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November 1, 2012
Opinion: Obamacare, the IRS, and the End of Privacy
Joseph J. Thorndike

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You know those letters that look official but aren't? The junk mail emblazoned with a "Request for Immediate Action" and warning of a "$2,000 fine, 5 years' imprisonment, or both for any person interfering or obstructing with delivery of this letter"?

Typically, those letters are hawking extended car warranties or debt settlement programs. But on first blush, they can seem awfully official. And they certainly trade on the fear inspired by that appearance.

Now we have the tax version of such faux-official direct mail. Americans for Tax Reform (ATR) has released an "IRS Tax Form for Obamacare Individual Mandate." At least that's what the headline says.

Now, to be fair, the text of ATR's announcement is careful to describe the form as "projected." And the image of the form is emblazoned with a watermark declaring "Not an IRS Form."

Can't find the caveat? Just look a little closer: It's right below the place where the form says "Department of the Treasury," "Internal Revenue Service," and "OMB No. 359."

I suppose the disclaimer allows ATR to meet the "accurate but misleading" standard governing political rhetoric these days, which, of course, much rhetoric fails to meet. "Our projected IRS form assists 140 million Americans in their obligation to disclose personal identifying health information and calculate the IRS tax penalty," the group explains on its website,

ATR regards its form as a teaching tool. And maybe also as a conceit of sorts -- a semi-serious joke for ardent opponents of the Patient Protection and Affordable Care Act. "You should get to know the Internal Revenue Service (IRS)," writes ATR President Grover Norquist in a piece published October 30 on "It is only polite, because the IRS wants to get to know you better. Much better. Soon."

This is Norquist at his archly amusing best. But not everyone seems to be in on the joke. On Twitter, for instance, many links to the ATR form suggest that it's real. "Of course Obamacare is a tax and now the IRS has a form for it," reports Holymolyrocky, self-described as an "unconventional conservative flying squirrel avoiding capture by Boris and Natasha."

Similarly, Kemberlee Kaye, tweeting from @red_red_head, warns that "this is actually happening: The IRS Tax Form for Obamacare Individual Mandate *shudders*."

Maybe these folks aren't as credulous as they seem. Maybe they understand that the form isn't real. Or maybe they don't. But either way, Norquist seems to be making his point.

On Display

And what a point it is. Norquist is playing into stereotypes of the IRS as a privacy scourge. "It is best to prepare now to save up to pay these taxes and to open your personal health ID information to be shared with the nice government workers at the IRS," Norquist concludes. "They are just doing what the law commands. And we will have to also."

This argument is brilliant. And it gets better. Norquist tries to capitalize on the debate over nonpayers and the income tax by spotlighting the lucky ducks of Obamacare. ATR's new "Form OBMA" includes a section where filers can claim an exemption from the insurance mandate and its associated penalties. "Now if you are a prisoner in a federal penitentiary or an undocumented immigrant or a welfare recipient you don't have to pay the tax penalty," Norquist points out helpfully. (He omits from this list the religious exemption, although it's included on the ATR form itself.)

Presumably, these exemptions are supposed to rankle. And for columnist Paul Bedard, they seem to. "Obamacare exempts millions -- prisoners, illegals, welfare recipients," exclaims the headline of his October 31 article for The Washington Examiner. "When added together, those three groups total up to one-sixth of the nation's population of 314 million: 218,929 are in federal prisons, 12 million are illegals and 42 million are below the poverty line and eligible for welfare, though some fit into all three categories, according to federal reports."

Inquisitorial IRS

The spotlight of the ATR form is firmly trained on privacy issues. "So the IRS form will require that you certify that you had Uncle Sam-mandated insurance each and every month of the year," Norquist explains in his op-ed. "You will have to disclose your personal identifying health ID number, the nature of the insurance and any information from your health insurance card the IRS regulations demand in the future."

Clearly, this new disclosure requirement is an outrage. Who wants to disclose health-related information to the tax man? It's a violation of our cherished right to privacy, which the GOP only selectively defends.

Of course, maybe we should also cleanse the code of other provisions that compromise health privacy. Like the deduction for extraordinary medical expenses. And the very existence of flexible spending accounts and health savings accounts.

And for that matter, what about all the other tax provisions that disclose to the IRS intimate facts about our personal lives? After all, the agency already knows whether your toddler is in day care, whether your teenager goes to college, and whether you actually contribute something to the collection plate on Sundays.

As Joel Slemrod pointed out in a 2006 article in Fiscal Studies, the tax system has increasingly taken account of the personal facts, as well as countless others. And that trend might plausibly continue:

    Indeed, it seems technologically feasible that the U.S. income tax system could operate like the kind of frequent-flyer program that most airlines have, where at any moment the customer can log on to the Internet and get a statement of the status of one's account, not only the net credits earned but also the transactions that affected the net amount. With the U.S. income tax, as with a frequent-flyer program, you get debits for earning income, but you get credits for a whole host of things, like giving money to a charity, sending a child to university, depositing money into a special savings account, and so on.

All those credits are great when it comes time to calculate your taxes. But they also involve some non-trivial sacrifice of personal privacy.

Snarkiness aside, tax privacy concerns are real. And they are not new. People have been complaining for millennia that the tax man is grasping and invasive. The income tax, in particular, has been denounced by its opponents -- and even some of its friends -- for being inquisitorial. It's not a pleasant or an easy tax to pay.

But it's our tax. For better or worse, Americans have pretty much made their peace with it and even with its privacy compromises. Indeed, if the unceasing quest for tax preferences is any indication, we're more than happy to sacrifice some information for a little extra cash in the refund check every April.

In any case, that's certainly the lesson to be drawn from our retail shopping practices. If the IRS knows a lot about you, the grocery store probably knows even more. Assuming you flash your loyalty card at the checkout counter, Kroger knows whether you just had a baby or desperately want to avoid having one; whether you drink too much or sleep too little; whether you've gained a few pounds or lost some more hair.

Credit card companies know still more about your personal life. And your Internet service provider? Let's not even go there.

Like most people, I like the idea of personal privacy. And I pine for the days when it wasn't compromised at every turn. But the privacy ship has long since sailed. And in the big scheme of things, turning over some information about your health insurance to the IRS? Not exactly the end of the world.