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Immediately before and after President Barack Obama signed a landmark health care reform bill on March 23, 2010, critics -- mostly Republicans -- charged that the measure would lead to the hiring of more than 16,000 new Internal Revenue Service employees simply to enforce the bill's tax provisions, including the controversial requirement that almost all Americans secure health insurance or else face a tax penalty.
One of at least a dozen lawmakers who made that point was Rep. Mark Kirk, R-Ill., who is a strong contender this fall to win the Senate seat once occupied by Obama himself.
"About the only jobs created by the (health care) legislation would be at the IRS," Kirk said in a floor speech on March 21, 2010, the day the measure passed the House. "According to the nonpartisan Congressional Budget Office, the IRS would need to hire over 16,000 people -- over 700 just in Illinois -- to audit the American people and impose the new taxes and mandates of the bill."
As we looked into the origin of this statistic, we found reasons to be cautious about its accuracy.
Let's first look at what the Congressional Budget Office said. On Dec. 19, 2009, the CBO released an analysis of the Senate version of the health care bill, which ultimately became the basis for the bill that was passed by both chambers and signed into law.
In its analysis, the CBO wrote that it had "not completed an estimate of the discretionary costs that would be associated with the legislation," including the costs for the IRS and other "federal agencies that would be responsible for implementing the provisions of the legislation."
But CBO did offer an estimate of the costs to the IRS for "implementing the eligibility determination, documentation, and verification processes for premium and cost-sharing credits." The IRS, the analysis said, "would probably" need to spend "between $5 billion and $10 billion over 10 years."
However, CBO did not translate that dollar range into a possible number of new hires. Instead, that task was taken up by another group -- the Republican staff of the House Ways and Means Committee.
On March 18, 2010, the House Ways and Means Republicans released a report titled, "The Wrong Prescription: Democrats’ Health Overhaul Dangerously Expands IRS Authority." That report is the source of the 16,000-plus figure.
The Ways and Means Republicans' report acknowledged that it is "impossible to know exactly how many new employees the IRS would have to hire to enforce the individual mandate and other provisions of the Democrats’ health care bill." Still, the report uses IRS data and "reasonable assumptions about costs and program responsibilities" to suggest that as many as 16,500 additional "examiners, agents, and other employees" could be needed.
Here's the report's explanation of the math, which is based on the high end of CBO's cost estimate of $10 billion over 10 years:
"First, assume that the IRS budget would grow by the $10 billion that CBO indicates could be necessary. While there might be some early-year start-up costs to prepare for the added workload, most of the costs would accrue in the last six years of CBO’s ten-year budget window, when the individual mandate and other provisions, which present the bulk of the new enforcement responsibilities, take effect. Thus, for this analysis, assume that $1 billion total will be spent by the IRS in the first four years to prepare for the mandate with the spending increasing to $1.5 billion per year in each of the last six years.
"Second, in the last year for which actual IRS data is available, fiscal year 2009, the IRS employed the equivalent of 92,577 people, nearly half of whom worked directly in examinations and collections. In total, the IRS had payroll and benefit expenses of $8.371 billion, implying that costs per worker were $90,427. If the $1.5 billion in annual funds are used for the payroll and benefits of a similar mix of employees, the IRS could add more than 16,500 additional agents, auditors, examiners, and administrative support personnel to enforce large portions of the nation’s health insurance system."
But even as it offered the 16,500 figure, the Ways and Means Republicans' report offered caveats as well.
"Some might argue that figure over-estimates the number of employees that would be hired, because it includes only payroll and benefit costs and does not include other costs that would be incurred, including office overhead," the report says. "However, note that the IRS total budget in fiscal year 2009 was $11.708 billion, meaning that, when all costs are included, IRS total spending averaged $126,474 per employee. Thus, critics of the 16,500 figure might argue that any new employees should be assumed to cost as much as the average member of the existing workforce and that the $1.5 billion per year would 'only' support hiring slightly more than 11,800 new IRS employees."
