White House backs 1099 repeal, concerned about how to pay for it

The Obama administration expressed strong support for repealing the 1099 reporting provision included in the healthcare law but is concerned about how the cost of the measure is offset in House and Senate legislation. 

"The administration strongly opposes the House’s offset to pay for this repeal, which would undo an improvement enacted with nearly unanimous support in the Medicare and Medicaid Extenders Act that eliminated an egregious "cliff" in the tax system affecting middle income taxpayers," according to Statement of Administration Policy released Tuesday night.

The House's Republican-proposed offset would recapture improper overpayments of exchange subsidies established under the new healthcare law for those consumers earning more than to 400 percent of the poverty line. Those making less than that would have to pay back a greater portion than they are required to pay back under current law when health insurance exchanges open in 2014.

The most recent "doc fix" patch to stave off cuts in Medicare physician reimbursements also boosted the penalties for recapturing exchange subsidies. 

"Specifically, H.R. 4 would result in tax increases on certain middle-class families that incur unexpected tax liabilities, in many cases totaling thousands of dollars, notwithstanding that they followed the rules," the White House said.

The House is expected to pass the bill on Wednesday that would eliminate the requirement for businesses to file 1099 forms with vendors for purchases of $600 or more in goods and services. House Democrats voiced opposition to how the bill is paid for during a hearing in the House Rules Committee, arguing it would raise taxes by $25 billion. 

House Ways and Means ranking member Sander Levin (D-Mich.) argued that the Republican bill could require some families to pay back the tax break for federal healthcare if their salary changes during the year and pushes them over the threshold, forcing them to pay back upward of thousands in tax breaks. 

"It reinstates a steep cliff we eliminated in December legislation that smoothed out payments," Levin told the House Rules Committee earlier today.  

The administration also said that the Senate's version, included in the Federal Aviation Administration reauthorization, which pays for the repeal "with an unspecified rescission of $44 billion that, in combination with other proposals currently under consideration in Congress, could cause serious disruption in a wide range of services provided by the federal government."

That amendment was initially a bill authored by Sen. Mike Johanns (R-Neb.) and was offered as an amendment by Democratic Sen. Debbie Stabeow (Mich.), which covers the $22 price tag of the bill with $44 billion in rescissions. 

"The administration looks forward to continuing to work with the Congress on the repeal of the information reporting requirements in the course of the legislative process, including finding an acceptable offset for the cost of the repeal," the statement said.