Will IRS Abuse American Rights to Enforce Health Care Reform Tax?

Published: Wed 24 Mar 2010

Wendy Blair

To enforce the bevy of new tax mandates stipulated in the Democrats' latest health care reform bill, the Internal Revenue Service (IRS) will experience the biggest expansion since tax withholding was first introduced during World War II, according to Representative Kevin Brady (R-TX).

A new prediction from the House Ways and Means Committee minority staff and the Joint Economic Committee approximates that as many as 16,500 new IRS staff members will be necessary to examine, collect, and audit additional tax information mandated on small businesses and households in the "reconciliation" bill that the House of Representatives will vote on this weekend, Brady says.

"When most people think of health care reform they think of more doctor's exams, not more IRS exams," explains Congressman Kevin Brady, the leading House Republican on the Joint Economic Committee. "Isn't the federal government already intruding enough into our lives? We need thousands of new doctors and nurses in America, not thousands more IRS agents."

More Complex Tax Structure

Innumerable new federal mandates as well as fifteen separate tax increases amounting to $400 billion are introduced in the House bill. Aside from more confusing tax returns, American families and small businesses will have to disclose additional tax information to the IRS, provide detailed sales data to follow new excise tax rules, and offer proof of "government approved" health insurance.

Regrettably, the Center for American Progress reports that the format of the IRS' employment of private agencies to collect "debts" facilitates abuse. Under the existing program, debt collectors are given as much as 25 cents for every dollar collected, as well as a $100 bonus for every closed account.

This strategy of giving private debt collectors a commission of 25 percent to retrieve unpaid tax debts initially received bipartisan opposition in Congress. Legislators claimed that the scheme put the privacy and rights of U.S. taxpayers in jeopardy. Numerous organizations expressed their opposition to the proposal by the IRS and have called for consumer protection laws like the one introduced by Representative Chris Van Holen.

Incentives for Pushing the Envelope

The essence of the IRS program encourages debt collectors to stretch the limits of the law in order to drain more revenue from their targets. In the IRS Restructuring and Reform Act of 1998, Congress forbade the IRS from providing incentives to its own collectors based on the amounts they retrieve in order to prevent unnecessarily aggressive practices. If Congress agrees that incentive-based pay will compel IRS collectors to abuse their power, it stands to reason that private collectors would be vulnerable to the same temptation.

IRS officials report that they are reviewing criteria that could prompt a go/no-go decision, such as the number of penalties collected from taxpayers unable or unwilling to buy health insurance, and there are several signs of PCAs exploiting or abusing taxpayer information.

Using a commission basis to compensate private debt collectors is expensive and threatens the privacy and rights of American taxpayers. Congress must guarantee, as the upcoming resolution promises to do, that federal tax collection duties will not be put in the hands of private-sector debt bounty hunters.

Related Article:

IRS Could Check Who Has Health Care