Health care decision means more work for IRS
By David Gamage, San Francisco Chronicle
The U.S. Supreme Court's decision is good news for the supporters of health care reform but bad news for supporters of a simpler tax code. Thursday's ruling may lead Congress to write even more social welfare legislation into the tax code and impede efforts to simplify tax law.
Over the past few decades, both Republicans and Democrats have enacted major domestic policy initiatives through the tax law.
For example, former President Bill Clinton reduced welfare grants while expanding the earned income tax credit. Under Clinton's welfare reforms, the tax code has become the primary mechanism through which the federal government gives monetary aid to poor Americans.
Today, much of the resources the federal government directs toward higher education, housing and many other areas are given through special tax preferences. Health care is no exception. Important components of health care reform thus will be administered by the IRS.
The Supreme Court upheld the constitutionality of health care reform by construing the individual mandate as a tax on anyone who chooses not to buy health insurance.
According to the Supreme Court's ruling, the individual mandate would not be constitutional if it were solely a regulation enacted under Congress' power to regulate interstate commerce.
This decision, however, could become an obstacle to Congress adopting comprehensive tax reform. Most reform envisions repealing special tax provisions that support congressional policies but do not raise revenues. Under tax reform, Congress would have to support non-tax policies through regulations or direct spending rather than through special tax preferences. For example, in place of the home-mortgage interest deduction, Congress would need to support housing policy through subsidies paid to home buyers or through regulating mortgage providers.
In Thursday's decision, the Supreme Court placed new limitations on Congress' powers to regulate interstate commerce and to direct how the states spend federal grants for programs like Medicaid. It remains to be seen how restrictive these new limitations will be.
We do know the tax law will become ever more complex. The IRS is already an overburdened agency. If the IRS is to be charged with administering social welfare policy in addition to collecting tax revenues, then the agency needs to be given adequate resources. Otherwise, we threaten the IRS' important role in administering the tax system. Thanks to Thursday's Supreme Court decision, the IRS' job is likely to become much more difficult. 6/30/2012