The momentum to repeal ObamaCare picked up a little momentum in an unlikely place: the White House. After facing a deluge of criticism for new tax records mandates that threaten to drown both the IRS and small businesses, Congress finally scheduled an attempt to remove that portion of the new law. Yesterday, the Obama administration quietly asked Democrats to expedite the process and eliminate the 1099 requirements:
Facing a backlash from small businesses over a new tax-reporting requirement in the healthcare law the president signed in March, the Obama administration is embracing the first change to the landmark legislation.
In a letter to Senate leaders, Health and Human Services Secretary Kathleen Sebelius and Treasury Secretary Timothy F. Geithner urged the Senate to back a proposal to scale back the new reporting mandate.
The law requires businesses to report to the Internal Revenue Service transactions worth more than $600, a provision that was added to the law to raise an estimated $17 billion over a decade and offset the cost of expanding coverage to millions of uninsured Americans.
The small item garnered little attention when it was inserted into the gargantuan legislation.
Well, why did it garner “little attention”? The media may have missed it, but we’ve been talking about this for at least eleven months. Cato reminded everyone about it in April, and yet it has taken five months for the White House to conclude that it will create huge costs and administrative burdens for business and the IRS alike.
Had this bill been processed normally through committees and debated honestly, this flaw would have gotten immediate attention. Instead, the ObamaCare bill got written in back rooms, rushed to the floor of both chambers, instead of developed in the normal process. The excuse was that it was too important to get vetted, and too time-critical to delay it or pass it in components. Well, this is what happens when Congressional leadership says that they have to pass a bill to find out what’s in it, and when they drop 2800 pages of legislative text on members just 48 hours before floor votes.
What remains to be seen is how Democrats plan to replace the $17 billion they assumed they would get from the provision. Two months ago, they seemed perfectly content to blame Republicans for not hiking other taxes to replace the revenue. The Wall Street Journal notes this problem, and another issue with the White House’s favored solution:
Most Democrats now claim they were blindsided and didn’t understand the implications of the 1099 provision—which is typical of the slapdash, destructive way the bill was written and passed. As the critics claimed, most Members had no idea what they were voting on. Some 239 House Democrats voted to dump the 1099 provision in August, and the repeal would have passed except Speaker Pelosi rigged the vote procedurally so it needed a two-thirds majority. She thus gave Democrats the cover of a repeal vote without actually repealing it.
In the Senate today, Nebraska Republican Mike Johanns will offer his amendment to scrap the new 1099 rules altogether. But the White House is opposing this because it fears it would set a precedent for repealing the larger health bill. Over the weekend the Treasury Department pronounced the Johanns amendment “not acceptable in its current form.”
Yesterday the White House endorsed a competing proposal from Florida Democrat Bill Nelson that would increase the 1099 threshold to $5,000 and exempt businesses with fewer than 25 workers. Yet this is little more than a rearguard action in favor of the status quo; the Nelson amendment leaves the basic architecture unchanged while making the problem more complex.
Businesses would still have to track all purchases, not knowing in advance which contractors will exceed $5,000 at the end of the year. It also creates a marginal barrier to job creation—for a smaller firm, hiring a 26th employee would be extremely costly. The Nelson amendment also includes new taxes on domestic oil production, as every Democratic bill now seems to do.
Let’s just reflect on the fact that Democrats now claim that they backed a bill in the face of overwhelming opposition from voters, and now say they didn’t understand it when they did. And instead of cutting the spending in the bill, Democrats insist on raising taxes to cover their own mistake. If that’s not an election-year ad, I don’t know what is.