How the IRS Scandal Threatens Obamacare


Photo credit: OECD / Foter.com / CC BY-NC-ND

Obamacare is not merely a massive overhaul of the health care system. It is also a substantial expansion of the Internal Revenue Service. That's because the law relies on the tax collection agency to both enforce its individual mandate and administer the tax credits the law offers to subsidize the purchase of health insurance. Following recent revelations that agents in multiple IRS offices, including tax officials in Washington, targeted conservative groups for extra scrutiny, a number of former and current Republican legislators are already counseling caution about the agency's role in administering the law.

Concerns about the agency's oversight of the health law are well-founded—and not only because of general concerns about the agency's judgment.

For one thing, the IRS appears to have specifically targeted groups that opposed the health care law. According to The Washington Post, "although some of the groups were explicitly labeled 'tea party' or 'patriot,' others that came under intense scrutiny were focused on challenging the Affordable Care Act — known by many as Obamacare — or the integrity of federal elections."

In other words, the agency has singled out Obamacare opponents for unusual treatment. That does not speak well of the agency's ability to fairly carry out its duties under the law.

Perhaps more importantly, however, the agency has already launched an attempt to subvert the health law's clear statutory language. As I noted earlier today, the text of the legislation specifies that the law's tax credits for private insurance are available in exchanges created by states. It does not provide for those subsidies to be available in exchanges run by the federal government. Yet the IRS rule regarding the tax credits essentially ignored this, and allowed for the subsidies to be available in both state and federally run exchanges.

What this means is that the IRS is already taking creative liberties with the administrative duties it is assigned under the health law. It's already attempting to use its power to expand Obamacare beyond the specifics of its statute. It's already ignoring the text of the law when doing so suits its purposes. 

And it has done so with the explicit support of the same top official who claimed that there was "absolutely no targeting" of conservative groups going on at the IRS.

As the Cato Institute's Michael Cannon noted last week, former IRS Commissioner Douglas Shulman insisted in a 2012 congressional subcommittee hearing that the IRS was in no way singling out groups based on political outlook. We now know that to be false.

A year prior, Shulman insisted that the IRS rule regarding premium subsidies in federally run exchanges was "consistent with the language, purpose, and structure" of Obamacare. Tellingly, he did not point to a statute authorizing the IRS interpretation. Admittedly, that would have been difficult, because there isn't one. As the Congressional Research Service noted in its analysis of the law, a "strictly textual analysis of the plain meaning of the provision would likely lead to the conclusion that the IRS' authority to issue the premium tax credits is limited only to situations in which the taxpayer is enrolled in a state-established exchange." [Emphasis added.]

The IRS has already demonstrated dubious political and legal judgment regarding its role in the administration of Obamacare. More officials should question its judgment in matters related to the law.