Under Obamacare, the Internal Revenue Service will determine who is eligible for health insurance subsidies, and it will deliver those subsidies, in the form of tax credits, to millions of individual Americans. It’s a huge job, and a critical one, involving hundreds of billions of taxpayer dollars. So it should go without saying that the subsidies go only to people who actually qualify for them. But a new scandal within the IRS casts serious doubt on whether that will happen.
The scandal involves a program known as the Earned Income Tax Credit. It is an anti-poverty program in which the government gives low-income workers a tax refund larger than their tax liability. For example, a family with a $1,000 income tax liability might qualify for a credit four times that large, and receive an Earned Income Tax Credit payment of $4,000. Another family with no income tax liability at all might qualify for the same lump-sum payment. Call it a subsidy, a refund, a transfer payment — in any case, the family receives a check from the feds.