HOPEY-CHANGEY: Latest Tax Season Headache? Obamacare.
The new year has brought a new sort of commercial to our televisions: ads urging people to check with tax preparers about the potential consequences of Obamacare. H&R Block is offering free Obamacare consultations tomorrow. I’ve written before that the big Obamacare event of this year will not be the exchange enrollments, but tax season, when people who got too much in subsidies find out how much money they owe the government (and been told by a tax preparer that it was even worse than I thought). Tax preparers, to judge from my Twitter feed, have been panicking for months. But now they face the Herculean job of communicating that panic to the public.
There’s been a lot of talk about the “hidden taxes” in the Affordable Care Act, but here’s one I hadn’t thought of before or seen mentioned anywhere: the sudden need for folks with simple tax returns to avail themselves of the services of a paid professional. If you have no income outside a modest salary, and not much in the way of potential deductions such as huge mortgage interest or state tax bills, then there was really no reason to use a tax preparer. Even the mathematically challenged should, with the aid of a calculator, be able to fill out their 1040EZ forms just fine. But Obamacare has introduced a significant level of complexity into the taxes of lower-middle-class wage earners. More of them are going to need an accountant to negotiate the process — or risk owing the government hundreds of dollars because they didn’t fill out the forms correctly.
The money doesn’t go to the government, of course, but in many ways this looks like a tax: Suddenly, people with simple incomes are going to need to pay a significant sum to keep themselves out of trouble with the IRS. This tax will be extremely regressive, because the people most likely to be hit by it are people whose incomes are (or have been) low enough to qualify for subsidies.
Yeah, a flat tax or fair tax would fix this.