care legislation is what it will mean for the role of the IRS in American society.
Conservatives have loudly trumpeted that 16,500 new IRS agents will be required to audit and enforce the individual mandate provisions of the health bill. That figure seems to have originated with a March 18 analysis prepared for the ranking Republican on the House Ways and Means Committee, Dave Camp (R-MI). The report claims that the new legislation would grant the IRS the power to verify if you have “acceptable” health insurance and fine you “up to $2,250 or 2 percent of your income” if you do not. In addition, the report concludes that the IRS may need upwards of $10 billion “to administer the new health care program this decade” and may need “as many as 16,500 additional auditors, agents and other employees to investigate and collect billions in new taxes from Americans.”
However, it is important to note that the report offers that 16,500 figure as an estimate only, based on “reasonable assumptions about costs and program responsibilities” such as the current number of IRS employees, current IRS payroll, and Congressional Budge Office (CBO) estimates of additional funds the IRS may need to enforce the new law.
In a March 11 letter to Senate Majority Leader Harry Reid (D-NV), CBO Director Doug Elmendorf did estimate that the IRS may need an additional “$5 billion to $10 billion over 10 years for administrative costs” (note that the analysis for Dave Camp took the high end of that estimate, the $10 billion figure, as its starting point). However, during congressional testimony on March 25, IRS Commissioner Douglas Shulman claimed that the agency had not yet finished completing its own estimates on what the legislation will mean for its staffing and funding needs.
Shulman also claimed in his testimony that the IRS will not audit taxpayers to verify if they have acceptable health coverage. Instead, he envisions that “the Department of Health and Human Services and the [insurance] exchanges will be working with the insurance companies to determine what is acceptable coverage.” However, Shulman did admit that the IRS would be involved in the “tax portions” of the new law, i.e., incentives, subsidies, credits, and penalties.
Of course, the IRS will need to be informed, whether by an insurance company, employer, or HHS, whether a citizen has acceptable health coverage in order to execute these “tax” duties. Shulman admitted as much in a nonchalant way during his testimony, stating: “All that will happen with the IRS is similar to a current 1099 where a bank sends the IRS a statement that says ‘here’s the interest’ someone owes and they send it to the taxpayer. We expect to get a simple form that we won’t look behind that says this person has acceptable health coverage.” Ah yes, a simple IRS form; we’re all familiar with those. How easy and non-threatening the commissioner makes it all sound.
The truth of the matter is this: The 16,500 new IRS agents bandied about in conservative media is one estimate only, and a wildly pessimistic one at that. However, it is also true that the IRS will grow as a result of the new health care regime, and will be notified whether or not you are complying with the individual mandate, and will have the authority to fine you if you are not.
Defenders of ObamaCare argue that the IRS will be largely confined to enforcing those fines via confiscation of tax refunds and government benefits. True enough — for now. But as the cost of this massive new entitlement explodes, as it surely will, the IRS will be forced to take more aggressive measures to enforce the mandate in order to raise revenue. Bet on it.
You can also bet that, whatever additional resources the IRS will need to execute its new duties — and they will be considerable — it will be a larger, more powerful, more intrusive agency than ever before. Welcome to the IRS of A; one nation, under bureaucracy, with penalties and mandates for all.