How The IRS Will Police Us on Healthcare

In 2 and a ½ years, most taxpayers will have to start providing proof on their tax returns that they have health insurance, renewing questions about whether the agency is capable of policing the health care decisions of millions of people in the United States while also collecting the taxes needed to run the federal government.

Under the law, the IRS will provide tax breaks to help pay for insurance and impose penalties on those who don’t buy coverage as well as on some businesses that don’t offer insurance to their employees.

The changes will require new regulations, forms and publications, new computer programs and an outreach program to explain it all to taxpayers and tax professionals. Businesses that don’t claim an exemption will have to prove they offer health insurance to employees.

The health care law “includes the largest set of tax law changes in more than 20 years,” according to the Treasury inspector general who oversees the IRS. The agency will have to hire thousands of new workers to manage it, requiring significant budget increases.

“Knowing the complexity of the health law, there’s no question that the IRS is going to struggle with this,” said Rep. Charles Boustany Jr., R-La., chairman of the House Ways and Means oversight subcommittee. “The IRS wants more resources. Well, we need to start digging down into what are they doing with the resources and personnel.”

Treasury spokeswoman Sabrina Siddiqui said, “The overwhelming majority of funds used by the agency to implement the Affordable Care Act go to administer the premium tax credits, which will be a tax cut averaging about $4,000 for more than 20 million middle-class people and families.”

The Supreme Court, in its 5-4 ruling, upheld the mandate that most Americans get health insurance. Those who don’t get qualified health insurance will be required to pay a penalty, or tax, starting for the 2014 tax year, unless they are exempt because of low income, religious beliefs, or are members of Native American tribes.

The penalty will be fully phased in by 2016, when it will be $695 for each uninsured adult or 2.5 percent of family income, whichever is greater, up to $12,500. The nonpartisan Congressional Budget Office estimates that 4 million people will pay the penalty that year.

The law limits the ability of the IRS to collect the penalties. There are no civil or criminal penalties for refusing to pay it and the IRS cannot seize bank accounts or dock wages nor does interest accumulate for unpaid penalties.

The law does allow the IRS to withhold tax refunds to collect the penalty.

The IRS says it is well on its way to gearing up for the new law but has offered little information about its long-term budget and staffing needs, generating concern from government watchdogs.

The IRS is expected to spend $881 million on the law from 2010 through 2013, hiring more than 2,700 new workers and upgrading its computer systems, but the agency has not made public information about its spending plans in the following years, when the bulk of the health care law takes effect.

The lack of information makes it impossible to determine whether the IRS will have adequate workers to enforce the health care law, the Treasury inspector general for tax administration said in a report three weeks ago. The report, however, concluded that “appropriate plans had been developed to implement tax-related provisions” of the law.

In 2010, House Ways and Means Committee Republicans issued a report saying the IRS may need as many as 16,500 additional auditors, agents and other employees “to investigate and collect billions in new taxes from Americans.”

That assessment has been widely cited by opponents of the law. The IRS disputes the jobs number but hasn’t offered another one.

“That is a made-up number with no basis in fact,” IRS spokesman Dean Patterson said in an email. “The 2012 budget calls for about 1,200 employees for the IRS to implement the (Affordable Care Act), and the vast majority of those employees are needed to build technology infrastructure to support payments like the new tax credits for individuals and small businesses.”

Republicans on the House committee have accused the IRS of obscuring its cost of putting in place the health care law by absorbing it into in other parts of the agency’s budget. They cite a June report by the Government Accountability Office that said the IRS has not always accurately identified spending related to the new health care law.

“The agency’s repeated lack of transparency to Congress and its failure to provide accountability to the American taxpayers raises fundamental concerns about implementation authorities vested to the IRS,” the top four Republicans on the Ways and Means Committee wrote in a June 27 letter to the IRS commissioner.


Federal Government’s Ability to Provide Health Insurance Subsidies Being Challenged

Starting in 2014, the Affordable Care Act requires most Americans have health insurance and offers subsidies to help people pay for insurance bought through markets known as insurance exchanges.

Critics say the law only provides subsidies for people who obtain their coverage through state-run exchanges but the White House says the law can be read to allow subsidies for people who get coverage in federal exchanges as well.

