Happy tax day: Obamacare is making your filing even more complex

Some shocking figures from the National Taxpayer Union on what complying with Obamacare tax regs is costing us.

This year’s new analysis of tax complexity from National Taxpayers Union Foundation (NTUF) found some startling lead figures: a $234 billion cost to the economy due to 6.1 billion lost hours of productivity and $32 billion spent out-of-pocket to comply with America’s insanely complicated tax system.

As always, there is much more to the story.

Since 2010, tax complexity costs have remained sky-high, at well over $200 billion each year. From fiscal year 2005 to 2013, the Treasury's paperwork burden rose from 6.4 billion hours to 7 billion hours never making up less than 74 percent of the burden imposed by all government agencies combined.

While last year’s (covering 2013) totals actually trended downward compared to the previous year (2012), there was little reason to believe that was the beginning of a trend toward continued relief.

In fact, given the burdens that Obamacare was/and is continuing to add, and to a lesser extent those from the Foreign Account Tax Compliance Act (FATCA), there was good reason to think last year was an anomaly.

NTUF’s latest study clearly shows that to be the case, as the cost of complexity has spiked upward since last year’s analysis by nearly $10 billion.

What does that mean for the future?

Looking deeper at NTUF’s research, there is one big reason to think this could be the beginning of a trend in the wrong direction: 3,322 pages of legal guidance for Obamacare (or the ACA) added to IRS.gov (1,077 pages of regulations, 1,377 pages of Treasury decisions, 669 notices, 100 revenue procedures, and 12 revenue rulings).

Essentially, Obamacare is coming home to roost.

So far, while it certainly contributed to rising complexity over the last tax year, Obamacare has not drastically increased costs under NTUF’s metrics.

Yet, it is inflicting new burdens on taxpayers, and this is bound to increase the burdens of tax complexity more than what has already been observed.

Fortunately for most taxpayers, all they have to do is check a box on their return to show their insurance meets Obamacare mandates.  But for millions of taxpayers, a complicated formula is used to calculate how much a taxpayer might owe if he didn't have the right insurance for either part or all of last year.

Most taxpayers could save a lot of money if they itemized.  But the bewildering rules on what and how much you can deduct uusually discourage people from going that route.

And that's a feature – not a bug.

Jonathan Chait highlights another aspect of Obamacare complexity – continuous changes by the IRS to the rules:

Section 1401 (which creates Section 36B of the Internal Revenue Code) authorizes tax credits for the purchase of qualifying health insurance in an exchange “established by the State under Section 1311″ of the Act. The IRS rule also authorizes tax credits for the purchase of health insurance in an exchange established by the federal government. The Supreme Court will rule on this challenge later this year.

In a series of posts at “Notice & Comment,” the blog of the Yale Journal on Regulation, Professor Andy Grewal documents two additional cases in which the IRS has rewritten the PPACA’s tax credit eligibility requirements so as to expand eligibility beyond what Congress authorized.  Combined with other instances of the IRS and HHS disregarding the PPACA’s plain text, it appears the federal government has little regard for what the PPACA actually says.

In his first two posts, Professor Grewall explains how IRS regulations disregard the statutory text so as to extend tax credit eligibility to some low-income aliens not lawfully residing in the U.S.  In this way, the IRS regulation “casts a wider net than the statute” by expanding the number of people eligible for tax credits. Yet the IRS never provided any rationale for this change.  Indeed, if one had just read the IRS explanation for what its regulations accomplish — as opposed to the regulations themselves — one would not even be aware of what the IRS did.

In a second pair of posts, Professor Grewal explains how the IRS also issued regulations effectively disregarding the income requirements for tax credit eligibility.  Under the PPACA, individuals are only eligibile for tax credits if they earn between 100 and 400 percent of the poverty line.  Under the IRS regulations, however, the 100 percent threshold is disregarded in some instances.

That's our Obama administration – making stuff up as they go along.  Not a very cheery way to celebrate income tax day, but an eye-opener nontheless.

