Johanns will try to tack on 1099 repeal to small business bill

The Senate will begin consideration of an authorization bill on Tuesday that would fund the Small Business Administration (SBA) for 2011, which Democrats say will create jobs. 

As the 1099 debate has gone so far, the White House and House and Senate lawmakers across both parties back the elimination of the 1099 provision but are at odds over how to make up for $22 billion in lost revenue as projected by the Joint Committee on Taxation. 

Senate Finance Chairman Max Baucus (D-Mont.) said Monday “there is still a difference of opinion on the offsets” and said he hoped to have a clearer picture on Tuesday of how he wants to proceed. 

Despite the latest debate over how to pay for the measure, Johanns said “it doesn’t make a lot of sense, there’s all of a sudden this push back on the pay-for that was used for the ‘doc fix’ unanimously.” 

“Nothing I see [with the pay-for] that should be a problem at all.” 

Senate Majority Leader Harry Reid (D-Nev.) said last week that he prefers the pay-for included in the House version. 

“Me, personally, I like the House pay-for better than ours, so we’ll have to see,” he said. 

Generally, Baucus and other lawmakers in both parties backed the repeal language included in the Federal Aviation Administration authorization bill that pays for the cost with unused, previously appropriated federal funds as determined by the Office of Management and Budget. 

On March 3, the House passed a 1099 repeal measure that requires taxpayers who receive federal health insurance subsidies to reimburse the IRS if they earn more than 400 percent of the poverty line and are deemed ineligible. Taxpayers would be required to pay back only the amount of the subsidy and won’t levied with penalties above that amount, according to House Ways and Means Republican staff. 

Some taxpayers could receive a subsidy even though they didn’t qualify because they are self-reporting on data that is based on a two-year window and their eligibility could change significantly during that time. Under current law, those receiving the subsidy are required to report going over the level that makes them ineligible for premium assistance, according to Republican staff. 

Some House Democrats say the bill’s offset creates a $25 billion tax hike on the middle class because it could ensnare taxpayers who straddle the 400 percent income line and that a mere year-end bonus could push taxpayers “over the cliff” and force them to repay the money. 

Meanwhile, House Republicans have argued that those taxpayers who exceed the income levels shouldn’t receive the subsidy and should pay it back. 

They also have argued they it’s the same pay-for offered by Democrats last year to cover the “doc fix.”

This story was updated at 10 a.m. 

This version corrects and specifies that taxpayers aren’t required to pay penalties to the IRS on top of the amount of the subsidy they would have to repay. They have to repay only the amount of the premium assistance they received.