A Government Takeover of Health Care — Led by the IRS…
Amidst all the news about the Berwick nomination yesterday, the National Taxpayer Advocate released a report that includes details about the IRS’ major role in implementing the new health care law; the Washington Post has a related piece here. The Advocate’s report notes that lack of funding, coupled with the many new requirements imposed on the IRS under the law, “mean that taxpayers will be less and less likely to have their problems addressed by the IRS at first point of contact, and as a result, more taxpayers will have difficulty complying with their tax obligations” (page 8). In addition, because “the IRS in the context of health reform often will be the administrator of decisions made by another agency” – for instance, CMS or the state exchanges – “some individuals will inevitably be referred repeatedly from one agency to another,” and IRS agents should be prepared to handle these cases (page 39).
The Taxpayer Advocate report also includes several pages (pages 21-25 of the PDF) discussing the new “corporate reporting” requirements imposed in the health care law. This provision requires vendors and small businesses to file Forms 1099 for any goods purchases that total over $600 in the aggregate over the course of a year – which will force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor, caterer, etc. This provision will affect 40 million businesses – ten times the number of firms the Administration asserts will benefit from small business tax credits. (No word on whether the IRS will be sending out 40 million postcards to these businesses to inform them of their new requirements.)
The Advocate “is concerned that the new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance.” The report lays out several reasons why the corporate reporting language has caused “a great deal of concern because of its potential to create administrative burdens for businesses, vendors, and the IRS,” including:
- “The IRS will face challenges making productive use of this new volume of information reports,” not least because “the amounts on the information reports and the tax returns will not match” due to the accounting impact of returned goods and other technical reasons;
- “It is highly likely that the IRS will improperly assess penalties” for not filing forms “that it must abate later, after great expenditure of taxpayer and IRS time and effort;”
- “The PPACA reporting requirement could have distortionary effects on taxpayer behavior,” as “small businesses that lack the capacity to track customer purchases” in accordance with the new federal requirements “may lose customers, leaving the economy with more large national vendors and less local competition.”
Overall, the Advocate’s report includes additional grounds to be concerned about the health care law’s impact:
- More delays as individuals get shuffled from bureaucracy to bureaucracy;
- Higher costs for small businesses to comply with myriad new tax filing requirements;
- Inadvertent penalties that by the IRS’ own admission will waste the time and effort of taxpayers and IRS agents; and
- Loss of business for small firms who may not be able to meet the law’s massive new mandates as easily as big firms.
In general, the report provides additional information on how the health care law IS a government takeover of health care – and IS NOT the kind of “reform” Americans need.