9:26am

Thu February 3, 2011
It's All Politics

Health Law Tax Feature Most Everyone Hated Headed For Scrap Heap

If there was one provision in the new health care law practically everybody agreed they hated, it was the 1099 provision.

Democrat, Republican, it didn't matter. For many, the provision came to symbolize a blunder in the new law.

The provision was meant to raise billions of dollars to help pay for the new law by bringing in additional revenue by making it harder for businesses to evade some taxes.

It required any business that paid $600 or more to another company for goods or services to report as much to the IRS so the agency would have a better picture of the taxes due.

But businesses, especially small ones, complained about the vast new clerical burden being imposed on them.

Even accountants, who one might expect to support the new law as a full-employment act for their profession, opposed the provision and asked Congress to repeal it. Ponder that for a minute.

Late last year while it Democrats still controlled it, the House voted to repeal the provision.

But a similar effort stalled in the Senate where there was more disagreement about how to make up the lost revenue.

Finally, on Wednesday, the Senate passed a bill in an 81-17 vote to repeal the politically damaging 1099 provision.

In the post-election news conference where he acknowledged the Republicans' "shellacking" of Democrats, President Obama cited a repeal of the 1099 provision as an area where both parties might work together. The solidly bipartisan nature of the Senate vote proves he was right.

While it appears headed to history's scrap heap, the damage done by the 1099 provision will likely linger long after it's gone.

It gave the law's opponents a sizable cudgel to beat the law's defenders with.

It especially dovetailed neatly into the Republican critique that the overall law is a job-killer because it imposes the costs of higher taxes and bureaucracy on U.S. businesses, making it harder, not easier, for them to create jobs.

It also helped to fuel suspicions about what other unpleasant surprises might be in the legislation.

Meanwhile, one of the more interesting aspects of how the 1099 repeal progressed through the Senate was how Sen. Harry Reid (D-NV), the Senate majority leader, managed to get the bill credited to Sen. Debbie Stabenow (D-MI) who's facing a difficult re-election bid.

As Felicia Sonmez of the Washington Post reported, Republican Sen. Mike Johanns of Nebraska had introduced a bill last year to repeal the 1099 provision.

His bill failed in part because he wanted to offset the revenue loss from repeal by subtracting funds from preventative health care programs.

But a very similar bill with Stabenow's name on it is what was finally approved.

As the WaPo reports:

Asked Wednesday evening about the Democratic move, Johanns acknowledged that "it really is the same amendment" but said that he was "actually kind of flattered" by the maneuver.

"I think my friends on the other side of the aisle saw that the handwriting was on the wall," Johanns said. "They couldn't let the train leave the station, if you will. And so, Senator Stabenow, for whatever reason, was picked to kind of go to the floor and call up really my amendment. But I was very, very happy to vote for my amendment and vote 'yes' and see 81 votes for it, whether it had her name on it or my name on it."

Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.

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