Republicans want to repeal health reform's contract reporting requirement

Tax form with pencil pointing to "Amount you owe"

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Tess Vigeland: The president spent his morning not at the mall -- but on the basketball court, where he apparently took an elbow to the lip requiring 12 stitches. Insurance will cover it.

Meantime, the health reform law is only eight months old and already it's facing challenges on several fronts. On Monday, the Senate is likely to take the first step in rolling back a requirement that businesses report to the IRS every contract worth more than $600. It's supposed to crack down on tax evasion and help pay for health insurance for more Americans. But companies have complained the paperwork will cost them time and money.

From Washington, Marketplace's John Dimsdale explains.


John Dimsdale: The IRS figures to collect an extra $17 billion in revenue if only the government knew about business contracts that now fly below the radar. So the health reform law requires companies to file a 1099 form for every contract worth over $600 a year. For some businesses, that means keeping track of thousands of transactions, not to mention the cost of filling out new paperwork.

And since those costs are tax deductible, Keith Ashmus, with the National Small Business Association, says it won't generate that much revenue.

Keith Ashmus: On the one hand, the government is thinking they might be getting some more money from people who now aren't paying taxes. On the other hand, they're certainly going to be losing taxes from the businesses that are now paying because they now have less profits because they're having deductible expenses to fill out 1099 forms.

Ashmus says small businesses have picked the 1099 reporting requirement as their first challenge to the health law. They worry companies will try to avoid filling out the forms by reducing the number of contracts they enter into.

Ashmus: So the tendency will be to consolidate your purchases of services and goods from fewer and fewer businesses. So instead of going to five small businesses, you might go to one large business. And that cuts small businesses off from a major source of where they get their income.

Even President Obama concedes the reporting requirement is counterproductive. So a repeal is likely. The only question appears to be how to pay for the $17 billion in lost revenue. Republicans hope to take it out of other health reform accounts.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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