Repeal of ObamaCare’s Small Business Tax Reporting Provision Goes Nowhere In the Senate, Again

When Democrats crafted this year’s health care overhaul, they knew it would be expensive. And they also knew that they needed to produce a legislation that was “paid for”—scored by the CBO to reduce the deficit. That meant piling on just about every revenue raiser that anyone could come up with that might play well with the CBO. One of those revenue raisers turned out to a requirement that would force small business owners to fill out a separate 1099 tax form each year for each outside business that they conducted more than $600 in transactions with. Credit card purchases, already recorded electronically, would be exempted, but the added reporting was expected to pick up billions worth of unreported transactions and, as a result, add about $17 billion in new tax revenue. And that new revenue could then be used to help pay for the law’s expensive expansions of insurance coverage.

But in addition to raising revenue, the provision added a major new tax-related paperwork hassle to small business tax reporting. Business didn't like it. Republicans didn't like it. A couple of Democrats admitted early on that it was probably a bad idea, and at this point, just about everyone agrees that the provision needs to go: Even President Obama has said that, as written, the provision is "burdensome." 

Trouble is, despite widespread agreement that the provision is a bad idea, the parties can’t agree on how to fix it. According to Politico, the chief disagreement is whether or not to add that $17 billion in "lost" revenue to the deficit. A proposal by Democratic Sen. Max Baucus, would repeal the requirement but not attempt to make up the revenue. A proposal by Republican Sen. Mike Johanns would make cuts elsewhere in order to allow for repeal without increasing the deficit. And so, in a similar situation to what occurred last time the Senate attempted to defuse the provision, the Senate once again failed yesterday to strike down the requirement:

The Senate on Monday failed to repeal an unpopular element of the health care overhaul even though Democrats and Republicans agreed it needed to be jettisoned to prevent businesses from being saddled with undue tax paperwork.

Caught in a partisan dispute over how to proceed with eliminating new tax reporting rules, the Senate twice was unable to reach an agreed-upon threshold of 67 votes to eliminate a provision that critics have seized on to illustrate the failings of the health care legislation championed by Democrats.

A Democratic plan to overturn it attracted only 44 votes in support with 53 against; a Republican plan that would have cut other programs to make up the shortfall caused by the repeal fell short on a vote of 61 to 35.

The effective end result of the Republican proposal would just be to substitute program-cuts for revenue raising, using the money saved by cutting those programs to fund the law’s expenses. I suppose that’s better at the margin than paying for the law through new paperwork burdens and expanded tax collection, but mostly what this little drama suggests is that there are real limits to fighting the law through minor tweaks.

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  • Joe M||

    In related news, a very shitty bill just passed in the Senate:

    Senate Passes Overhaul of Food Safety Regulations

  • Fluffy||

    Coulda been worse.

    Hate the bill, hated previous versions even more.

  • ||

    That article is nothing but unapologetic protectionism with a sugary Public Safety coating. Thankfully, the bill still isn't law, so things might work-out in the end. (I know, the House is gonna pass the Senate version, no complaints, because hey, at least it's more regulation....I can dream though.)

  • ||

    Good god, why did i go back to try and finish the article...

    “This legislation means that parents who tell their kids to eat their spinach can be assured that it won’t make them sick,”

    Or, you could, I dunno, cook it. I know, crazytalk.

    And the bit about the bipartisan bonding...what a puke-a-thon.

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  • prolefeed||

    mostly what this little drama suggests is that there are real limits to fighting the law through minor tweaks.

    Well, no. The Republicans needed just three more votes to repeal this awful provision and replace it with cuts to other programs. They'll have those votes in January.

    What this drama suggests is that a lot of Democrats in Congress still think this law is a good idea despite the ass-whuppin their party just got.

  • ||

    They'll have those votes in January.

    Actually not clear. By my count, the GOP will only have two more votes for this issue in January. First, Kirk was already seated here. Second, a lot of the Democrats Senators who were defeated are the ones who cast votes for the bill: Feingold, Lincoln, and Bayh were all Ayes.

    However, there were some Not Voting: Burr (R-NC), Pryor (D-AR), Lieberman (I-CT), Brownback (R-KS).

    If the two votes switch *and* Pryor and Lieberman vote for it (and assume the GOPers vote for it), then, yeah, it'll pass. It needs two-thirds of those voting, so only 33 against with 99 or 100 voting.

