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Administration’s 2019 Budget proposal includes ACA repeal & IRS reforms

President Trump’s FY 2019 Budget Proposal.


On February 12, the White House released its federal budget proposals for the 2019 fiscal year (the Budget). As expected, given the recent enactment of the Tax Cuts and Jobs Act (P.L. 115-123, 12/22/2017), the proposals focus largely on non-tax areas, but with a few notable exceptions. Although many of these proposals are unlikely to become law, the Budget nonetheless is a strong statement setting out the policies and objectives of the Administration.

The process for passing a budget generally begins with the President submitting a comprehensive detailed budget request to Congress. Then, House and Senate Budget Committees typically hold hearings on the President’s budget request, inviting White House officials to testify, then pass their own respective budgets, which are in turn negotiated by the full House and Senate before passage of a single congressional budget resolution. The budget resolution is then the basis of annual appropriation bills.

Repeal and replace the Affordable Care Act.

Among the initiatives listed in the Budget for the Department of Health and Human Services is one that would repeal the Affordable Care Act (ACA, or Obamacare), replace in with a “two-part approach” that begins with enacting legislation modeled closely after the Graham-Cassidy-Heller-Johnson bill (see Weekly Alert ¶  2  09/28/2017), and enact “additional reforms to help set Government healthcare spending on a sustainable fiscal path that leads to higher value spending.”

Establish HSAs for Medicare beneficiaries.

The Budget would “creat[e] a new option for Medicare beneficiaries to save for out of pocket healthcare expenses by allowing tax deductible contributions to health savings accounts [HSAs] associated with high deductible health plans offered by employers or Medicare Advantage.”

Inventivize States to build unemployment insurance (UI) reserves.

Noting that many States’ UI accounts lack “sufficient reserves to weather another recession,” the Budget would “strength the incentive” for States to adequately fund their UI systems by “reducing Federal tax credits in States with particularly low reserve balances.”

Eliminate CDFI funding.

The Budget would eliminate funding for Community Development Financial Institutions (CDFI) Fund discretionary grant and direct loan programs, asserting that the CDFI Fund was created more than 20 years ago to jump-start a now mature industry. However, the Budget would maintain funding for administrative expenses to support ongoing CDFI Fund program activities, including the New Markets Tax Credit program.

IRS funding.

The Budget would provide IRS with $11.1 billion in “base funding,” including $2.3 billion for “running key tax filing and compliance IT [information technology] applications” and $110 million for “IT modernization efforts.” The Budget states that, by “investing in the modernization” of IRS systems, the Budget “would help make implementation of tax reform [i.e., the Tax Cuts and Jobs Act] successful.”

Funding to close the tax gap.

The Budget also requests additional IRS funding for “new and continuing investments to expand and strengthen the enforcement of tax law to ensure that all Americans are paying the taxes they owe.” The Budget states that these additional investments, over the next 10 years, would cost approximately $15 billion but would generate approximately $44 billion in additional revenue.

Increase return preparer oversight.

The Budget calls for increasing oversight of paid tax preparers and ensuring that they understand the Code.

Increase IRS authority to correct errors, etc.

The Budget would give IRS the authority to correct more errors on tax returns before refunds are issued, keeping refunds from being issued to taxpayers who are not eligible. It would also allow IRS to “resolve simple issues quickly without having to direct enforcement resources away from more difficult cases.”

Require SSN for certain credits.

The Budget would require a valid “Social Security Number [SSN] for work” in order to claim the child tax credit and earned income tax credit to “ensure that only individuals authorized to work in the United States could claim these credits.”