Senate finally votes to repeal 1099

The Senate on Tuesday voted to repeal the health care overhaul’s 1099 tax reporting requirements, finally ending months of debate and votes over a provision that, by the end, had few defenders.

The overwhelmingly bipartisan vote, 87-12, gives President Barack Obama the first opportunity to sign or veto a bill repealing a piece of his signature law. He’s expected to sign it despite concern about how to replace the money the provision would have raised.

What started out last summer as a partisan strike against health reform eventually — through the course of at least 10 Congressional votes — became more of a business issue embraced by both parties and the president.

But the long, drawn-out process may serve as a warning that repealing other pieces of the health law — particularly the big building blocks of the plan — may be much more difficult than opponents of the law once thought.

“This was a provision in the health care law that pretty quickly everybody agreed was foolish,” Sen. Mike Johanns (R-Neb.), one of the strongest supporters of repealing the 1099 provision, told POLITICO in a phone interview. “And yet we had over a dozen votes to get to this point. … Can you imagine what kind of battle you would have on a key part of the health care bill? Once something becomes law in the federal government, it is very, very hard to amend it or tweak it unless there is unanimous agreement.”

The Senate passed the House’s 1099 repeal bill, H.R. 4, without changes, allowing it to go directly to the White House.

The Senate voted down a Democratic amendment that would have likely eliminated how the repeal is paid for: a change in how tax subsidies are recollected in the health exchanges if consumers’ income changes in the course of a year. Republicans argued that it was a poison pill meant to delay the 1099 repeal’s passage. The amendment, sponsored by Sen. Robert Menendez (D-N.J.), failed 41-58.

Republican Leader Sen. Mitch McConnell immediately heralded the bill's passage as, "the first repeal effort of Obamacare."

The 1099 provision, which would have raised $19 billion to help pay for health reform, would have required business owners to file a tax reporting document for all vendors from which they buy $600 worth of goods or services within a year.

The U.S. Chamber of Commerce, the National Federation of Independent Business, Small Business Majority and many other business groups argued that small business owners would be overly burdened with paperwork to comply.

Hampered by the complicated politics of the health reform law, lawmakers in both chambers introduced at least a dozen different bills to repeal or scale back the provision.

In July, House Republicans first tried to repeal it. But it was initially met with overtly partisan reactions, dooming its passage. Republicans hailed it as taking apart a piece of “Obamacare” and Democrats were apprehensive to repeal any piece of the law they worked so hard to get through Congress.

Bipartisan opposition to the provision grew, Obama endorsed repealing it, and the parties slowly came together on ways to pay for it that wouldn’t be immediately met with opposition.

But even in the final bill, some Democrats strongly opposed the way it was paid for, only agreeing to swallow it because opposition to the 1099 requirement is stronger. It is paid for by requiring consumers to return more of their tax subsidies if their income changes during the year and they are eligible for less assistance.

Opponents of the payment method, including the Center for Budget and Policy Priorities and Families USA, argue the changes could particularly hurt unemployed people who get a job in the middle of the year and even discourage people from joining the exchanges.

For instance, a family of four making just under 400 percent of the federal poverty level could have to repay up to $12,000 if they are pushed over the eligibility limit.

“This is an issue that we will hear about when our constituents get those tax bills… when this goes into effect,” Menendez said on the Senate floor. “Do you want to be on the record as having given them the tax bill or do you want to be on the record for trying to save them from it?”

The White House said earlier this month that it opposed the payment method but did not issue a veto threat.

The Menendez amendment would have required the Department of Health and Human Services to conduct a study ensuring that the repeal bill doesn’t raise costs or decrease access to coverage. If the study came back positive, the changes to the subsidy recapturing wouldn’t go into effect.