The 1099 Insurrection: Obama fights effort to ease burden on small business

A Wall Street Journal Opinion

You might not have seen it reported, but the Senate will vote this morning on whether to repeal part of ObamaCare that it passed only months ago. The White House is opposed, but this fight is likely to be the first of many as Americans discover—as Nancy Pelosi once famously predicted—what’s in the bill.

The Senate will vote on amendments to the White House small business bill that would rescind an ObamaCare mandate that companies track and submit to the IRS all business-to-business transactions over $600 annually. Democrats tucked the 1099 reporting footnote into the bill to raise an estimated $17.1 billion, part of the effort to claim that ObamaCare reduces the deficit by $100 billion or so.

But this “tax gap” of unreported business income is largely a Beltway myth, and no less than the Treasury Department’s National Taxpayer Advocate Nina Olson says the costs will be “disproportionate as compared with any resulting improvements in tax compliance.”

Meanwhile, small businesses are staring in horror toward 2013, when the 1099 mandate will hit more than 30 million of them. Currently businesses only have to tell the IRS the value of services they purchase from vendors and the like. Under the new rules, they’ll have to report the value of goods and merchandise they purchase as well, adding vast accounting and paperwork costs.

Think about a midsized trucking company. The back office would have to collect hundreds of thousands of receipts from every gas station where its drivers filled up and figure out where it spent more than $600 that year. Then it would also need to match those payments to the stations’ corporate parents.

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.

As of yesterday, no one was sure if either amendment would get 60 votes, though Democrat Blanche Lincoln of Arkansas is cosponsoring the Johanns version. Enough Democrats may bend to White House wishes and produce a stalemate, but this issue won’t go away. The President’s opposition to a clean repeal shows the hollowness of his alleged support for small business, which he expresses at every campaign stop but is less a priority than preserving his health-care legacy.

The larger political story here is that ObamaCare is already under bipartisan siege—and in the same Congress that passed it. The 1099 provision is only one plank, but repealing the law plank by plank may be the right strategy. Sooner or later the whole thing becomes unworkable. Voters should watch this vote to see who’s really on the side of small business.

3 responses to “The 1099 Insurrection: Obama fights effort to ease burden on small business

  1. Let me get this straight.

    We’re going to be “gifted” with a health care plan we are forced to purchase and fined if we don’t,

    written by a committee whose chairman says he doesn’t understand it,

    passed by a Congress that hasn’t read it but exempts themselves from it,

    signed by a president who also smokes,

    with funding administered by a treasury chief who didn’t pay his taxes,

    to be overseen by a surgeon general who is obese,

    and financed by a country that’s broke.

    What the hell could possibly go wrong?

  2. The 1099 requirement will come back to bite Democrats big-time once it hits the public consciousness next year. It will also cause major IRS expense and create endless extra work for people like me who help small businesses/self employed keep their books. The anxiety and confusion to come will be blamed squarely on Dems.

  3. I use to be a Democrat. I’ve been telling all my Democrat friends how I have been given no choice but to but to realize they havent a clue what it takes already to run a small business, let alone run the country I live in. This 1099 bill is the stupid button that is going to wipe out the Democratic party. Wake up Democrats and realize you just wiped the Democratic party right off the face of the earth.

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