The law says that “each state shall” set up an exchange but officials in one third to half of the states have either been slow to or flat out refused to set them up. Washington may have to set up federally run exchanges to ensure people are covered.

The Congressional Budget Office predicts that 23 million uninsured people will gain coverage through exchanges and that all but five million of them will qualify for subsidies, averaging more than $6,000 a year per person. Subsidies, in the form of tax credits, will be available to people with incomes from the poverty level up to four times that amount ($23,050 to $92,200 for a family of four).

Some supporters of the law say Congress may have made a mistake in drafting this section. But, they add, the intent of Congress is clear: subsidies should be available in federal as well as state exchanges.

The Obama administration issued a rule that allows tax credits for insurance bought in either a state or a federal exchange.

Representative Phil Roe, (R) Tennessee, said the rule on premium subsidies “contradicts the explicit statutory language” of the Patient Protection and Affordable Care Act. Roe and another Tennessee Republican, Scott DesJarlais, have introduced a bill to nullify the rule, issued by the Internal Revenue Service.

Douglas H. Shulman, the I.R.S. commissioner said “The statute includes language that indicates that individuals are eligible for tax credits whether they are enrolled through a state-based exchange or a federally facilitated exchange.”

However, Senator Orrin G. Hatch, (R) Utah, of the Senate Finance Committee, said the Obama administration was usurping the role of Congress and rewriting the law to provide tax credits through federal exchanges.

James F. Blumstein, a professor of constitutional and health law at Vanderbilt University, said the dispute over subsidies involved a serious legal issue.

“The language of the statute is explicit,” Mr. Blumstein said. “Subsidies accrue to people who obtain coverage through state-run exchanges. The I.R.S. tries to get around that by providing subsidies for all insurance exchanges. That interpretation will almost certainly be challenged by someone.”

The most likely challenger, Mr. Blumstein said, is an employer penalized because one or more of its employees receive subsidies through a federal exchange. Employers may be subject to financial penalties if they offer no coverage or inadequate coverage and at least one of their full-time employees receives subsidies.

Michael F. Cannon, director of health policy studies at the libertarian Cato Institute, said the link between subsidies and penalties was a crucial part of the law.

“Those tax credits trigger the penalties against employers,” Mr. Cannon said. If workers cannot receive subsidies in states with a federal exchange, their employers cannot be penalized, he said. That, in turn, would hobble federal efforts to get employers to offer coverage in those states, Mr. Cannon said.

Prof. Timothy S. Jost, an expert on health law at Washington and Lee University, said Congress had made “a drafting error” that should be obvious to anyone who understands the new health care law.

“There is no coherent policy reason why Congress would have refused premium tax credits to the citizens of states that end up with a federal exchange,” said Mr. Jost, who supports the law.

CBO: Obama’s Budget Would Add $3.5 Trillion in Deficits Through 2022

According to a new estimate from the Congressional Budget Office, President Obama’s 2013 budget would add $3.5 trillion to annual deficits through 2022 and raise the deficit next year by $365 billion.

The White House claims that the Obama’s budget would reduce deficits by $3.2 trillion over the next decade.

The differences between the estimates from the CBO and the White House budget office are attributable to different baselines and economic assumptions,  the CBO expects the deficit to spike sharply under Obama’s budget due to the expiration of the Bush-era tax rates at the end of 2012.

Obama wants to continue the middle-class tax cuts, something that is reflected in his budget.

The CBO also compares Obama’s budget to a different baseline than that of the budget office. The budget office assumes Congress and the administration will decide to avoid big tax increases and deep spending cuts, something both branches have repeatedly done in the past.

Under this scenario, all of the Bush-era tax rates are extended and the Alternative Minimum Tax is “patched” to prevent it from falling on millions of middle-class taxpayers. If that were the case than Obama’s budget would actually reduce the deficit by $4.3 trillion through 2022.

White House acting budget director Jeff Zients wrote in a blog post that CBO’s report “confirms that the president has a balanced plan to reduce our budget deficits and put the country on a fiscally sustainable path.”

He notes that CBO said that by 2016 deficits would be below 3 percent as a share of the economy and that debt held by the public will decrease and then stabilize as a share of gross domestic product.

