Now that the repeal has passed, where will all the energy spent on pandering to small businesses go?
Bowing to pressure from business groups worried about an avalanche of paperwork, the U.S. Senate voted on Tuesday to rescind a tax-reporting requirement included in last year’s healthcare overhaul law.
With bipartisan support, the Senate voted 87-12 to pass legislation sponsored by Republican Senator Mike Johanns that repeals a requirement for businesses and landlords to file a Form 1099 document with the Internal Revenue Service for purchases of goods and services exceeding $600 a year.
President Obama is expected to sign the bill at which point GOP leaders are expected to criticize him for something.
It is fine for Republicans to refuse to raise taxes as long as they admit we must have significant cuts in entitlements. Ryan is leading the way for the Republicans. For this he deserves kudos. It is fine for Democrats to refuse cutting entitlements as long as they admit we must have significant tax increases. Nobody is leading the Democrats. And politics requires that the President stall because he cannot even hint at a tax increase before the 2012 election. [Martin Sullivan]
If only somehow they could kill it completely, could we fully revel in the disfunction of the legislative branch:
What is clear is that nothing is certain with moving a 1099 repeal. The House passed a standalone measure on March 3 and the Senate tacked on an amendment to the Federal Aviation Administration (FAA) authorization bill, which passed the upper chamber, each with different offsets to cover the costs of the repeal.
The White House and House and Senate lawmakers across both parties back the elimination of the 1099 provision from the healthcare law but are at odds over how to make up for $22 billion in lost revenue as projected by the Joint Committee on Taxation.
Fate of 1099 repeal still up in the air [The Hill]
The repeal of the 1099 reporting provision of the healthcare reform bill was finally passed by the House today but not before things got a little awkward when Represenative Earl Blumenauer (D-OR) “said Republican claims that the law is a government takeover of healthcare had been deemed ‘the 2010 political lie of the year.’ ”
Now, on its surface, this seems like a little bit of tangential grandstanding by the
man-child gentleman from Oregon but his colleague Dan Lungren (R-CA) didn’t appreciate the remark and was not about to let this slide:
Blumenauer seemed to gesture toward Lungren, who had just finished speaking, and said the Republican member called the healthcare law a government takeover.
Lungren did not directly say the law is a government takeover, but did criticize the laws in other ways.
After Blumenauer’s “lie of the year” comment, Lungren quickly interrupted to raise a point of order and ask whether Blumenauer should be allowed to say, or imply, that Lungren is a liar.
Blumenauer – not to be outdone – countered this challenge with one of his own:
Asked if he was demanding Blumenauer’s words be “taken down” — a challenge to their propriety — Lungren said no, but did ask the acting Speaker to warn members about referring to colleagues in this way.
The exchange continued: Blumenauer said he was simply citing a Politifact finding that Republican claims of a government healthcare takeover are the political lie of the year. Lungren then immediately asked that Blumenauer’s words be taken down.
Blumenauer, knowing he was beat, then capitulated (he’s a Democrat, after all), “Several minutes later, Blumenauer asked unanimous consent to strike his words,” and then thought better of it, “[he] repeated the Politifact citation again in his explanatory comments.”
“I’m not calling anybody a liar,” Blumenauer said. “What I intended to say … is that as we have repeated talking points about a government takeover of healthcare, this has been judged by an independent undertaking as the political lie of the year.”
It could probably go either way but someone seems to be getting called a liar in there somewhere.
Lawmakers spar over ‘lie of the year’ in debate over healthcare provision [Floor Action/The Hill]
Mike Simpson has represented Idaho’s 2nd Congressional District since 1999 and in that time he has cosponsored legislation that would abolish our beloved Internal Revenue Code. And even one time, in 2000, the House of Representatives managed to pass a bill that did exactly that by a vote of 229-187. It’s safe to say that, if similar legislation had been passed by the Senate and then followed up by the signature of the President, you would have heard about it. Since we haven’t heard any such news or seen any reports of this monumental legislative achievement, we can only assume that it has always been, and thus, always will be a failure and complete waste of everyone’s valuable time.
No matter! Congressman Simpson will press on for this all-important goal and making another run at ending the tyranny once and for all:
Idaho Congressman Mike Simpson is an original cosponsor of H.R. 462, the Tax Code Termination Act. This legislation would abolish the Internal Revenue Code and call on Congress to fundamentally reform the federal tax system.
“Over the last few years there have been several proposals to curtail the Internal Revenue Service’s (IRS) intrusion into the American homes. These include proposals to implement a flat tax or a national sales tax,” said Simpson. “I believe the most effective course of action is to sunset the current complex and unfair federal tax code and replace it with a simple and fair alternative.”