Some shocking figures from the National Taxpayer Union on what complying with Obamacare tax regs is costing us.

This year’s new analysis of tax complexity from National Taxpayers Union Foundation (NTUF) found some startling lead figures: a $234 billion cost to the economy due to 6.1 billion lost hours of productivity and $32 billion spent out-of-pocket to comply with America’s insanely complicated tax system.

As always, there is much more to the story.

Since 2010, tax complexity costs have remained sky-high, at well over $200 billion each year. From fiscal year 2005 to 2013, the Treasury's paperwork burden rose from 6.4 billion hours to 7 billion hours never making up less than 74 percent of the burden imposed by all government agencies combined.

While last year’s (covering 2013) totals actually trended downward compared to the previous year (2012), there was little reason to believe that was the beginning of a trend toward continued relief.

In fact, given the burdens that Obamacare was/and is continuing to add, and to a lesser extent those from the Foreign Account Tax Compliance Act (FATCA), there was good reason to think last year was an anomaly.

NTUF’s latest study clearly shows that to be the case, as the cost of complexity has spiked upward since last year’s analysis by nearly $10 billion.

What does that mean for the future?

Looking deeper at NTUF’s research, there is one big reason to think this could be the beginning of a trend in the wrong direction: 3,322 pages of legal guidance for Obamacare (or the ACA) added to IRS.gov (1,077 pages of regulations, 1,377 pages of Treasury decisions, 669 notices, 100 revenue procedures, and 12 revenue rulings).

Essentially, Obamacare is coming home to roost.

So far, while it certainly contributed to rising complexity over the last tax year, Obamacare has not drastically increased costs under NTUF’s metrics.

Yet, it is inflicting new burdens on taxpayers, and this is bound to increase the burdens of tax complexity more than what has already been observed.

Fortunately for most taxpayers, all they have to do is check a box on their return to show their insurance meets Obamacare mandates.  But for millions of taxpayers, a complicated formula is used to calculate how much a taxpayer might owe if he didn't have the right insurance for either part or all of last year.

Most taxpayers could save a lot of money if they itemized.  But the bewildering rules on what and how much you can deduct uusually discourage people from going that route.

And that's a feature – not a bug.

Jonathan Chait highlights another aspect of Obamacare complexity – continuous changes by the IRS to the rules:

Section 1401 (which creates Section 36B of the Internal Revenue Code) authorizes tax credits for the purchase of qualifying health insurance in an exchange “established by the State under Section 1311″ of the Act. The IRS rule also authorizes tax credits for the purchase of health insurance in an exchange established by the federal government. The Supreme Court will rule on this challenge later this year.

In a series of posts at “Notice & Comment,” the blog of the Yale Journal on Regulation, Professor Andy Grewal documents two additional cases in which the IRS has rewritten the PPACA’s tax credit eligibility requirements so as to expand eligibility beyond what Congress authorized.  Combined with other instances of the IRS and HHS disregarding the PPACA’s plain text, it appears the federal government has little regard for what the PPACA actually says.

In his first two posts, Professor Grewall explains how IRS regulations disregard the statutory text so as to extend tax credit eligibility to some low-income aliens not lawfully residing in the U.S.  In this way, the IRS regulation “casts a wider net than the statute” by expanding the number of people eligible for tax credits. Yet the IRS never provided any rationale for this change.  Indeed, if one had just read the IRS explanation for what its regulations accomplish — as opposed to the regulations themselves — one would not even be aware of what the IRS did.

In a second pair of posts, Professor Grewal explains how the IRS also issued regulations effectively disregarding the income requirements for tax credit eligibility.  Under the PPACA, individuals are only eligibile for tax credits if they earn between 100 and 400 percent of the poverty line.  Under the IRS regulations, however, the 100 percent threshold is disregarded in some instances.

That's our Obama administration – making stuff up as they go along.  Not a very cheery way to celebrate income tax day, but an eye-opener nontheless.