Choosing not to fix the 1099 problem

CHOOSING NOT TO FIX THE 1099 PROBLEM…. One of last week’s more bizarre developments came and went fairly quickly, but it’s worth taking a moment to pause and acknowledge what happened.

The problem is the “1099 issue.” The Affordable Care Act included IRS filing requirements that appears to be too burdensome on businesses. The point is sound — preventing tax fraud — but the execution needs some work.

The Senate attempted to correct the problem in September, and considered two competing solutions. The first came from Sen. Mike Johanns (R-Neb.), who wanted to eliminate the reporting requirements altogether, and would pay for it by all by eliminating the Prevention and Public Health Fund, gutting funds for things like HIV prevention, cancer screening, and flu vaccinations. Republicans thought this was a great idea and unanimously supported the Johanns amendment, but it the Democratic majority balked.

The other proposed fix came from Sen. Bill Nelson (D-Fla.), who offered a reasonable compromise: raise the 1099 reporting threshold to $5,000 and exempt firms with fewer than 25 employees, and pay for the measure by reducing subsidies to oil companies. Republicans — knowing that it was either Nelson’s fix or no fix at all — rejected the compromise. The GOP concluded oil industry subsidies were just too high a priority.

The Senate tried once more last week. It didn’t go well.

Sen. Max Baucus decided the hell with it. The amount of revenue is tiny (less than $2 billion per year), so why not just repeal the 1099 provision, lower everyone’s taxes, and forget about paying for it? This is an eminently sensible position, since Republicans want the provision repealed and have repeatedly and unanimously taken the position that tax cuts don’t need to be paid for.

So Baucus introduced an amendment to do the deed. And it failed because all but two Republicans voted against it.

Here’s the roll call. Nearly every Democrat voted for it; nearly every Republican voted against it.

Republican motivations are often mysterious, but this one was expected. They are, of course, the ones who were practically desperate to scrap the 1099 provision in the first place. Baucus made it easy for them to get exactly what they said they want, but they still balked.

As best as I can tell, the GOP’s stated rationale for opposition was based on the fact that Baucus’ fix wasn’t paid for — and that’s true, it wasn’t. But (a) the price tag was a relative pittance; and (b) these are the same folks who want expensive Bush-era tax cuts without paying for any of them.

The GOP’s real rationale? It’s likely they want something to substantive to complain about when attacking health care policy. Fixing the problem would take that away.