For Immediate Release
October 22, 2013
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Hatch Says TIGTA Report on EITC Improper Payments Doesn’t Bode Well for ObamaCare Subsidies

Utah Senator Says, “The IRS and the Obama Administration must aggressively crack down on these erroneous payments or we could see $250 billion in ObamaCare premium credits, on top of the approximately $136 billion in EITC credits, being wasted.”

SALT LAKE CITY – After the Treasury Inspector General for Tax Administration (TIGTA) released a report today saying the Internal Revenue Service (IRS) has “made no significant improvement” in reducing  improper Earned Income Tax Credit (EITC) payments, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, called on the IRS to take stronger steps to curb these payments.

EITC are refundable tax credits, which amount to a subsidy given out by the IRS through the tax code instead of a direct payment from the government.  These credits are similar to the advanceable and refundable premium tax credits, or subsidies, in the Affordable Care Act (ACA), which will go to defray the cost of purchasing government-mandated insurance.  Hatch has long cited the high EITC improper payment rates as a red flag for what could potentially be around $250 billion in improper payments for these premiums subsidies over ten years.  

“Refundable tax credits are a nightmare to administer and lead to far too much of the American people’s money going out to those who aren’t eligible.  That the IRS can’t figure out how to rein in the improper Earned Income Tax Credit payments doesn’t bode well for the $1.1 trillion in ObamaCare subsidies,” said Hatch.  “The IRS and the Obama Administration must aggressively crack down on these erroneous payments or we could see around $250 billion in ObamaCare subsidies, on top of the approximately $136 billion in EITC credits, being wasted.”

The IRS estimates that 21 to 25 percent ($11.6 billion to $13.6 billion) of EITC payments were issued improperly during Fiscal Year (FY) 2012.  TIGTA said that the IRS’ FY 2012 estimates for EITC payments are low, because the laws extending increases in the EITC were not factored into the estimates.

The Congressional Budget Office estimated earlier this year that the cost of the ACA subsidies would be $1.1 trillion over ten years.  

In 2011, Congress acted to reform the EITC by stopping them from being “advanceable” credits – meaning going out to people before their income is verified.  

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