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Obamacare battle turns into Trump vs. the IRS

Jake Novak
Carlos Barria | Reuters. The IRS is throwing a big wrench into President Trump's plans to gut Obamacare, says Jake Novak.

A funny thing happened on the way to making America great again. The IRS got in the way. Even as the Trump administration continues to move to dismantle Obamacare, the Internal Revenue Service has apparently thrown a big wrench into the effort by telling tax preparers that it will block or suspend processing of 2017 income tax returns that do not comply with Obamacare rules requiring filers to disclose their health insurance status. Back on his first day in office President Trump signed an executive order calling on the "heads of all executive departments... to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the (Affordable Care) Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications." The IRS responded in February, with a "thanks, but no thanks," statement, saying that barring a legislative change, it will continue enforcing the Affordable Care Act, while "taxpayers remain required to follow the law and pay what they may owe." There were some reports at the time that the agency would start accepting tax returns that didn't include the health coverage information, but now we know those reports were false. Yep, the IRS is sticking to its guns and it does appear to have some legal footing for its stand. That is, even many conservatives who believe the Obamacare law is unconstitutional believe that only legislation passed by Congress can lawfully repeal Obamacare.

But that's not where the story will end, even for now. IRS critics and Trump supporters will likely point out that the agency is still run by Obama appointee John Koskinen, whom those same conservatives have been loudly calling for President Trump to fire since March. Call it "the swamp" or "the establishment," or just plain old bureaucracy, the taxman may turn out to be the biggest hurdle for the Trump team and the de facto leaders of the so-called anti-Trump or "Resist" movement. That is not to say this is some kind of conspiracy engineered by Koskinen and other Obama loyalists in the capital. Before we assume that, remember that politics aside, it's not surprising that the IRS would be such a tough stone to turn. You can ask anyone who's ever tried to tangle with the IRS in court about that. They call "death and taxes" life's two certainties for a reason. The IRS has one job: Collect as much taxes as possible. And it's been pretty hell bent on fulfilling that mission for more than 100 years, no matter who's in the White House. But this development may not be all bad for President Trump and the anti-Obamacare forces that remain in the Republican Party. That's because from a political and public persuasion standpoint, you really couldn't ask for a better enemy than the IRS. Seriously, does anybody other than the people who work at the IRS actually like the IRS? And the other fact here is that while the IRS is saying it won't accept the incomplete returns, we already know that enforcement of the taxes has been light on those who do admit they didn't have health coverage. That may be a place where both sides can agree to let things stand until there is a real legislative repeal. Polls show the IRS is consistently the least popular government entity. Duh. Of course, any confrontation with the IRS and the inevitable demonization of Koskinen by President Trump will brew up yet another chaotic political storm. But so far, the White House has decided to take on the dismantling of many Obama policies in chaotic fashion, so this will be par for the course. The chaos and protest that came from imposing travel bans and slashing environmental rules was one thing. The backlash from advocates for immigrants and the environment have launched significant legal and public relations challenges. But if the White House addresses this apparent IRS challenge by firing Koskinen and imposing new rules at the agency, will there be much of a real public outcry? Probably, because we're talking about the polarizing President Trump. Still, when it comes to fighting the tax man in the court of public opinion, this looks like a battle he could win. The larger question is whether the IRS news proves that Obamacare really is almost invulnerable. We won't know that for sure unless and until President Trump brings in new leadership at the agency. But for now, a very key part of the federal government isn't going along with the plan to dismantle the ACA by executive order. Trump is going to have to try something else. Commentary by Jake Novak, senior columnist. Follow him on Twitter @jakejakeny. For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

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