Grasping for an Obamacare Hangover Cure

It may be overly optimistic to believe this is the beginning of the repeal of Obamacare. But when the White House urges Senate Democrats to scale back one of the most egregious provisions of the so-called health care reform law, something significant has begun.

Even though two Senate votes failed Tuesday, it's noteworthy that, so soon after passage, there is serious consideration to substantively modify the Obama administration's sweeping centerpiece legislation. It's all the more significant that the White House urged scaling back of the law's tax-reporting requirement.

House Speaker Nancy Pelosi infamously said in March that, "(W)e have to pass the bill so that you can find out what is in it." Ever since, as Americans have learned what the 2,500-page law requires, they have complained in growing numbers.

This political reality clearly moved the Obama administration this week to urge Democrats to soften one provision. As the Los Angeles Times put it: "Facing a backlash from small businesses ... the Obama administration is embracing the first change to the landmark legislation."

A Republican proposal would have repealed one of Obamacare's most egregious requirements, that tens of millions of businesses must report to the government annual purchases exceeding $600 from any vendor, merchant or individual. That limited repeal effort was defeated Tuesday as an amendment to a bill passed to provide loans and tax breaks for small businesses.

An alternative Democratic amendment supported by the administration also failed.

It would have limited IRS reporting to cumulative annual spending in excess of $5,000 for companies with more than 25 employees. That would have lessened the reporting requirements, but not businesses' record-keeping burden. It also would have built in a financial disincentive to hire more than 25 employees. As it stands now, the accounting ordeal will force a business, for example, to collect and tally gas station receipts all year to know whether any of them exceeded the $5,000 threshold, requiring filing of a 1099 form.

The provision not only mandates filing with the IRS, but requires copies also be sent to each business and individual a company paid more than $600. The paperwork burden was imposed to raise what some speculate could be as much as $17 billion in unreported taxes over a decade. It's argued that when a 1099 form is received, a vendor will realize the government is aware of the tax liability and, therefore, be more inclined to declare the income on tax returns.

It's unclear whether Congress will again consider easing or eliminating this or any other provisions of Obamacare before adjourning and legislators hit the campaign trail. It's conceivable that the tax-reporting provision, which goes into effect in 2012, could be modified in the lame-duck session after the Nov. 2 election, but we think that's less likely once the motivation to appease voters' wrath has passed.

The tax-reporting provision has drawn widespread and justified outrage from businesses. It's one of the grounds for a pending federal lawsuit filed by business interests and attorneys general of 20 states, seeking to have Obamacare overturned. We hope one way or another, this unnecessary, burdensome government intrusion is undone.

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