By Chuck Ross
A new special report on the implementation of Obamacare, by tax expert and analyst Daniel J. Pilla, says the huge administrative burden on the Internal Revenue Service could create such a load that the federal government would bog down.
“I do not believe it’s melodramatic to suggest that the costs and massive bureaucracy required to run this system could bring the IRS to its knees,” he wrote in his new Pilla Talks Taxes.
Pilla is concerned with several key provisions in Patient Protection and Affordable Care Act, or PPACA. These provisions, he writes, “promise to impose tremendous administrative burdens for the IRS and compliance nightmares for both individuals and businesses.”
Those provisions are what is referred to as the “individual mandate,” tax credits to “small employers” and individuals with low incomes who purchase approved health insurance plans and a penalty assessed against firms employing more than 50 workers who fail to provide insurance coverage for “all of its employees.”
According to Pilla, “the penalty applies if even just ‘one full-time employee’ qualifies for a subsidy to purchase insurance through an exchange.”
Michael Cannon of the Cato Institute has covered PPACA extensively and wrote that the small business owner is “going to be much less likely to take on new commitments like expanding or hiring new workers.”
Pilla fears that the IRS will be overburdened with the increased oversight role.
Not that Congress would allow the IRS to get behind, what with Congressional Budget Office estimates that by 2019 the federal government can expect to collect up to $17 billion in penalties stemming from the individual mandate as well as $52 billion from the employer mandate.
“I don’t expect the IRS to leave just leave this money on the table,” Pilla states.
He asks then, of the IRS, “How much larger will it grow under this bill?”
The special report by Pilla, a renowned taxpayer advocate, explores “the impact that [PPACA] has on private citizens and businesses.”
He writes, “given the scope of the PPACA, there is no telling how deep the tentacles of the IRS will sink into the fabric of our lives and businesses.”
Pilla addresses what he believes are disincentives for businesses under the policy, known as Obamacare, as well as its infringement on individual liberties. PPACA, he writes, “involves a massive expansion of the power and reach of the Internal Revenue Service.”
According to Pilla, “one of the key reasons the IRS has grown so large and powerful over the past several decades is that Congress continues to hand the IRS the duties of administering social programs.”
The IRS, according to Pilla, will spend nearly $1 billion through 2013 to implement information technology systems. It is estimated that it will hire between 5,000 and 16,000 additional employees to enforce the law.
His concerns are that the load will be so heavy, and so much growth will be required, that things will spin out of hand.
“Given the massive scope of the law, the challenges for the IRS and citizens are simply daunting,” he writes.
As evidence, Pilla cites the decreased share of the IRS budget devoted to taxpayer services. Between 2009 and the projected budget for 2013, the Government Accountability Office determined that the IRS will increase its spending on enforcement from $5.1 billion to $5.7 billion.
But during the same period, it will decrease its spending on taxpayer services by $40 million, from $2.293 billion to $2.253 billion.
Pilla believes that this will decrease the level of service taxpayers receive, all at a time when the tax code has become more difficult for taxpayers to interpret.
All of this, Pilla suggests, “is going to require the IRS to undertake a massive education program.”
The decreased transparency of the tax code brought on by PPACA will create “a cottage industry of tax and legal professionals who charge citizens and businesses fees to navigate, negotiate and overcome the mountains of complicated procedures and regulations that will grow from the act.”
As the administration and Democrats continue their efforts to sell PPACA to the public, Pilla points to the unseen costs of government-mandate care. PPACA will place a limit on the amount of medical expenses individuals can deduct. And a 2.9 percent tax will be imposed on the sale of all medical devices in the United States, according to Pilla’s report.
Some industry insiders agree. Stephen Ubl, CEO of the Advanced Medical Technology Association, told industry website Plastics News, “Unless repealed, a $20 billion tax on medical devices could result in the loss of up to 43,000 American jobs.”
Pilla points to other taxes contained in PPACA. A 40 percent excise tax placed on “Cadillac” insurance plans – those which cost employers more than $10,200 per individual or $27,500 per family – will take effect in 2018. Beginning in 2013, individuals earning more than $200,000 and families making more than $250,000 will see a 3.8 percent tax placed on capital gains income.
All of these “hidden” taxes, according to Pilla, “will be paid by consumers in the form of higher prices for the products and services covered by the tax.”