House to Vote on Repeal, Then Do Real Business

The House is ready to repeal health care reform Wednesday, fulfilling a pledge Republicans made during last year’s election campaign.

This vote won’t mean anything. The bill probably won’t even make it onto the Senate floor, much less pass that chamber. Even if it did, President Barack Obama would veto it.

Nevertheless, health care reform’s critics and its defenders are gearing up for battle this week. On the business front, both the U.S. Chamber of Commerce and the National Federation of Independent Business have endorsed repeal. In its letter to House members, NFIB said 93 percent of its members favor repeal because they think its mandates and taxes on businesses will raise costs and stifle job creation.

Tomorrow, Karen Mills, who heads the Small Business Administration, will make the opposite argument in a conference call with reporters. She’ll highlight the money some small businesses will save through the law’s tax credits for health insurance and tout the new insurance exchanges that should help small businesses get a better deal on insurance beginning in 2014.

This back-and-forth, however, won’t be as significant as another development on the health care front. In an implicit acknowledgment that the overall repeal effort will die after the House vote, House Republican leaders have moved up action to repeal one specific provision in the bill: the requirement that will force businesses next year to file 1099 reports with the Internal Revenue Service any time they spend more than $600 a year with another business for goods or services.

This provision, which was included in health care reform to help pay for the cost of the legislation, provoked opposition from small businesses, who claim it would create a paperwork nightmare. Democrats, including President Barack Obama, agree with Republicans that this provision needs to be changed.

Republicans signaled their plan to take up legislation repealing the 1099 provision shortly after the overall health care reform vote by giving the 1099 bill a new number, H.R. 4, instead of its previous H.R. 144 number. The majority party typically reserves numbers 1 through 10 on House bills for high-priority bills that are scheduled for early votes in a legislative session. The health care reform bill, for example, is H.R. 2.

Unlike H.R. 2, however, H.R. 4 has a good shot of passing the Senate and being signed into law by the president.

The only obstacle standing in its way is how to make up for the $17 billion or so in tax revenue that the 1099 reporting requirement was projected to generate. (In theory, expanded third-party reporting of payments to businesses increases tax revenue because businesses are less inclined to try to hide this income from the IRS.)

The pending House bill doesn’t include any offsets for 1099 repeal, while the Senate in the past has insisted on offsets.

Businesses hope this question will be resolved quickly. Otherwise, they’ll have to start overhauling their accounting systems in order to comply with the expanded 1099 reporting requirements in 2012. That’s money they’d rather be spending on new employees and new equipment--a much more productive use of capital.

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Kent Hoover is the Washington bureau chief for bizjournals.