Health Reform WK-EDGE Senate Finance Committee questions IRS on FY 2017 budget proposals
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Monday, February 22, 2016

Senate Finance Committee questions IRS on FY 2017 budget proposals

By Brant Goldwyn, Wolters Kluwer News Staff

On February 10, 2016, the Senate Finance Committee held two hearings with Obama Administration officials on the fiscal year (FY) 2017 budget. Treasury Secretary Jack Lew testified on the budget’s goal of fostering economic growth and opportunity for all Americans. Internal Revenue Service (IRS) Commissioner John Koskinen spoke on the IRS’ proposed FY 2017 budget of $11.8 billion, an increase of $530 million over its FY 2016 budget of $11.2 billion.

Lew testimony. In his opening statement, Committee Chairman Sen. Orrin G. Hatch (R-Utah) criticized the Administration budget for raising taxes, including new regressive taxes packaged as fees, while generating deficits "as far as the eye can see" and an ever-growing national debt.

According to Lew, the Obama presidency has seen sustained economic growth and "an unprecedented decline" in the budget deficit. He testified that the most pressing economic challenge is to ensure that the benefits of growth are shared by all Americans.

Lew also said that the budget includes "smart" tax reforms that promote growth and opportunity, while strengthening tax policies that help middle-class families afford childcare, higher education and a secure retirement. He testified that the budget would strengthen the Earned Income Tax Credit for workers without dependent children and would increase retirement savings opportunities through pooled 401(k) plans for small businesses, automatic enrollment of workers, tax credits for small businesses to offer plans and participation by part-time workers.

Other tax issues discussed with Lew included Sen. Dean Heller (R-Nev) questioning the role of the geographic adjustment to the "Cadillac" tax on health insurance premiums; and Sen. Thomas Carper (D-Del) supporting the geographic adjustment.

Koskinen testimony. Koskinen thanked Congress for increasing IRS funding by $290 million in FY 2016. He noted that this was the first significant funding increase in six years. Koskinen testified that the IRS is more efficient in its tax collection operations than many western European nations, spending $4.70 to collect $1,000 of revenue, while the average Organization for Economic Co-operation and Development (OECD)-member country spends almost $9 to collect the same amount.

Specifics provided by Koskinen on the IRS’s intended use of the additional funds include: $48 million for taxpayer service, providing a telephone level of service of 53 percent; $153 million to implement the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148); $53 million for new technology; $90 million to combat stolen identity refund fraud and reduce improper payments; $399 million to strengthen enforcement; and $92 million for deployed business systems modernization projects.

Hatch expressed concern about the IRS implementation of the health insurance premium tax credit, noting that he and Sen. Charles E. Grassley (R-Iowa) had written to HHS regarding administration of the credit.

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