Why the IRS Scandal Could Bring Down Obamacare

The latest IRS scandal of targeting Tea Party-themed and other conservative groups could severely damage President Obama. This scandal has the potential to impede Obamacare since the IRS is responsible for overseeing the tax credits and tax increases in the law, and ensuring businesses and individuals comply with all the provisions.

By JOSH BOAK and ERIC PIANIN
May 14, 2013
The Fiscal Times

The Internal Revenue Service’s scandalous targeting of Tea Party-themed and other conservative groups could severely damage President Obama – but it’s not necessarily because anyone close to the White House sanctioned the allegedly independent actions by the tax collection agency. In fact, the president was quick on Monday to condemn the actions exposed in an inspector general's report being released later this week.

The real fallout could be that it will impede Obamacare, which passed in 2010 under the official title of the Patient Protection and Affordable Care Act.

The IRS will largely administer this attempt at providing near-universal health insurance. It is responsible for overseeing the tax credits and tax increases in the law, and—most critically—ensuring that businesses and individuals comply with the individual mandate and other major provisions.

Prominent Republicans are already connecting the unpopular insurance program to the questions swirling around the IRS targeting of non-profits that grew out of the Tea Party movement.

For them, the scandal is just what the doctor ordered, a chance to attack the IRS--a perennial punching bag--as politically tainted while linking the scandal back to a massive implementation challenge confronting the administration. The House plans a symbolic vote this week to repeal Obamacare, the 37th time it has done so.

Former House Speaker and GOP presidential candidate Newt Gingrich declared Monday on MSNBC's "Morning Joe," "How can you put Obamacare under the Internal Revenue Service?

“Why would you trust the bureaucracy with your health if you can’t trust the bureaucracy with your politics?" he said. "There are bureaucrats in the IRS who are capable of ruining your life while lying about it.”

"Americans should remember that this same corrupt IRS will be in charge of enforcing Obamacare," Sarah Palin wrote on her Facebook page Friday. "Forgive me for not trusting these big government promises any more than I trust the White House’s latest Benghazi spin or the IRS’ fairness."

Ahead of a House Ways and Means Committee hearing this Friday about the IRS scandal, Rep. Diane Black, R-Tenn., said the IRS has no business monitoring anyone's health insurance information. "I will not rest until the full scope of the IRS’ corruption is uncovered, the guilty parties are held accountable, and actions are taken to ensure this never happens again," Black, a member of the committee, told Newsmax.

The IRS has undermined its own credibility on the issue. It initially claimed before a congressional committee that conservative groups were not under a special microscope. The agency then apologized last week for targeting that supposedly occurred out of a Cincinnati field office. But a new report by the Washington Post on Monday says that IRS officials in Washington and California also queried conservative groups, who were told at the time that a Washington-based task force was overseeing their applications.

But long before the current uproar over the IRS scrutiny of these politically motivated groups seeking non-profit status, Republicans were challenging budget and staffing levels at the IRS and demanding to know how much the agency intended to spend to implement Obama’s health care reform law.

The agency has been saddled with an expanding workload and relatively flat funding levels for years that have left the IRS unable to adequately perform its primary duties – collecting taxes, overseeing audits, and providing the public with reasonable service.

As a result, the agency has struggled to collect the hundreds of billions of dollars a year that the government is owed but not paid, Nina E. Olson, the national taxpayer advocate, said in her annual report to Congress last year.

Last June, a Government Accountability Office (GAO) report estimated that the IRS would spend $881 million of taxpayers’ money to implement the first four years of Obamacare, including about $500 million that the Department of Health and Human Services (HHS) diverted to the agency.

The Administration has requested $440 million as part of its 2014 budget proposal to help the IRS prepare for implementing the health care law. And the IRS has estimated that it would need to assign a total of 2,195 employees to deal with health care reform by the end of this year.

Some Republicans believe that the IRS and administration are intentionally low-balling the actual cost and manpower needs. In March, Rep. Charles Boustany, R-La., the chairman of the House Ways and Means Oversight Subcommittee, called on the acting IRS commissioner Steven T. Miller to provide a detailed accounting on the costs of administering Obamacare.

Now with House Republican leaders furious about how the IRS treated conservative groups—despite their past denials— several analysts say it is possible the controversy could be used as another excuse to cut agency funding and manpower to further thwart implementing Obamacare.

“When people look at funding the IRS they’re going to take into account everything that’s out there,” said Floyd Williams, a former legislative affairs director for the IRS who is now with a private Washington public policy strategies firm. “It’s no secret some in Congress have been trying to repeal the Affordable Care Act, let alone limit IRS funding for enforcement . . . . [The] IRS has already suffered the past three years with a status quo budget, which basically is a reduction, especially if you look at people who retired and haven’t been able to be replaced. Now, you have sequestration coming up. All of that added together spells trouble for the IRS and tax law enforcement.”

Paul Van de Water, a health care policy expert with the Center on Budget and Policy Priorities, cautioned that “it’s hard to tell at this point” what -- if any -- effect the flap over the IRS’s dealing with conservative groups will have on funding for Affordable Care Act enforcement.

“It seems to me that Republicans haven’t lacked for reasons not to provide enough funding for the IRS in the past, so it’s not as if they need a new reason to do so, but who knows? When you get into the realm of politics, all sorts of strange things can happen.”

Under the legislation, the IRS will provide insurance premium tax credits to help low and moderate income people purchase health coverage. It also will impose penalties on employers that fail to provide insurance and individuals who decline to purchase the coverage made available to them.

But even without Obamacare, this week’s scandal does have some legs of its own.

The investigative journalism non-profit ProPublica reported Monday that it had received at the end of last year from the IRS Cincinnati office the confidential and pending applications for tax exemption from nine conservative groups.

While many organizations bearing the Tea Party name are small players, the applications provided in response to a Freedom of Information Act request included forms submitted by the Karl Rove-linked Crossroads GPS and Americans for Responsible Leadership, an Arizona-based group that supported Republican presidential candidate with more than $5.2 million in expenditures.

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