Key Democrat Moves to Repeal Part of Health Care Bill

Sen. Max Baucus/AP file

A key Senate Democrat announced Friday that he would introduce legislation to repeal a provision in the recently-passed health care reform law that would eliminate an overly-burdensome reporting requirement for small businesses that might have left many drowning in paperwork.

Senate Finance Committee Chairman Max Baucus, D-Mont., released a statement saying, "I have heard small businesses loud and clear and I am responding to their concerns."

The Patient Protection and Affordable Care Act (PPACA) contains a provision designed to raise revenue without raising tax rates, that would, beginning in 2012, require all businesses to report payments to and purchases from any business totaling more than $600 in a calendar year, regardless of what the money was used to purchase.

The Baucus legislation would strip the requirement from the bill entirely, but it will also leave a major hole from the revenue lost. The nonpartisan Joint Tax Committee estimated that $19 billion could be expected over 10 years.  But the bill, overall, even with the revenue removed would still be more than $100 billion in the black. The number crunchers at the nonpartisan Congressional Budget Office estimated that the health care bill would reduce the deficit by $143 billion over 10 years.

Small business owners and their advocate groups have canvassed Capitol Hill for months decrying the provision which was designed to reduce the sizable "tax gap" between what individuals and businesses owe the IRS and what they actually end up paying. The IRS estimates that the government loses more than $300 billion each year from noncompliance.

But Baucus said small businesses "need to focus their efforts on creating good-paying jobs - not filing paperwork."

The National Taxpayer Advocate, which operates independently within in the IRS, seriously questioned the provision back in June, estimating then that some 40 million taxpayers would be subject to the requirement, including 26 million who run sole proprietorships.

Until now, Democrats had focused on merely trimming back the threshold at which businesses must file the paperwork, so this is a major about-face for Baucus. An amendment offered earlier this year by Sen. Bill Nelson, D-Fla., would have increased the limit to $5,000 from $600, but it was defeated as Republicans sought to eliminate the reporting requirement entirely through legislation offered by Sen. Mike Johanns, R-Neb.

Johanns on Friday released a statement saying, "Our first order of business next week ought to be fulfilling the promise to support our job creators by repealing the ludicrous 1099 tax paperwork mandate. I'm pleased the President and members of Congress who opposed my repeal legislation earlier this year now realize the importance of getting rid of this job killing provision."

It is unclear when the Baucus legislation would come up for a vote, but if passed, it would be the first major change to the 2,400-page bill. It could open up a window to Republican efforts to drastically scale back the bill.