I don’t have much to add to this report from The DC except a weary “we told you so”:
Individuals who don’t purchase health insurance may lose their tax refunds according to IRS Commissioner Doug Shulman. After acknowledging the recently passed health-care bill limits the agency’s options for enforcing the individual mandate, Shulman told reporters that the most likely way to penalize individuals that don’t comply is by reducing or confiscating their tax refunds.
Speaking at the National Press Club on Monday, Shulman downplayed the IRS’s role in enforcing the recent overhaul of the health insurance industry by claiming the agency would not aggressively target individuals who don’t purchase coverage. He noted that the health-care bill expressly forbids the agency from freezing bank accounts, seizing assets or pursuing criminal charges, but when pressed said the IRS would most likely use tax refund offsets to penalize those that don’t comply with the mandate. The IRS uses refund offsets to collect from individuals that owe the federal government a delinquent debt.
“These are not the kinds of things we send agents out about,” Shulman said. “These are things where you get a letter from us. Congress was very careful to make sure there was nothing too punitive in this bill.”
Many reports have claimed that enforcement of the individual mandate will be non-existent, but Shulman’s answers indicate differently.
It will be interesting to see how this plays out, since countless millions of Americans look forward to their annual income tax refunds as the equivalent of a yearly bonus. Of course those who pay income tax could simply adjust their withholdings so that there is little to refund in the first place. But 40% or so of Americans — most of whom are lower income — earn no taxable income or have a negative tax liability. Many of those people count on IRS refunds in the form of earned income credits or child tax credits, and they do not have the option of changing their withholdings. Or what about disaster victims, who also receive earned income credits? How will these people will react when the government starts to delay or reduce the amount of their refunds?
(Final paragraph edited and expanded)