21st Century Expectation for the IRS - Health Care Enforcer?

Some aspects of the complicated health care legislative proposals have been in the news in the past few months, but it seems that little attention has been paid to some of the tax provisions. Certainly, we should all be used to tax provisions designed to modify behavior. But what about the health care proposals that impose new duties on the IRS? Is this what we expect tax agencies to be doing now or in the future?

The Kiplinger Tax Letter of 11/25/09 describes the likely effect as follows:

"The Service will grow by leaps and bounds as it puts a slew of tax changes related to health care into effect and sets up systems to enforce the rules." [subscription needed]

Some of these possible new duties of the IRS include information collection and enforcement of new excise taxes on employers not providing health benefits and credits for small businesses to help them provide benefits (Sections 501, 511, 512 and 521 of House-passed H.R. 3962).

When you think about it, the whole system seems odd. Due to a rule enacted decades ago regarding employee compensation levels, some employers started providing health insurance benefits. The system grew and employer-provided health benefits became a norm - unlike car insurance which we handle on our own. "Reform" includes keeping this odd system and even has the IRS playing a greater role in the delivery of employer-provided health benefits. I'm only aware of one proposal in the past few years that proposed to break the link between employment and health care - Senator Wyden's S. 334 (110th Congress), the Healthy Americans Act (more info here).

While technology should be allowing the IRS to be more efficient and perhaps not need to replace all of the employees who are retiring soon, new mandates could cause it to grow, without any positive impact on reducing the tax gap! That seems like a poor use of tax agency talent and expertise. I don't see that as helping the IRS move into the 21st century. Why not look for a health care reform option that doesn't shift so much work and enforcement activity to a tax agency?

What do you think?