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The weird scaremongering in the latest Obamacare lawsuit

Alex Wong/Getty Images News

The petition filed with the Supreme Court on the Obamacare subsidies case contains some dire language. "Profound consequences of delay mean that this Court's definitive resolution is urgently needed," reads the headline of one subsection.

Among those "profound consequences," the plaintiffs write:

Every month that subsidies are paid on the authority of the IRS Rule, its millions of beneficiaries thus not only detrimentally rely on its validity to make important economic decisions, but are potentially incurring thousands of dollars of potential debt-owed to the IRS as back taxes. This is grossly unfair, and only prompt resolution of the legal dispute can curtail that unfairness.

In effect, they argue that this case is charged with urgency because millions of Americans could be responsible for repaying billions of dollars in tax credits that were never authorized.

That's almost certainly an overstatement. Subsidies will continue to flow while the case is being resolved, and even if the tax credits are eventually invalidated, that doesn't mean that the IRS will claw back the subsidies they issued in the interim.

"There's a federal statute that has to do with IRS regulations," says Timothy Jost, a law professor at Washington and Lee University. "In the event this case goes against the government in the Supreme Court, the IRS would have to promulgate a new regulation on the tax credits."

The statute Jost refers to (26 U.S.C. 7805(b) if you want to get hyper-specific) indicates that new regulations would only have prospective, not retroactive, effects. Jost also points out that the Secretary of Treasury — not the high court or anyone else — wields the authority to determine retroactivity of judicial decisions.

Scaremongering that people might have to repay their tax credits in the future, and that this problem gets worse the longer the Court waits, is just that: scaremongering.

The plaintiffs did hedge themselves, couching their argument with words like "may" and "potentially." But they make other claims of urgency, so why are they reaching to make this argument about back taxes at all?

It may have to do with the fact that right now, there's a narrow window of opportunity, and they need to gin up all the "urgency" they can to encourage Supreme Court consideration.

The two federal appeals courts that ruled earlier this month are split — the DC Circuit ruled in favor of plaintiffs in Halbig, the Fourth Circuit in favor of the government in King. That circuit split is, however, expected to disappear in the fall, after the government receives en banc review in the DC Circuit.

The government reportedly filed their en banc petition with the DC Circuit on Friday afternoon. If accepted, the review will likely reverse the decision, so the ruling favors the government.

If the circuit split is resolved, the odds of Supreme Court review fall.

"Where there is no circuit split, and where multiple lower courts have upheld a federal regulation, the Supreme Court rarely reviews cases," Jost said. "If they took this case, it would be an extraordinary political act."

That's not to say it couldn't happen. As Nicholas Bagley, a law professor at the University of Michigan points out, four conservative justices dissented in the first Obamacare case that went to the Supreme Court.

"It only takes four justices to take a case, and it's not hard to tell a story about how four justices could be persuaded both that the Fourth Circuit's decision is wrong and that this is one of those rare cases of such public importance that prompt involvement is necessary," Bagley writes.

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