Premium tax credits administered under the Patient Protection and Affordable Care Act’s (PPACA) (P.L. 111-148) subsidy verification system will leave taxpayers owing federal taxes next year, said a witness at a joint hearing of the House Ways and Means Subcommittees on Oversight and Health on June 10. Douglas Holtz-Eakin, president of American Action Forum, predicted that the federal government will pay out incorrect subsidies and then be unable to collect the overpayments. Holtz-Eakin, former director of the Congressional Budget Office (CBO), said consumer reporting errors could leave taxpayers on the hook with the IRS for several years. “(T)his is a complicated system where consumers are asked to estimate their income a year in advance, and are then held accountable for a system that is difficult to navigate and understand,” he told lawmakers.
“Even discounting those out to defraud the federal government by intentionally reporting lower incomes, consumers cannot always prevent major fluctuations in income, creating room for error in reporting,” Holtz-Eakin said. “These errors will reflect on the federal budget and the country’s taxpayers.” But, Health Subcommittee ranking member Jim McDermott, D-Wash., disputed Holtz-Eakin’s assessment, saying that taxpayers are unlikely to underreport their incomes in order to get higher tax subsidies under the PPACA . He characterized the joint hearing on the premium tax credit as an attempt by GOP lawmakers to overhype problems with the health care law.
Committee Democrats cited Congressional Budget Office (CBO) estimates that the average tax credit for individuals and families would be around $4,400. They objected to a recent letter from GOP lawmakers to Treasury Secretary Jack Lew asking that all premium tax credits be denied to people who signed up for health insurance using the PPACA’s marketplace. According to committee Democrats, approximately 6.8-million individuals and families have received tax credits through the marketplace. “If my colleagues on the other side had their way, no middle class families—even those without inconsistencies—would benefit from these tax credits for the foreseeable future,” McDermott said. He noted that the federal government has been able to successfully handle data inconsistencies in programs such as Medicaid and CHIP.
By Stephen K. Cooper, CCH News Staff