The CBO’s estimate of a $365 billion increase to the deficit in 2013 would be caused by Obama’s proposal to increase spending by $137 billion and decrease revenue by $228 billion.

In total, the Obama budget spends $3.7 trillion next year and proposes generating $1.5 trillion from new taxes over ten years.

Over ten years, the Obama budget contains $6.4 trillion in new deficits, slightly less than the $6.7 trillion predicted by the White House.

Obama’s budget would increase the size of the national debt held by the public from $10.1 trillion today to $18.8 trillion in 2022.

According to CBO, the deficit will be $1.3 trillion in 2012, the fourth straight year of trillion dollar deficits despite Obama’s promise to cut the deficit in half after his first term.

In addition to extending the Bush-era tax rates for the middle class, Obama’s budget also proposes to to limit the reach of the Alternative Minimum Tax and restore the estate and gift taxes to 2009 levels. Those tax changes alone reduce revenue and increase spending by $3.5 trillion over ten years.




CBO Report: Real unemployment at 15%

President Barack Obama has been touting the recovering economy as part of his bid for reelection this November, but the non-partisan Congressional Budget Office (CBO), have released a new report that reveals a very poor outlook on the future of America’s economy.

The Department of Labor claims that the unemployment rate dropped from 8.5% in December 2011 to 8.3% in January 2012, but the CBO report states that, The official unemployment rate excludes those individuals who would like to work but have not searched for a job in the past four weeks as well as those who are working part-time but would prefer full-time work; if those people were counted among the unemployed, the unemployment rate in January 2012 would have been about 15 percent.

These numbers reflect the actual status of labor in the country that many outside of the mainstream media have been pointing to as indicators of the overall health of the economy.

The rate of unemployment, according to the White House, has been above 8% since February 2009, making the past three years under President Obama the longest stretch of high unemployment in the United States since the Great Depression.

Additionally, the CBO reports that the unemployment rate in America will stay above 8% through the election of 2012 and even until 2014.

“…the unemployment rate will remain above 8 percent until 2014. The share of unemployed people who have been looking for work for more than six months — referred to as the long-term unemployed — topped 40 percent in December 2009 and has remained above that level ever since.”

When Obama took office in 2009, the official rate was 7.8%. He promised to keep unemployment under 8%, but only three years into his administration has it finally dropped below 9%.

Historically, presidents do not get re-elected with unemployment over 7.2%.


The historic budget deal that wasn’t…

President Obama has been singing the praises of the Democrats and Republicans since last weekend because of their coming together at the 11th hour to avert a government shutdown by agreeing to a historic $38 billion dollars worth of federal budget spending cuts. As it turns out all the pats on the back may be celebrating a deal that was more smoke and mirrors than actual cuts to the deficit.

According to The Congressional Budget Office the spending bill would cut spending by only a mere $352 million through Sept. 30. A far cry from the $38 billion cited. There is $8 billion in immediate cuts to domestic programs and foreign aid but they are offset by increases in defense spending. In actuality, when the funding of our current wars are taking into consideration we would actually see an increase in total federal outlays by $3.3 billion relative to current levels. $38 billion in new spending would be reduced in comparison to current levels, but a majority of the cuts come in slow-spending accounts like water-and-sewer grants which do not have an immediate effect on our debt. The $5.7 billion in savings that come by way of cutting bonuses to states enrolling more children while reducing monies available to subsidize health care cooperatives authorized under the new health care law will not produce any actual savings. The CBO believes that that money wasn’t going to be used anyway. Even if they do not actually reduce the deficit, cuts to mandatory benefit programs can be claimed under budget rules to pay for spending increases elsewhere. In total there is $17.8 billion in savings that is being claimed using these rules with only a small portion of that money actually reducing the deficit. The CBO says the elimination of year-round Pell Grants while slash more than $40 billion from the deficit over the next decade.

House Appropriations Committee Chairman Harold Rogers, R-Ky, said of the budget deal “With this bill we not only are arresting that growth but we are reducing actual discretionary spending by a record amount, nearly $40 billion in actual cuts in spending that has not ever been accomplished by this body in its history, in the history of the country, The cuts in this bill exceed anything ever passed by the House.” while Former Minnesota Gov. Tim Pawlenty, a 2012 presidential candidate, said the budget deal has less cuts than advertised and should be rejected.