The medical-device excise tax is supposed to raise $20 billion of Obamacare’s $438 billion of revenue through 2019. The IRS started collecting the tax in January 2013, and expected to get $1.2 billion in the first half of 2013. The actual take? $913 million — a shortfall of almost one quarter.
This is the conclusion of a report by the Tax Inspector General for Tax Administration (TIGTA). However, the report also found a “discrepancy” of $118 million between what the IRS collected and the amount TIGTA believes was owed. Why? To put it simply, it is proving very difficult to determine which firms owe the tax.
So, it is not clear whether the IRS will eventually figure this out, turn over some rocks to find companies ducking the tax, and start collecting from them. In that case, the IRS might hit its revenue target. On the other hand, the report notes that the IRS levied 219 “failure to report penalties” during the period, which were later found erroneous. They IRS has apologized and reversed those penalties. So, the IRA may be over-zealous and over-collecting.
As Vice-President Biden would say: “Who knows, man? Who really knows?” One thing is for sure: Obamacare relies on tax revenue that is far riskier and volatile than its framers anticipated. Hopefully this will make the repeal of this universally reviled tax easier to accomplish.