  • Fluffy||

    Isn't January too late for this tax year?

  • ||

    No, but it's too late to have the IRS not to have to print up extra booklets.

  • ||

    It certainly means that people are forced to gather 1099s just in case, though.

  • fish||

    Excellent! One step closer to the abyss.

  • ||

    And, of course, by waiting until next year to repeal this provision, they will allow it to go into effect, meaning that the paperwork nightmare will be real.

  • Almanian||

    Time for the old "applied retoractively" business

  • ech||

    This goes into effect in 2012, so there is time to fix it. And it applies to all businesses, not just small businesses. The IRS themselves have said they don't have the computer power or staffing to handle the billions of forms that would flood in under this provision.

    At one time, Pelosi said she wouldn't allow a vote on this to come to the floor of the house, since it would have been the first crack in the Obamacare edifice. She didn't want a precedent of allowing changes to the monster she passed.

  • ||

    an agreed-upon threshold of 67 votes

    Agreed upon by whom? 61 votes is enough to overcome every legitimate procedural block in the Senate, so how did this not pass?

    Unless the Dems are afraid to actually force Obama to veto such a bill.

  • ||

    It takes two-thirds to pass something under suspension of the rules.

    Technically, a bare majority is sufficient to rewrite the rules.

  • ||

    I believe that they had to vote to suspend Rule XVI in order to get it to pass, hence two-thirds.

  • Almanian||

    I like the heading at the link - "How Congress Works"

    HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH! That's funny! Good one!

  • Vermont Gun Owner||

    I had the same reaction. It only took 59 to pass it, but it will require 67 to repeal? Wtf?

  • Holy Cow||

    What?! No Reason writers shouting "B-b-but the Civil Liberties, man, Civil Liberties!!!"

    Oh, but the Patriot Act was much worse than this. Much worse. Much worse. I'm sure Glenn Greenwald, the Nation, Salon, Van Jones, ANSWER, Moveon.org, Paul Krugman et al. and other champions of freedom are staunchly against this.

    They're not? Oh.... well, never mind then. Carry on, liberals.

    Anyway, I'd rather has this burden in my life then some pro-gun anti-abortion 4-eyed VP speaking in decidedly non-Harvardian rhythms. And what if she doesn't smoke weed? We dodged a fair-trade 100% Guatemalan hemp bullet in 2008, my fellow real libertarians.

    Yes, we did!

  • Fluffy||

    Are you retarded?

    Reason just spent two days stomping on The Nation.

    Krugman is only even mentioned so he can be mocked.

    And they've been covering the 1099 issue since it was first raised.

  • Spoonman.||

    I don't even know where this troll is shooting. Little help?

  • Special Sauce||

    Right between his own eyes.

  • ||

    the chief disagreement is whether or not to add that $17 billion in "lost" revenue to the deficit.

    Wait a minute...if the transactions are "unreported" how the hell do they know that $17 billion is "lost" in the first place? Where did that number come from? Pelosi's Back Passage?

  • Matt Fleming||

    Actually the offset in the Johanns amendment were not cuts in other spending but in using unspent stimulus money. Typical republican bs. "This tax cut must be funded (by cutting the stimulus), other tax cuts (for the rich) don't need to be funded." I don't know why anyone (with a brain) would take republicans seriously.

  • ||

    I dunno, Matt. It seems to me that reducing the amount available to spend by reducing the stimulus fund is plenty close enough to a spending cut for government work.

    Better than nothing, anyway, which is what we wound up with.

  • ||

    I agree with you, but I thought you didn't care about "rounding errors" and trivial differences that were only slightly better than nothing?

    Cutting $17 billion of stimulus spending is a rounding error. It's the difference between a 4 and an 8 on a scale of 100. Ordinarily you'd scoff at such a typically small achievement for the GOP minority. What's different here, when you suddenly appreciate the value of "small, but better than nothing, anyway?"

  • ||

    the added reporting was expected to pick up billions worth of unreported transactions and, as a result, add about $17 billion in new tax revenue.

    Oh, please.

  • ||

    I don't even know where this troll is shooting. Little help?

    It's a circular firing squad of one.

  • Rhywun||

    I wonder how much the new requirement to get a prescription for tax-free Rolaids and aspirin was designed to rake in. Over or under $17B?

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