The Obama Administration’s Illegal Health Care Taxes: an Update

There have been several developments with respect to the Obama administration’s attempt to impose the Patient Protection and Affordable Care Act’s employer-mandate penalties and individual-mandate penalties where it has no authority to do so.

My coauthor Jonathan Adler and I have posted an updated and final draft of our forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” to the Social Sciences Research Network web site. This draft contains additional evidence that Congress did indeed intend to restrict the Act’s tax credits, cost-sharing subsidies, employer mandate penalties, and (to a certain extent) individual mandate penalties to states that establish their own health insurance Exchanges. It also shows how recent arguments advanced by defenders of the rule cannot be reconciled with the statute or the legislative history. If you’re interested in this issue, you’ll want to read this draft, even if you’ve already read previous versions.

In the Winter issue of Regulation magazine, University of Missouri law professor Thomas Lambert shows how this feature of the Act, combined with the Supreme Court’s ruling in NFIB v. Sebelius and other features, make the law so dangerously unstable that repeal remains a distinct possibility. I plan to blog more about this article soon.

A private employer has petitioned a federal court in Oklahoma to be added as a plaintiff in that state’s lawsuit against the IRS rule.

The December 2012 Harvard Law Review notes that the IRS rule “may provide a useful opportunity for a reviewing court to clarify the major questions exception to Chevron. In several cases since 2000, the Supreme Court has refused to defer to an agency interpretation on politically or economically significant questions.” The rule certainly seems to be economically significant. Given that 32 states accounting for two-thirds of the U.S. population have refused to establish Exchanges, the rule would result in more than a half-trillion dollars in unauthorized tax credits, subsidies, and penalties against employers and individuals. 

On December 6, the Congressional Budget Office issued a letter that devastates the Obama administration’s defense of the IRS rule. Most media outlets misinterpreted the letter’s significance. I clarified the matter in this oped for Reuters.

On December 13, the chairmen of the House committees on Ways & Means and Oversight & Government Reform, who have held hearings on the IRS rule, sent a letter to Treasury Secretary Timothy Geithner requesting unredacted versions of documents relating to the development of the rule. The House Oversight committee has previously threatened to subpoena the documents if the agency is not forthcoming.