[via State Column]
The Hill reports that the new bill has 52 co-sponsors which lead you to believe that this time, repeal will be a cinch:
Senators reintroduced bills that would eliminate the 1099 requirement for businesses to report annual purchases of at least $600 from each vendor. Most Democrats, including the Obama administration, support repealing the provision, but lawmakers have clashed over how to offset the $19 billion in lost revenue.
A bill introduced Tuesday by Sens. Mike Johanns (R-Neb.) and Joe Manchin (D-W. Va.) authorizes the Office of Management and Budget to identify unobligated federal funds to cover the cost of repeal.
“It’s a bad policy; it hurts businesses and it should be repealed, enough said,” Johanns said in a conference call with reporters.
The measure has 52 co-sponsors including 12 Democrats: Sens. Mark Begich (Alaska), Michael Bennet (Colo.), Maria Cantwell (Wash.), Kay Hagan (N.C.), Amy Klobuchar (Minn.), Manchin, Ben Nelson (Neb.), Mark Pryor (Ark.), Debbie Stabenow (Mich.), Jon Tester (Mont.), Mark Udall (Colo.), Mark Warner (Va.).
With such an overwhelming show of bipartisan support the only issue now is who will get the credit for saving small business as we know it?
Both parties have seized on the 1099 requirement to score political points. Republicans are posing repeal of 1099 as part of their promise to chip away at the reform law, while Democrats are touting it as a sign of their willingness to improve the current law.
Just for the sake of spiteful mischief, we’re hoping this goes nowhere (any and all theories on how they manage to do that are encouraged). Stay tuned!
Senators introduce bipartisan 1099 repeal bill [On the Money/The Hill]
Republicans take control in the House of Representatives this week and boy, are they ever ready. With the ink safely dry on the extension of the Bush tax cuts, the GOP is moving on to spending cuts, supporting the troops, restoring honor, launching investigations and whatever hell else was in that pledge. Wait, that last one wasn’t in there?
Anyhoo, the idea of lower taxes and spending cuts to get the federal budget in ship shape has been the GOP song and dance long before Ronnie had his own float at the Tournament of Roses Parade but a recent poll has discovered that lots of people don’t agree with that sentiment:
Raising taxes on the rich beats out cuts to defense spending, Medicare and Social Security as U.S. adults’ top preference on how to close the deficit, according to a 60 Minutes/Vanity Fair poll.
Sixty-one percent of Americans said that increasing taxes to the wealthy should be the first step toward balancing the budget.
By contrast, 20 percent of respondents preferred cuts to defense spending as the first option, while 4 percent said that cutting Medicare would be the best way to start cutting the deficit. Three percent said they preferred cutting Social Security.
Now you might expect a major backlash from the more affluent citizens, you know, grumbling at polo matches, yacht races and beside the swimming pools filled with gold doubloons but surprisingly, quite a few of them are okay with it:
Increased taxes on the wealthy tops those four options even among higher earners who might be most affected by a tax hike, the poll suggested. Fifty-eight percent of respondents making between $50,000 and $100,000 per year rated tax hikes as the best first step to balancing the budget, while 46 percent of those making more than $100,000 said it was their top choice, as well.
But as we have learned, the GOP isn’t really down with this. Besides, tax rates won’t be an issue again the until the second and third weeks of December 2012, so they’d prefer we concentrate on things that aren’t already safely chiseled into the political dogma.
Don’t get too excited, the vote will only be on the tax cuts for those of you earning less than $250k. The vote that really counts (for the people that may be able to afford Snooki!) is being slapped onto the extension of unemployment benefits.
The bulk of the tax cuts — for lower and middle-class incomes — will be considered in a separate vote on Thursday. Democrats have long sought to only renew tax breaks for households under $250,000 in income, but Republicans have insisted on an extension of current tax rates for everyone.
Right, then. So this is a political play by the Democrats to show everyone that they don’t suck as much as the election results would have you believe. Republicans, however, do not care for this maneuver. Rep. Dave Camp (MI) is especially annoyed and evokes small business in the process:
“This is disappointing and a sign of bad faith after the president agreed to bipartisan, bi-cameral talks. There will be bipartisan opposition to the Democrats’ push to raise taxes on small business,” Camp said.
Gotta say, it is a pretty shrewd move by the Democrats (where was this spunk in October?) but at least everyone will have to get off their ass tomorrow and do something. God forbid the Republican members of Congress actually vote on something during the lame duck session.
