WASHINGTON — Congress sent the White House its first rollback of last year’s health care law Tuesday, a bipartisan repeal of a burdensome tax reporting requirement that’s widely unpopular with businesses. Even President Barack Obama is eager to see it gone.
The Senate voted 87 to 12 to repeal the filing requirement, which would have forced millions of businesses to file tax forms for every vendor selling them more than $600 in goods each year, starting in 2012. The filing requirement is unrelated to health care. However, it would have been used to pay for part of the new health law.
Republicans hope it is the first of many such bills, resulting in the entire health care law being scrapped. Democrats say the bill is part of an inevitable tinkering that will be needed to improve the health measure.
“I just saw this as something that never should have been in the health care law,” said Sen. Mike Johanns, R-Neb., who sponsored the repeal bill in the Senate.
White House spokesman Jay Carney said, “We are pleased Congress has acted to correct a flaw that placed an unnecessary bookkeeping burden on small businesses.”
He added, “The administration remains eager to work with anyone with ideas about how we can make health care better or more affordable for all Americans.”
The filing requirement was projected to raise nearly $25 billion over the next decade by ensuring that vendors pay their taxes. Under the bill, the money will be made up by changing another part of the health care law, requiring more families to repay tax credits designed to help them cover insurance premiums, if their incomes increase beyond certain levels.
Republicans said the filing provision is an example of what happens when lawmakers hastily patch together a massive bill like the health care overhaul, then vote to pass it without knowing everything that’s in it. Lawmakers from both parties say the filing requirement could create a paperwork nightmare for businesses and the Internal Revenue Service.
“This is a big win for small businesses,” said Senate Republican Leader Mitch McConnell of Kentucky. “Importantly, it’s also the first of what I hope are many successful repeal votes related to the disastrous health spending bill Democrats passed last year. The more Americans learn about this bill, the less they like it.”
Businesses already must file Form 1099s with the IRS when they purchase more than $600 in services from a vendor in a year. The new provision would have extended the requirement to the purchase of goods, starting in 2012.
The requirement would hit about 38 million businesses, charities and tax-exempt organizations, many of them small businesses already swamped by government paperwork, according to a report by the National Taxpayer Advocate, an independent watchdog within the IRS.
Democrats passed the health care law last year with no Republican support, when they had majorities in both the House and Senate. Republicans took control of the House in January, following congressional elections in November.
“The 1099 health care mandate is an albatross around the necks of American small businesses, forcing them to bear the brunt of the Obama Administration’s big-spending, tax-hiking, debt- increasing agenda,” said Sen. Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee.
Obama acknowledged the requirement would “place an unnecessary bookkeeping burden on small businesses,” according to a statement released by the president’s budget office. The House voted 314-112 in early March to repeal the filing requirement.
Starting in 2014, the new health care law will provide tax credits to low- and middle-income families to help pay health insurance premiums, if they don’t get insurance through their employers.
The credits will be paid directly to insurance companies throughout the year. The amount will be based on family size, premium costs and income, as reported on previously filed tax returns.
Under the law, if a family’s income increases, and the family members no longer qualify for the tax credits, or qualify for a smaller amount, they would have to repay a portion of those tax credits when they file their federal tax returns. The bill passed Tuesday would increase the amount people would have to repay, generating a projected $25 billion over the next decade.