In fact, in a footnote, the report said that "it is likely the number would lie somewhere in between the two sets of figures. There would be some additional overhead costs for the new employees, such as computers and telephone services. But there could also be fixed costs that are not as affected by additional workers (e.g., the agency may already have extra office space so does not need to rent additional square footage for each additional worker)."
We contacted a half-dozen experts in federal human-resources issues to see if they could provide an independent critique of the report's math, but those who responded ultimately declined to either confirm or second-guess the Ways and Means Republicans' calculations, citing uncertainty about what kind of staffing would be needed. One key unknown is whether computer automation -- something in which the IRS has made a substantial investment in recent years -- could handle much of the work stemming from the health care bill, rather than employees.
For the record, the IRS itself says that it has not sorted out the employment fallout yet.
On March 25, 2010, IRS Commissioner Douglas Shulman appeared at a hearing of the House Ways and Means Subcommittee on Oversight. At one point, Rep. Ron Kind, D-Wis., asked Shulman, "You said that right now you are moving forward as far as calculations and costs and staffing needs the IRS has -- you haven't made any of those final determinations yet, have you?"
To that question, Shulman answered, "That's correct."
Ultimately, we have several problems with the way that Kirk has used the 16,500 figure.
• The attribution is misleading. Kirk is right that the 16,500 figure has a connection to CBO -- but only an indirect one. CBO offered a cost estimate, but suggested nothing about how many jobs that dollar figure would translate into. Calculating a jobs number was a task that the Ways and Means Republicans took upon themselves. The CBO is Congress' nonpartisan referee for budgetary questions, and as such maintains a high degree of credibility on both sides of the partisan divide. For Kirk to attribute the 16,500 figure to the CBO rather than to an entity of House Republicans -- who voted unanimously against the final health care bill -- in effect launders partisan fingerprints from the estimate. Even if the 16,500 estimate is ultimately proven accurate, it would have been more accurate to label the the estimate as one coming from a partisan, rather than a nonpartisan, entity.
• It uses the high end of the CBO estimate. The CBO estimated a cost burden of between $5 billion and $10 billion over 10 years. The Ways and Means Republicans' report made its calculations based only on the high end of that range. If it had used the $5 billion figure instead (or offered it side by side with the $10 billion figure) it would have worked out to 8,250 jobs. Yet Kirk failed to use a qualifier like "as many as" or "up to" 16,500 new IRS employees.
• The Ways and Means Republicans themselves acknowledge that the figure could be less than 16,500 new jobs. Factoring overhead -- rather than just salaries and benefits -- into the equation would reduce the number from 16,500 new employees to 11,800. This isn't just an outside critique; this is something stated explicitly in the Ways and Means Republicans' own report. And if one uses the $5 billion CBO estimate rather than the $10 billion CBO estimate, that number could shrink to 5,900 new jobs -- substantially below the 16,500 figure used widely in the congressional debate.
We think it's fair to assume that the IRS will need to hire new employees, perhaps thousands, to handle the caseload from the new health care bill. And for this item, we will assume that the Ways and Means' Republicans' methodology is credible, since we were not able to find any expert who argued otherwise. Finally, Kirk is hardly alone in ignoring the caveats to the 16,500 figure -- Sen. John Ensign, R-Nev., to just cite one example, said in a March 25, 2010, floor speech that "16,500 new IRS agents are going to be required to be hired because of the health care reform bill," which to us expresses an unwarranted degree of certainty. But in this item, we're focusing on Kirk's statement, and we believe it rates only a Barely True.
Editor's note: This statement was rated Barely True when it was published. On July 27, 2011, we changed the name for the rating to Mostly False.
Congressional Budget Office, analysis of the Patient Protection and Affordable Care Act, Senate Amendment 2786 in the nature of a substitute to H.R. 3590 (as printed in the Congressional Record on November 19, 2009), Dec. 19, 2009
Douglas Shulman, testimony before the House Ways and Means Subcommittee on Oversight, March 25, 2010
John Ensign, Senate floor speech, March 25, 2010
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