How the IRS scandal could hurt ObamaCare

The unfolding scandal at the Internal Revenue Service is causing some major headaches for President Obama — and it could get worse as the administration prepares to hand the IRS far greater power to fully implement the Affordable Care Act this year.

The White House has requested hundreds of millions of dollars to hire new agents who would oversee the various tax breaks and credits included in the ACA. But the scandal over the IRS' targeting of Tea Party groups could tarnish an agency that is already far from popular, giving Republicans an opportunity to block those funds — and perhaps even achieve a long-held goal of crippling ObamaCare.

When the Supreme Court upheld the ACA last year, it ruled that the law was constitutional because it used tax penalties and credits to make the new health care system work. The agency is in charge of implementing 47 tax provisions, including new taxes on medical devices and new subsidies for those who want to purchase coverage through health care exchanges set to debut later this year. The agency will also be tasked with ensuring that all Americans can prove they have "qualifying" coverage under the law.

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Those added duties come with a cost though: The Obama administration has requested that $440 million in its 2014 budget proposal be diverted to the IRS to help cover the expense of hiring new staffers and enforcing the ACA. Enter outraged Republicans who, citing the latest scandal, are now threatening to rescind that funding.

"With the recent events related to the Internal Revenue Service (IRS), I feel it is necessary that both Congress and the Department of Health and Human Services look closely at the money given to the IRS through the health care law.," Sen. Dean Heller (R-Nev.) wrote Tuesday in a letter to Secretary of Health and Human Services Kathleen Sebelius.

Heller said that he's preparing a bill, to be introduced later this week, that would temporarily block IRS funding designated for hiring more agents to enforce ObamaCare.

Other Republicans have raised similar concerns in recent days over putting the IRS in charge of health care.

"Why would you trust the bureaucracy with your health if you can't trust the bureaucracy with your politics?," Newt Gingrich asked Monday on MSNBC's Morning Joe. "There are bureaucrats in the IRS who are capable of ruining your life while lying about it."

It doesn't help the White House that some of the groups the IRS reportedly targeted were big critics of the health care overhaul.

"In other words, the agency has singled out ObamaCare opponents for unusual treatment," says Reason's Peter Suderman. "That does not speak well of the agency’s ability to fairly carry out its duties under the law."

Republicans have opposed the increased IRS funding since before the ACA even passed in 2010. Ryan Ellis of Americans for Tax Reform — the influential anti-tax group led by Grover Norquist — has accused the agency of repeated malfeasance, and warned that "taxpayers should expect their annual tax season headache to become an ObamaCare migraine until Congress gets the IRS out of the healthcare business."

The latest scandal has certainly added more fuel to the fire.

"For them, the scandal is just what the doctor ordered, a chance to attack the IRS — a perennial punching bag — as politically tainted while linking the scandal back to a massive implementation challenge confronting the administration," say the Fiscal Times' Josh Boak and Eric Pianin.

The timing of the scandal is also somewhat fortuitous for Republicans. The GOP-controlled House was already set to vote Thursday on a symbolic repeal of the entire health care law, as it has done multiple times in the past.