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IRS Health Care Power Grab Tramples States

The opinions expressed by columnists are their own and do not necessarily represent the views of

A couple of weeks before President Obama's big immigration dictate, his IRS issued a more quiet but no less outrageous edict that attempts to up-end the ability of states to opt out of his health care law's new entitlement.


When the law was written, its supporters assumed states would be eager to participate and get access to enormous subsidies from federal taxpayers. Instead, more than half the states challenged the constitutionality of the law in court, and at least that many are likely to refuse to set up the so-called exchanges through which the new entitlement subsidies flow.

So the Obama administration is trying to bribe states to participate by manipulating language in the law that is meant to authorize start-up grants to instead fund years of operating expenses. A recent announcement from the Department of Health and Human Services (HHS) offered states six full years of funding.

Even that bribe isn't convincing many states that are flatly refusing to implement exchanges - which are subject to onerous regulatory control by HHS.

The statute does, under section 1321, authorize HHS to create federal exchanges in states that choose not to participate. But the law specifically denies taxpayers in those states "premium assistance credits," the subsidies at the heart of the new health care entitlement. This was supposed to be a way to coerce states into playing along - the Democrats who wrote the bill just couldn't imagine a state leaving billions in federal subsidies on the table. The author of the provisions, Senator Max Baucus, has reportedly stated that this was an intended feature of the law.

Now the IRS, likely at the direction of an Obama White House increasingly concerned that the whole law will crumble due to the number of states opting out, is scrambling to bureaucratically rewrite the law and allow subsidies to flow through federal exchanges.


The IRS, in a May 23 dictate, had the nerve to say: "The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange."

Yet there is no mention of a "federally-facilitated Exchange" anywhere in 36B or in any section referenced in 36B. In fact, the definition of the new credit under 36B specifically requires enrollment "through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act." Identical language appears in the definition of a "coverage month" later in 36B.

Not only does 36B clearly state that eligibility for the subsidy requires enrollment in an exchange "established by the State," but it also specifically cites 1311, the section of the bill dealing with state exchanges. Federally-run exchanges are authorized by a different section that is never mentioned anywhere in 36B. There is zero basis in the law for the IRS's claim that section 36B authorizes credits in a federal exchange.

Moreover, because employers can be taxed $3000 per subsidy-eligible employee, the IRS is literally attempting taxation without representation. The new IRS Tax will whack companies in states that already opted out and therefore shouldn't lawfully be taxed.

It's an affront not just to principles of federalism but to the very first thing our founders put in the Constitution after the famous "We the People" preamble. Article I, Section 1 states: "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."


It doesn't say the power to write and rewrite laws is vested in HHS and IRS, or that unelected bureaucrats can impose taxes on states that legitimately opted out of a federal program.

Fortunately, the Senate is expected to vote on overturning this outrageous IRS dictate and protecting the right of states to opt out of President Obama's new health care subsidies and employer taxes. The vote, under the Congressional Review Act, will be protected from filibuster and will therefore require just 51 votes to overturn the IRS dictate.

This Senate vote will tell us whether each U.S. senator supports the rule of law and our federalist system or believes IRS bureaucrats should be allowed to govern by dictate, even to impose their own taxes. Citizens whose senators are up for election this year should watch closely and consider whether senators who would outsource such power to the IRS deserve to stay in the Senate.

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