EXCERPT FROM THIS ARTICLE: To summarize: The IRS (famed for nitpicking and prosecuting the tax law), chose to authorize hundreds of billions of illegal subsidies without having performed a smidgen of legal due diligence, and did so at the direction of political taskmasters. The agency’s actions provided aid and comfort to elected Democrats, even as it disenfranchised millions of Americans who voted in their states to reject state-run exchanges. And Treasury knows how ugly this looks, which is why it initially stonewalled Congress in its investigation—at first refusing to give documents to investigators, and redacting large portions of the information.
Administration officials will continue to use the IRS to try to improve its political fortunes. The subsidy shenanigans are merely one example. Add Democrats’ hijacking of the agency to target and silence political opponents. What you begin to see are the makings of a Washington agency—a body with the power to harass, to collect, to fine, to imprison—working on behalf of one political party. Richard Nixon, eat your heart out
And it was entirely political. Democrats needed those subsidies. The party had assumed that dangling subsidies before the states would induce them to set up exchanges. When dozens instead refused, the White House was faced with the prospect that citizens in 36 states—two-thirds of the country—would be exposed to the full cost of ObamaCare’s overpriced insurance. The backlash would have been horrific, potentially forcing Democrats to reopen the law, or even costing President Obama re-election.
The White House viewed it as imperative, therefore, that IRS bureaucrats ignore the law’s text and come up with a politically helpful rule. The evidence shows that career officials at the IRS did indeed do as Treasury Department and Health and Human Services Department officials told them. This, despite the fact that the IRS is supposed to be insulated from political meddling.
We know this thanks to a largely overlooked joint investigation and February report by the House Oversight and Ways and Means committees into the history of the IRS subsidy rule. We know that in the late summer of 2010, after ObamaCare was signed into law, the IRS assembled a working group—made up of career IRS and Treasury employees—to develop regulations around ObamaCare subsidies. And we know that this working group initially decided to follow the text of the law. An early draft of its rule about subsidies explained that they were for “Exchanges established by the State.”
Yet in March 2011, Emily McMahon, the acting assistant secretary for tax policy at the Treasury Department (a political hire), saw a news article that noted a growing legal focus on the meaning of that text. She forwarded it to the working group, which in turn decided to elevate the issue—according to Congress’s report—to “senior IRS and Treasury officials.” The office of the IRS chief counsel—one of two positions appointed by the president—drafted a memo telling the group that it should read the text to mean that everyone, in every exchange, got subsidies. At some point between March 10 and March 15, 2011, the reference to “Exchanges established by the State” disappeared from the draft rule. Read the rest of this entry »