Remarks Against GOP 1099 Tax Increase
U.S. Rep. Jared Polis (D-CO)
Remarks Against GOP 1099 Tax Increase
Wednesday, March 2, 2011
Mr. Speaker, today the Republicans are breaking a promise that they made to the American people, a promise not to raise taxes. The new majority came in promising a growth agenda. Instead, under the guise of giving administrative relief to small businesses--relief that we all agree is necessary and the majority of this body last session voted to provide with a different way of paying for it--the Republicans are now increasing taxes on middle class Americans and punishing workers.
Mr. Speaker, my colleagues have also broken their promise to this body. The people's House was promised an open legislative process. Over and over, the leadership has told the American people they want to create an open process, create jobs, and lower taxes. Yet here we are debating the second closed rule of the week on a bill that calls out for new and better ideas, a bill that in its current form will increase taxes and punish employees.
We all agree that the 1099 reporting provision of the Affordable Care Act needs to be fixed. Just last Congress, we brought a bill to the floor to do that. H.R. 5982 would have repealed the 1099 requirements. But the measure failed because our Republican friends did not believe that ending incentives for companies to outsource jobs overseas, which is the way we paid for fixing this administrative burden at the time, would protect American jobs and wouldn't raise taxes on individuals. They didn't believe that that was the correct way to offset the legislation. Instead, in this Congress, they are seeking a tax increase on middle class families as somehow preferable as a way of paying for something we all agree is important rather than ending incentives to shift American jobs overseas.
Now, we won't get into an argument about semantics. There will be those who somehow argue that this is not a tax increase. Well, if it looks and smells like a tax increase, it is a tax increase. A tax increase by any other name would smell as bitter.
Indeed, under this bill, hundreds of thousands of American families will receive an extra bill from the IRS to the tune of $3,000, $5,000, particularly middle class families, families earning $80,000 a year and $90,000 a year. The heart of what makes up the American middle class face the largest tax increases under this bill.
This bill would raise taxes, harming workers that should be protected. As the Joint Committee on Taxation points out, the Republican proposal would increase taxes for a family of four by an average of $3,000 a year. And, yes, that is a bill from the IRS. That is taxes. T-A-X-E-S is what the Republicans are seeking to increase under this bill.
Let me give another real-life example. One of the issues we want to correct with regard to the 1099 bill and work with our colleagues on the other side of the aisle to find a good way to pay for, is that currently people who have rental property are going to be classified as being in the business of renting property, and being subject to additional paperwork under the 1099 provision. So this could be a family of four earning maybe $60,000 a year in salary; they earn another $20,000, $25,000 from a rental property. They work hard. They keep up that property. Maybe it was formerly a family home, or maybe they saved up over 10 or 15 years to buy it.
With the 1099 paperwork problem, we are saying hey, you put a new refrigerator for $600 in that rental home, you have to fill out additional government paperwork that makes you responsible for taxes on that, okay? That's what we want to save people from, Republicans and Democrats. We're saying: You know what, we don't want to burden that family. You make $60,000 a year, you're getting $20,000 from a rental property, we don't want you to jump through hoops to put a new refrigerator in your rental property.
But you know what? To that family, they say we don't want to do that extra paperwork, but if it's between that paperwork and paying a $5,000 bill to the IRS, I'll do the darn paperwork. I'll do the darn paperwork.
Who are we trying to help here? Who are we talking about helping? If they don't want the help, if this is actually harmful, who are we talking about helping?
According to Families USA, House Republicans wish to decimate what remains of the safe harbor that protects individuals and families from substantial tax penalties. The Affordable Care Act provides built-in flexibility to consumers and protects them by capping the tax penalty if the monthly premium credit received during the year exceeds the amount of credit due based on unexpected income or family status.
So again, how can unexpected or unplanned for income or family status change? It could be a bonus, it could be a raise at work, it could be a divorce, or it could be a marriage. There are a number of ways these things change and put people in a higher category where the IRS will be sending them, because of this bill, $3,000 to pay, $5,000 to pay. That's what American families are going to be on the line for.