There’s a small part of us that hopes the lame-o Congress just throws their hands up and lets all the outstanding tax policy issues expire, just to see what the fallout would be.
While we wish no harm to our practitioner friends like Joe Kristan, watching the pols in Congress squirm from the wrath of the American populace would be rather enjoyable.
Doug Shulman, on the other hand, does not share our impish impulses and wrote a letter to Congressional members on the Senate Finance and House Ways & Mean Committees, reminding them that if they let this one get away, his agency will have one hell of a mess on their hands.
Reuters has some excerpts:
“Of course, if legislation has not passed by the end of this year, our computers will have been programed incorrectly and we will need to delay filing for these individuals,” he said in a letter to the top lawmakers on the congressional committees charged with tax policy.
Realizing that the members might not quite understand what all this crazy-talk means, the Commish gave some details:
“It would be an unprecedented and daunting operational challenge to open the tax filing season under one set of tax laws with respect to AMT and extenders, begin accepting tax returns, and then have the law change,” Shulman wrote.
So essentially, re-doing a bunch of work. Nobody wants that. Luckily for everyone involved, Shulman appears to understand that while dysfunction is standard operating procedure on the Hill, most CPAs prefer providing above average client service.
“We plan to do everything possible to enact AMT relief legislation in a form mutually agreeable to the Congress and the president. We urge the Internal Revenue Service to take all steps necessary to plan for changes that would be made by the legislation.”
~ One of those “letters” that legislators write to bureaucrats as a form of grandstanding. This particular letter was from Max Baucus, Chuck Grassley, Sandy Levin and Dave Camp to Doug Shulman
It’s unlikely that the lame ducks will accomplish much.
Jesus, that’s no way to start.
I expect an AMT patch to pass (though you should bet the other way if they offer points). I would bet against the extenders getting past the lame ducks, though it could happen. Action on the Bush tax cuts and the estate tax seems unlikely to me. It would require a triumphal GOP to work out a deal with a President whose response to disagreement so far has been to repeat himself slower and louder. The same dynamics bode poorly for the next Congress when it meets in January.
After such an ugly campaign, we wouldn’t put it past a bunch of losers (read: Democrats) to spite the entire country just because they couldn’t effectively communicate any accomplishments from the past two years. Of course, that’s us being cynical to a fault.
Thinking a little more practically, we agree with Joe on his AMT patch prediction. The rules are such a mess that it could stand a complete overhaul but we realize that’s nothing short of water into wine with less than two months left in 2010.
As far as the tax cuts are concerned, the shred of political capital that the members of Congress who will remain in DC have left simply cannot be lost. And besides, the President and Congress fundamentally agree on a major portion of the policy – that is, to extend tax cuts for the middle class. Again, this could be a pipe dream, but compromising on the extension of the cuts for the wealthiest Americans for two years seems like a simple solution (as bad of an idea as it is).
As for the estate tax – it’s toast. No one seems to give a shit about it except for Jon Kyl but once the first decrepit billionaire (who is unwilling to pull the plug on themselves) kicks the bucket in 2011, thus paying 55% tax on the estate, it will only take one phone call and Congress will spring into action.
Sigh. Place your bets.
Rep. Joe Barton (R-TX) – who probably isn’t in any danger of losing reelection – appears to be pandering to key fanatical college football voter bloc.
“As public charities that take in millions of dollars each year, they receive significant tax exemptions and benefits that must not be abused,” wrote the four House members in a letter to IRS Commissioner Doug Shulman, obtained Tuesday by The Associated Press. The lawmakers, all critics of the BCS, added: “We therefore ask that you act on our request and thoroughly examine these troubling claims” made about the bowls.
Tax cuts and estate tax policy being ignored and these ‘troubling claims’ are you are bringing to the IRS’s attention? We’re all for a playoff in college football and we understand that tax policy can make your head hurt sometimes but but FOR THE LOVE OF GOD this is what some people in DC are doing:
The letter was signed by Texas Republican Joe Barton, who has sponsored legislation aimed at forcing college football to switch to a playoff system to determine its national champion; Wyoming Republican Cynthia Lummis, a co-sponsor of Barton’s bill; Texas Democrat Gene Green, who has co-sponsored a resolution calling for a playoff system and for a Justice Department investigation; and Utah Republican Jason Chaffetz, a former BYU kicker.
Unfortunately for DeMint, not too many people think the permanent abolishment of the estate tax is that hot of an idea.
Namely, a whole bunch of Democrats (minus Lincoln and Nelson of Neb) led by Majority Leader Harry Reid. The amendment failed 39-59 in a vote yesterday but no worries lovers of tax-free death! A few races in this fall’s election could kick around the this particular political pigskin, including Reid’s in Nevada where Tea Party darling Sharron Angle supports the permanent repeal.
