House panel Republicans say Obama 'playing politics' on 1099 repeal

House Republicans are accusing President Obama of "playing politics" by opposing their plan to pay for the repeal of an unpopular IRS reporting requirement in the healthcare reform law by tapping into the law’s insurance subsidies.

The House is set to debate a bill Wednesday that would offset the cost of healthcare reform’s 1099 requirement by recapturing a greater amount of improper overpayments of insurance exchange subsidies established by the law. 

The White House denounced the plan Tuesday night, accusing it of creating a tax increase for middle-class families.

"[The bill] 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 administration said.

However, Republicans on the panel that developed the 1099 repeal pay-for say they are restoring the law’s subsidy penalties to their original form after Congress changed the recapture formula in December to fund a one-year patch staving off scheduled reimbursement cuts to Medicare physicians.

"If the Obama administration and the Democrats are going to let those who are ineligible for taxpayer-funded subsidies pocket taxpayer dollars anyway, then they’ve got some explaining to do to the American people," a spokesperson for Ways and Means Committee Republicans told The Hill.

"It is hypocritical for Democrats to oppose provisions they previously supported," the spokesperson continued. "If they were interested in eliminating the 1099 policy instead of playing politics, then why wouldn’t they support this bill?"

The White House and Democrats have joined Republicans in calling for the repeal of the healthcare law's 1099 requirement for small businesses to report annual payments of more than $600 to each vendor. However, the administration has yet to endorse a strategy that pays for the cost of repeal, priced at $22 billion

Ways and Means ranking member Sander Levin (D-Mich.) argued Tuesday that the Republican pay-for could require some families to pay back the entire tax break for purchasing health insurance, which starts in 2014, if their salary changes during the year and pushes them over the subsidy threshold.

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

The White House also said it had serious concerns about an alternative plan, which passed the Senate last month, that would pay for repeal by authorizing the Office of Management and Budget to target unobligated federal funds. That plan "could cause serious disruption in a wide range of services provided by the Federal government," the administration said.