House repeals tax reporting requirement, but disagreement over funding remains

Under the new healthcare law, consumers must repay a portion of the subsidy if they misreport their income or if it jumps over a certain threshold during the year.
 
The House bill, which passed 314-112, reinstates the “cliff” — 400 percent of the federal poverty level — at which consumers would have to repay the entire subsidy. The threshold was eliminated late last year when Congress altered the subsidy recapture formula to pay for a $19 billion, one-year patch staving off Medicare reimbursement cuts to doctors.
 
Democrats, including the Obama administration, are portraying the House pay-for as a tax hike. Republicans argue Democrats are being hypocritical for opposing a provision included in the original healthcare reform law enacted 11 months ago.
 
“[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 this week in a statement strongly opposing the Republican pay-for.
 
House Ways and Means Chairman Dave Camp (R-Mich.) had a different view.
 
“Paying back money you weren't entitled to is not a tax increase,” he said Thursday.
 
Seventy-six House Democrats, including a significant number of vulnerable members, joined all of their Republican colleagues in approving the 1099 repeal on Thursday. But Democratic House leadership continued to express their opposition to the bill.
 
“I hope both sides can reach an agreement and identify an offset that will make it through both chambers and be signed into law by the President, so that we can ease the burden on small businesses by repealing the 1099 provision in the near future,” Minority Whip Steny Hoyer (D-Md.) said in a statement after the vote.
 
Further, Senate Democrats are unlikely to embrace the GOP’s strategy for funding repeal. With 81 votes, the Senate passed its own 1099 repeal measure that would authorize the Office of Management and Budget to identify unobligated federal funds to pay for 1099 repeal. The administration also expressed serious concern about the Senate bill.
 
The Senate bill, “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,” the administration said this week.
 
The administration and Democrats have been eager to offer 1099 repeal as a signal of their willingness to work on improving healthcare reform. Obama, in his January State of the Union address, specifically singled out elimination of the 1099 provision.
 
“Instead of re-fighting the battles of the last two years, let’s fix what needs fixing and let’s move forward,” Obama told Congress. 
 
Besides 1099, the administration had not proposed significant changes until earlier this week, when it supported a plan that would encourage states to develop their own healthcare reforms three years earlier than the law currently allows. However, House Republicans are not supporting the plan, originally proposed by a bipartisan duo of senators, Scott Brown (R-Mass.) and Ron Wyden (D-Ore.). 
 
House Republicans on Thursday cast the 1099 provision as a major burden on small business and asked the Senate and White House to quickly back their repeal effort. Failure to enact repeal — something everyone agrees with in basic principle — sets a bad precedent, they said.
 
“If we can’t get done, this would be the true definition of dysfunctional government,”said Rep. Dan Lungren (R-Calif.), who sponsored the House bill.