It’s worth noting that J DeM considered the abolishment of the tax not to be a ‘tax cut’ but a “continuation of current policy since Congress let the tax lapse this year.” In that context, it sounds like Senator DeMint is embracing the fact that Congress screwed the pooch on the whole damn thing and figured that continuing the impotence of Congress was easier than having the same debate over and over.
Estate Tax Vote: An Issue in Fall Vote? [Washington Wire/WSJ]
Senate rejects permanent estate tax death [Don’t Mess With Taxes]
Also see: Senate Rejects Measure to Permanently Abolish Estate Tax [TaxProf]
By now most of you have heard that George Steinbrenner passed away this morning at age 80. We’d ask that you to wait at least a few hours before you start dispensing with the Costanza or GS quotes in Larry David’s voice (“Big Stein wants an eggplant calzone!”) but we realize not every one was a fan of the Boss.
The silver lining in Big Stein’s death is that since the estate tax still remains in limbo among the hallowed walls of Congress, his $1.1 billion fortune (Forbes’ latest ranking) could possibly pass to his heirs tax free.
It’s an especially well-timed passing if you read yesterday’s morbid Wall St. Journal article. If you didn’t happen to read it, the article more or less made the case for every wealthy person to give serious consideration to paging Jack Kevorkian, taking a nice warm bath with a toaster or whatever their preferred method of self-imposed death would be.
Steinbrenner is the third billionaire to pass on to the big baseball diamond in the sky (btw, can someone up there keep him away from Billy Martin?) this year – Walter Shorenstein and Dan Duncan are the others – and if the family is as shrewd about their money as they are about their baseball team, they will likely fight any retroactive provisions in the new estate tax (assuming it ever passes).
As with mentioned in the Duncan post, we hope that the Steinbrenners are able to keep their fortune; not because we’re opposed to taxing the rich (just ask AG), it’s because we’re opposed to an incompetent and impotent Congress who allowed the estate tax to expire in the first place. Besides, GS went out with the Yankees as reigning champs, so it seems fitting that he gets a final win against the tax man as well.
RIP Big Stein.
Congress has been twisting itself into knots to pass 70-odd special interest “expiring provisions” this spring, though without success. These provisions that have come within one or two votes of being extended one more time are almost all special-interest provisons, providing tax breaks or direct cash subsidies to folks like biodiesel producers and race-track operators.
Meanwhile, the grandaddy of all expiring provisions goes largely unmentioned. Without new legislation, 24 million additional taxpayers will pay alternative minimum tax this year. That will happen because the AMT exemption for joint returns will fall from $70,950 to $45,000, and from $46,700 to $33,750 for single filers.
The AMT is a shadow tax system with fewer deductions and credits and a different rate schedule; it only applies when it gives a higher tax than the “regular” income tax. The reduction of regular tax rates in 2001 brought the regular and AMT brackets much closer, threatening to bring millions of voters into the AMT system. Congress has been passing “patches” to raise the AMT exemption for a year or two at a time since 2001 to avoid that. The last “patch” expired at the end of 2009.
An unpatched AMT would hit hardest taxpayers in the $100,000-$500,000 income range. Congress doesn’t want to anger that many potential campaign contributors. But where will Congress find the $68 billion or so of income that the AMT is budgeted to raise next year without a patch? The six month unemployment extension failed yesterday in the Senate because it would have increased the deficit by $34 billion.
So what will happen? Presumably an AMT patch will pass to appease voters as the election approaches, deficits be damned. Still, that’s not certain, especially in the current political environment.
So what can taxpayers do? They should start by projecting their tax for 2010. If you have one, your tax preparer is likely to have software to enable you to run the projection. If you use home tax software, it may also include a tax projection feature. Otherwise, you will have to use a 2009 copy of Form 6251, but using the reduced 2010 exemption amounts. Then you should fiddle with some items that affect AMT:
• The timing of your state and local tax payments.
• The timing of your miscellaneous itemized deductions.
• The timing of your capital gains, including capital losses.
Don’t be surprised if you find you have alternative minimum tax no matter what you do, especially if you live in a high-tax state. Then call your Congresscritter and ask for your patch.
What does this mean (besides the fact that more than a few partners are eating their hats, shaving their heads, coming to work naked, etc.)?
The Board itself is not unconstitutional and thus will continue operating (sorry E&Y) so it’s not going anywhere. The problem is, Congress will have to get involved in order to and who knows what the brain trust will cook up.