Order Of Procedure
Floor Speech
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Mr. GRASSLEY. I thank my friend, the Senator from Kansas, for his kind remarks. I am very happy to join him in sounding an alarm about the role of the Internal Revenue Service in America's health care choices.
The various health care bills being considered before Congress would task the IRS with administering several new and very controversial provisions. This would include things such as the individual mandate--or another way to say that is a government-run insurance mandate, a government-required insurance mandate. It would also affect the employer free rider penalty. The IRS would be involved with the premium subsidy for low-income individuals. It would be involved with the small business tax credit. The IRS would be involved in working with exchanges to verify income information, and it would be involved in figuring out how to calculate and collect several new fees, which are in fact excise taxes.
Senator Roberts has just explained some of this. Also, during debate in the Finance Committee--when the Senate Finance Committee bill was up in that committee, some people joked that CMS stands for ``it's a mess.'' The same could be said of the IRS. As many of us know all too well, the tax gap is a very serious problem. The hundreds of billions of dollars owed that the IRS isn't collecting suggests that the IRS isn't effective at executing its primary mission: the enforcement of our revenue laws.
The IRS is just now starting to increase its enforcement efforts, which had declined significantly after the restructuring of that agency a decade ago. But just like many other Federal agencies, it is facing a human resource crisis because more than 50 percent of its workforce is expected to retire in the near future. So it doesn't have the resources it needs to do its presently described job, never mind a whole new one, such as administering health care reform--or at least helping administer health care reform.
One independent report after another highlights IRS's enforcement problems. Senator Roberts mentioned the recent reports on the Making Work Pay credit, home buyer tax credit, and the IRS's financial statements. In addition to those, we have problems with the earned-income tax credit and the health coverage tax credit.
In February, the Treasury Inspector General for Tax Administration issued a report on fraud in the earned-income tax credit. Then today, the administration reports that waste of taxpayer dollars from improper payments has increased from $72 billion in 2008 to $98 billion in 2009. Over $12 billion--almost 12 percent--of the $98 billion in improper payments was because of the earned-income tax credit.
In another tax inspector general report from earlier this month on the health coverage tax credit, that inspector general reviewed a valid sample of individuals who claimed this credit on their 2006 Federal tax return. The tax inspector general found that 72 percent did not have the required documentation to get that credit. In addition, the inspector general states that the IRS does not effectively identify or prevent individuals from erroneously claiming the health credit on their Federal tax return.
The inspector general identified over 1,200 individuals who appeared to have wrongly claimed $1.8 million of these credits on their Federal tax returns. This report is particularly relative since the premium subsidy in the Finance Committee health reform bill is modeled after this credit.
The earned-income tax credit, the health coverage tax credit, and the making work pay tax credit are all examples of social welfare programs that presently are being administered by the Internal Revenue Service, and this despite the fact that we have a whole separate agency--the Department of Health and Human Services--that is supposed to be concerned with social welfare.
In a recent interview with tax analysts about current health reform proposals, a former IRS Assistant Commissioner had this to say about IRS' role in the health reform issue:
These kinds of programs require social welfare expertise. IRS agents are not recruited or trained to do that. ..... The IRS record is mixed and sometimes abysmal with regard to effectively administering these kinds of programs.
I couldn't have said it better myself.
Aside from the costs and the problems with enforcing these types of credits, there are opportunity costs associated with requiring the IRS to administer programs outside its expertise. The Government Accountability Office and the tax inspector general issued reports discussing the IRS' poor performance in providing telephone customer service during the 2009 filing season because of stimulus legislation. That was passed in February of this year. The reports state that customer service declined significantly, despite the fact that collection employees were assigned to staff the phones.
So honest and diligent taxpayers do not get the help they need when they need it, and tax cheats and tax evaders increasingly get away with not paying their fair share, and the tax gap widens.
From a tax administration perspective, the provisions in the various health reform bills will create infinite new problems for the Internal Revenue Service. The Internal Revenue Service is likely to be tasked with implementing provisions for which it actually must go out and collect new data--data that is unrelated to the taxpayer's tax liability.
In addition to the provisions Senator Roberts highlighted, the Internal Revenue Service would have to develop new processes and procedures for insurance companies and employers to challenge and appeal the calculations of the high-cost premiums tax and the employer free rider excise tax, both new provisions in the Senate Finance Committee bill. Both these taxes are calculated by a third party, other than the IRS or the individual taxpayer. The IRS would have to develop a method for calculating the new excise taxes on medical devices and pharmaceuticals, also a new provision in that bill, the basis for which is unprecedented.
In light of these issues, I think it is fair to consider a couple questions.
Assuming that an individual mandate is constitutional, do we want the IRS checking up on whether everyone has health insurance?
Another question: Do we want to facilitate the dissemination of tax information to third parties, such as employers or an insurance exchange? We have always been very cautious about maintaining the privacy of individual tax returns.
Another question: Shouldn't we be providing more resources to the Department of Health and Human Services to ensure that it can receive and process the necessary data if this bill is going to be implemented instead of having the IRS do it?
My Democratic colleagues in the Congress and the administration have many ideas for new and complex ways to tax individuals and, of course, tax small businesses as well, to fund all sorts of new spending. It would seem wise to make sure the IRS can enforce the tax laws before being charged with administering new social programs created because of health reform.
I ask my colleagues on the other side of the aisle to consider these questions as we debate the health care reform bill over the next several weeks.
I yield the floor, and I suggest the absence of a quorum.
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