These provisions of the Affordable Care Act recognize that forcing middle income individuals to repay the entire amount would dampen their willingness to sign up for insurance in the first place. It would penalize them if they found a new job, or penalize them if they received a raise. This process of reconciling the actual income versus tax credits is often called a true up.
Now, last December, as part our bill to prevent the SGR payment cuts from going into effect, we changed the true-up policy for the better. We converted it to a graduated income approach to protect those with middle income levels and enable us to ease away from the cliff that people face when they reach the 400 percent level.
Now, let's talk briefly about health care reform. I know there is a lot in health care reform that my colleagues on the other side of the aisle don't agree with, but I like to think there is some they do agree with as well.
One of the most important provisions of health care reform from a market perspective is the incentive it gave middle class families to work and get off of government health care. Let me explain.
Before this House and the country took up health care reform, there were many families that were right at the cutoff point for Medicaid, okay. Let's say they are earning $10 an hour. If they got a raise to $10.50 an hour, they might lose thousands of dollars in government benefits. And I've met constituents who've said this. They've said: Look, I'm earning $9.50 an hour. I can't even take a raise at my job. I can't work another 20 hours a week at a side job because I actually lose money. So the government was telling them they couldn't work harder. The government was telling them we're going to trap you into a cycle of dependency. The government was telling them if you earn any more money, we're cutting off your health care.
We replace that in the Affordable Care Act with something that I like to think has support from both sides of the aisles, and that is a sliding scale of reductions. So there is an actual incentive to get off of government health care, to get off of Medicaid, to better yourself and take that 50 cent raise, realizing you may not keep all 50 cents, you might lose a little bit. But, you know what, we're going to let you keep 30 cents of that, and 20 cents will go to decreasing your government benefits. And eventually you've weaned yourself off of government aid entirely and you're able to support health care. That is another misconception. It's not that people want to receive Medicaid or government health care; what they want is to be able to afford, to earn enough money to afford to have private insurance. That's the goal here. The Affordable Care Act helps them get there.
This would strip that provision back and provide a disincentive for families making $75,000, $80,000 a year, depending on the size of the family, to work harder.
America was built on a strong work ethic. We all, on both sides of the aisle, have a strong awareness of the market-based system we live in and the power of incentives. We should provide an incentive for middle class families to earn more, not earn less. Why do we penalize those who succeed? Why are the Republicans seeking to raise taxes on middle class families who are seeking to do a little bit better? We should encourage them to get that second home and make some rental income, to work another 10- or 20-hour-a-week job so they can send their kids to a good college. That's what this body should be discussing. Yet instead, we're about to present to the middle class in this country an enormous tax hike. Now to fund something we all agree, and that is why if this was an open process, as Republican leadership has repeatedly promised, we could come together around better ways to pay for it. Okay, you didn't like the way the Democrats proposed paying for it last year. And you know what, by the way, a lot of those pay-fors wound up in statute anyway paying for other bills, but let's work together to do that. Consistent with the cut-go proposal, let's make cuts in government expenditures somewhere to pay for closing this 1099 loophole. Let's not put it on the backs of middle class families earning $80,000, $90,000 a year, those who are least able to pay for a tax increase.
You know, I was proud to support the continuation for 2 years of the Bush tax cuts at the end of last year, and let me tell you why. I think it would be unthinkable to raise taxes on families making under $250,000 a year. Now, I supported letting them expire for families making over $250,000 a year. You don't take pleasure in that, but it was because I felt we needed to do that to close the deficit. We couldn't leave that revenue on the table. But I felt it was so important to make sure that families making $80,000, $90,000, $100,000 a year didn't get a tax increase that I was willing to support no tax increase for millionaires as well as part of the package.
And yet here we are in the third month of the Republican Congress with an enormous tax increase on those Americans who can least afford it, the very families who are making $80,000, $90,000 a year who form the backbone of the American middle class, facing a $3,000, $4,000, $5,000 tax increase because of the way the Republican majority has chosen to pay for what we all agree is a worthy cause: reducing paperwork for small businesses and home renters.