Former IRS Commissioner Douglas Shulman and current Acting IRS Commissioner Steven Miller have been the subjects of intense questioning from Congress over the past two weeks over their relation to the Tea Party targeting scandal. For Shulman, questions remain as to whether he may have lied in front of the House Ways and Means Committee in March 2012 when questioned about allegations of targeting that at the time were simmering without mainstream awareness. He appeared to be less than forthright in his responses when questioned by the House Oversight and Government Reform Committee on Wednesday. Miller has already tendered his resignation under pressure.
But there’s another IRS scandal waiting to gain widespread awareness, and this time it undeniably has Shumlan’s and MIller’s fingerprints all over it. The IRS is unconstitutionally implementing ObamaCare exchange subsidies in states that refuse to establish an exchange.
What PPACA Says
As I’ve written about previously, PPACA Section 1401 authorizes its massive subsidies to flow through ObamaCare exchanges established by a state. There is no statutory authorization in Section 1401 or elsewhere for these subsidies to be available on the so-called federally-facilitated ObamaCare exchanges established by the federal government in states that have refused to participate. Michael Cannon at Cato Institute and Jonathan Adler of Case Western Reserve School of Law have written the definitive treatise on this issue titled “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits under the PPACA.”
Why It Matters
As reported by the FreedomWorks project BlockExchanges.com, 27 states have refused to setup an exchange. The Henry J. Kaiser Family Foundation has the current count at just 17 states actually establishing an exchange (with 7 opting for a federal partnership exchange).
ObamaCare is massive in scope, and its tentacles extend to almost every aspect of our economy. But at its core are the individual mandate and the employer mandate, the two provisions that drive ObamaCare’s central purpose. Both mandates are entirely dependent on subsidized exchange coverage.
The individual mandate cannot function if individuals cannot afford to purchase the policies, and the actual unsubsidized cost of these exchange policies larded with coverage mandates (which, by the way, is not the appropriate role for insurance) will be astronomical. The employer mandate is necessary both to ensure that the exchanges are not overwhelmed with a new class of subsidy-seeking citizens all the way up to 400% of the federal poverty line ($94,200 for a family of four in 2013), and to ensure that there is sufficient revenue squeezed out of the private sector to fund these new entitlements by way of the employer mandate’s onerous excise tax penalties. In other words, ObamaCare would be devastatingly eviscerated, and essentially inoperable, if no exchange subsidies were available in states choosing not to establish an exchange.
IRS Regulations Stray From Statutory Authority
The quick fix of course is to implement the law with regulations that entirely disregard whether an exchange is established by the state or run by the federal government. The IRS initially finalized the regulations in May of last year, offering this feeble defense of its interpretation:
The statutory language of… the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange…and the federally-facilitated Exchange. Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges. Accordingly, the final regulations maintain the rule in the proposed regulations because it is consistent with the language, purpose, and structure of…the Affordable Care Act as a whole.
Page 30400 of the Federal Register states you-know-who as having approved the regulation: “Steven T. Miller, Deputy Commissioner for Services and Enforcement. Approved: May 16, 2012.”
When the regulations were re-finalized earlier this year, a familiar name again gave his stamp of approval on page 7265 of the Federal Register: “Steven T. Miller, Deputy Commissioner for Services and Enforcement. Approved: January 25, 2013.”
Chairman Issa (R-CA) and Chairman Camp (R-MI) have made many attempts to gather information and communications related to the regulatory decision from Commissioners Shulman and Miller, with no apparent response.
Former Commissioner Shulman already faced the House Oversight and Government Reform Committee on this issue last August. He was arrogant and defiant in the same manner we’ve now grown accustomed to from him and other IRS officials testifying on the Tea Party targeting issue. In response to accusations that the IRS was unconstitutionally bypassing Congress by trying to expand the subsidies when the statute provides no authority for the IRS to do so, Shulman stated: “Congress writes the laws and we interpret them. If you disagree, there’s always the courts.”
As a matter of fact, two major court challenges have called Shulman’s bluff. Oklahoma Attorney General Scott Pruitt has filed a complaint in the Eastern District of Oklahoma. More recently, a group of small business owners filed a complaint in the District of Columbia. The common theme is that the employer mandate excise tax penalties are triggered by employees receiving subsidized coverage on the ObamaCare exchange. If the law were properly implemented, employers in states without a state-run ObamaCare exchange would not be subject to the employer mandate.
Shulman’s 118 Visits to the White House
One of the revelations to come from Shulman’s testimony last week is that he visited the White House 118 times in 2010 and 2011. Shulman adamantly denied ever discussing the Tea Party targeting issue. So what was discussed? “The implementation of the Affordable Care Act would have been one of the themes, and there could have been more,” Shulman admitted when questioned about the nature of his visits, adding that “the IRS has a major role in the money flows in the Affordable Care Act.”
Is there any question that one of the items Shulman discussed with the White House was the fact that far fewer states than anticipated would be setting up an ObamaCare exchange? And how to finagle the law to ensure that its subsidies would reach Americans from sea to shining sea? In ObamaCare’s manifest destiny, it appears the ends justify the means.
Which takes us to the other important revelation from Shulman’s testimony last week. He has no understanding of the U.S. Constitution, and the IRS does not take training classes on our governing document. The line of questioning from Rep. Kerry Bentivolio provoked some truly awkward laughter from Shulman, as well as a rather unpleasant exchange on a number of levels, culminating with Shulman blurting “I really can’t recite the Constitution, sir.” Well after you’re done learning the First Amendment, you might want to also refresh your memory on Article I, Section 1: “All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.” No mention of the IRS.
The IRS is one of the most powerful agencies in the unelected and largely unaccountable fourth branch of the U.S. government, otherwise known as the administrative state. Most of the civil servants working in the various monuments to the bureaucracy around the country are honorable and earnest, even in Cincinnati. The Tea Party scandal is more broadly symptomatic of the fundamental flaws inherent to the modern size and scope of our federal government. Its unyielding desire to control every aspect of our lives comes with an insatiable need for revenue and tax collection enforcement. The result is a supremely powerful IRS. Any entity as large as the IRS will have bad apples. The problem is that the IRS’s authority empowers a bad apple to infringe on the liberties of countless American taxpayers.
And then there’s ObamaCare. An unholy alliance between the law that augmented the power of the federal government to unimaginable ends, combined with the enforcement power of the IRS, the only agency capable of such invasive micromanaging. For a small sample of the IRS’s presence in ObamaCare implementation, take a look its website that complies the IRS regulations and other guidance related to ObamaCare to date. We’re at 31 distinct sections of ObamaCare and counting. All this prior to it taking full effect in 2014. And all overseen by Sarah Hall Ingram, director of the Affordable Care Act office.
Shulman, Miller, and the rest of the IRS have faced intense Congressional and media scrutiny in recent weeks over the Tea Party targeting scandal. That may be the tip of the iceberg. Exposing the IRS’s unconstitutional regulations implementing subsidies on federally-facilitated ObamaCare exchanges should be the next shoe to drop. The statute unambiguously does not authorize the IRS to issue these regulations that will subject businesses to the employer mandate in states that have refused to establish an exchange. In other words, Shulman and Miller aren’t off the hot seat just yet.