Faulty PPACA Tax Subsidy System Will Leave Taxpayers Owing IRS, Witness Says

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

 

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

All stories by: Wolters Kluwer Tax and Accounting