The New 1099 Scam

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Do you remember the great 1099 controversy? No matter. Details are here if you’re interested, but all that matters is that (a) it raised tax collections on small businesses a bit to fund the healthcare reform act, (b) everybody hates it, and (c) there’s a bipartisan consensus to get rid of it.

Fine. With Republicans in charge of the House, they can now write a bill to repeal it, which amounts to passing a tax cut. But guess what? For the first time in living memory, they’re insisting that a tax reduction has to be paid for with higher revenue from somewhere else. In particular, they’re taking aim at a provision of PPACA that says if you lose your job and get subsidized insurance via the exchange, but then you find a job six months later, you’ll get hit with a hefty year-end bill for the months you didn’t qualify for a subsidy. This is already bad enough, but at least the maximum payback is fairly modest. The Republican bill would make it much worse, upping the potential payback to multiple thousands of dollars. This is especially punitive for two reasons. First, because the incomes of the poor are highly volatile, which means they’re highly likely to get hit with year-end bills. And second, because the total amount of money this raises is minuscule.

Jon Cohn and Ezra Klein have more details, but it’s not the details that matter here, it’s the principle. Republicans obviously don’t believe that tax reductions require offsetting spending cuts, a stand they’ve made clear time and time again. Nor have they suddenly changed their minds about this. Rather, they’re trying to use the 1099 fix as an excuse to undermine the effectiveness of healthcare reform. As Austin Frakt puts it, “ACA’s subsidies are starting to function as a cash cow, paying for changes to the law.”

Tea party Republicans, now that they’re away from the campaign trail and have to face the real world, have discovered that they really don’t have any leverage to either repeal or seriously defund PPACA. So now they’re trying to find backdoor ways to chip away at it. This one is unusually shameless.