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GOP Declares New War on IRS over Health Care Law

July 8, 2012

With the Affordable Care Act having passed constitutional muster, Republicans are once again targeting the Internal Revenue Service in order to deny funding for the ACA's implementation. Hoping to repeat the GOP's successful 1990's war on the agency, Republicans like Maine Governor Paul LePage are resurrecting terms like "the new Gestapo" to slander the IRS. Of course, LePage's malicious smear isn't merely wrong on its face. It also suggests that in 2006 Mitt Romney must have unleashed a goose-stepping Massachusetts Department of Revenue after the passage of his virtually identical Bay State individual mandate.

As you will recall, the Affordable Care Act is forecast by the nonpartisan Congressional Budget Office (CBO) to reduce the U.S. national debt. It does this in part through $500 billion in new tax revenue over 10 years. But as it turns out, penalties for noncompliance with the individual mandate to purchase insurance represent only a small fraction of those funds. The CBO estimates only 4 million people (less than 2 percent of the population) will pay that penalty, producing just $65 billion in the first decade of the law.
Which is very similar to the experience in Massachusetts, where six years ago Governor Romney signed what MIT professor and adviser Jonathan Gruber called "the same f--king bill." Enjoying the consistent support of Bay State residents by a 2 to 1 margin, the bill Governor Mitt Romney signed into law lowered the uninsured rate from around 10 percent to a national low of two percent. In March, a study by the National Bureau of Economic Research (NBER) showed that universal coverage in Massachusetts is indeed making people there healthier. And as it turns out, only 48,000 Bay State residents out of a population 6.6 million opted to pay the penalty ranging from $228 to $1,212 a year rather than acquire health insurance under Mitt Romney's version of the individual mandate. That's less than half the national rate projected by the CBO.
Nevertheless, Republicans are sounding the alarm about what the Fiscal Times called "the new health care tax the IRS won't enforce." Dredging up bogus charges that "the tax man cometh to police you on health care" by deploying 16,000 new IRS agents, House Republicans have scheduled hearings this week. Overlooking the ACA's tax incentives for small businesses and individuals needing help purchasing insurance, the GOP's best-and-brightest like Senator Marco Rubio (R-FL) are issuing dire warnings:

Romney "supported it on the state level. Which means if you didn't like it in Massachusetts, you could move to another state," Rubio said on Bloomberg Television. "What are people supposed to do? Leave the United States now because of Barack Obama's brilliant idea to stick the IRS on millions of people? More importantly, the state of Massachusetts doesn't have the IRS. The IRS will follow you. Do people understand what this means?"

In his Saturday radio address, Maine Republican LePage claimed that he does. As the Portland Press Herald reported:

LePage said the court decision has "made America less free."
"We the people have been told there is no choice," he said. "You must buy health insurance or pay the new Gestapo -- the IRS."

If that kind of incendiary rhetoric, it should. Because back in the 1990's, Congressional Republicans used it to undermine both the Internal Revenue Service itself and the tax revenue it is supposed to collect.
As the Los Angeles Times reported in 1998, "Americans are failing to pay $195 billion annually in taxes owed to the federal government, the highest estimate ever of the so-called tax gap." But that was before the full force of the anti-IRS jihad led by Phil Gramm and his Republican allies was brought to bear.
As David Cay Johnston explained in his 2003 classic Perfectly Legal, the GOP during the Clinton administration waged an all-out war on the IRS, turning the priorities for auditing Americans upside-down. Then as now, GOP spinmeister Frank Luntz framed the issue for his Republican allies, "Which would you prefer: having your wallet or purse stolen or being audited by the IRS?" As Senator William Roth's Finance Committee held hearings in 1997 and 1998, Mississippi's Trent Lott decried the IRS' "Gestapo-like tactics" while Alaska's Frank Murkowski protested, "You don't need to send in armed personnel in flak jackets" Former Senator Don Nickles of Oklahoma raged, "The IRS is out of control!" Congress went on to pass and Bill Clinton signed the IRS Reform and Restructuring Act in 1998.
Even as then-IRS Director Charles Rossotti warned Congress about an epidemic of tax cheating, Senator Gramm in May 1998 denounced the agency. Peddling myths of jack-booted IRS agents tormenting American taxpayers, Gramm called on Rossotti to fire his 50 worst employees. Gramm concluded:

"I have no confidence in the Internal Revenue Service of this country. You do not have a good system. This agency has too much unchecked power."

As the New York Times recounted that spring, the plan to gut the IRS advocated by Phil Gramm and his allies was a popular political gambit, but almost certain to create incentives for tax evasion:

Mr. Gramm spoke at length of how he had ''no confidence'' in the I.R.S., remarks that were in sharp contrast to those of every other senator, who emphasized that the majority of I.R.S. workers were honest and most taxpayers law-abiding.
A variety of tax experts have said in recent weeks that attacks on the I.R.S., which polls show are a potent device to win votes and contributions for Republicans, give comfort to tax cheats and discourage honest taxpayers.

Which, of course, is exactly what happened. IRS staffing was slashed and audits of the wealthy dropped precipitously. As Johnston explained:

In 1999, for the first time, the poor were more likely than the rich to have their tax returns audited. The overall rate for people making less than $25,000 a year was 1.36%, compared with 1.15% of returns by those making $100,000 or more...Over the previous 11 years audit rates for the poor had increased by a third, while falling 90 percent for the top tier of Americans.

By 2006, as the New York Times reported, "Over the last five years, officials at both the I.R.S. and the Treasury have told Congress that cheating among the highest-income Americans is a major and growing problem." By 2010, estimates put the tax gap, that is, revenue lost to evasion, fraud and underreporting, as high as $500 billion a year.
Mercifully, the Obama administration in the face of continued Republican opposition and budget cuts to the IRS has made progress against tax cheating, especially by the rich. But when it comes to making sure people who flout the insurance mandate pay up, the Massachusetts experience shows it was all business as usual for the government's revenue agency. That is, what Paul LePage calls the Gestapo.


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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