Senate Fails in Attempts to Repeal Health Law Provision on 1099 Tax

Efforts to repeal what is widely seen as a burdensome tax provision in the new federal healthcare law failed in the U.S. Senate Monday despite broad support to drop it.

A majority of the Democratic-led Senate voted in favor of waiving the chamber’s rules to allow a vote on a proposed amendment to eliminate the reporting rule which businesses say is onerous.

But the vote — 61-35 — fell short of the 67 needed to permit consideration of the amendment as part of an unrelated food safety bill. A second and similar amendment also failed, 44-53.

Regardless, Democrats and Republicans voiced confidence that they could eliminate the tax provision before it is scheduled to take effect in 2012.

“We have plenty of time,” said Senate Finance Committee Chairman Max Baucus, a Democrat.

“We will pass it next year,” predicted a Republican leadership aide.

Removal of the provision has gained bipartisan backing in response to complaints from small business groups that it would become a paperwork nightmare.

The provision requires businesses to file a so-called 1099 forms identifying anyone to whom they pay $600 or more in a year, with copies sent to suppliers.

It is aimed at ensuring greater tax law compliance and raise an estimated $17 billion over 10 years to help cover the cost of expanding health coverage to the uninsured.

One of the proposed amendments was offered by Republican Senator Mike Johanns, while the other was introduced by Baucus.

Johanns’ sought to fill the revenue gap by directing budget experts to find the money in unspent federal funds. The vote to waive the rules on his measure came up short, 61-35.

Baucus’ proposal did not offer a way to make up for lost revenue. The vote to waive the rules on his amendment failed, 44-53.

While there is plenty of support to repeal the provision, some fear it may provide momentum to Republican calls to “repeal and replace” President Barack Obama’s overall overhaul this year of the U.S. healthcare system.

Republicans cite the provision as an example of how the embattled law can burden employers and curb job creation.

But backers of the law say eliminating the tax provision would merely provide some needed and anticipated tweaking of the massive and landmark measure.

(Editing by Jackie Frank)