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Washington Watch - May 11, 2011

 

Tax Gap Measures Targeting The Self-Employed

With the additional 1099 reporting requirement now repealed, the NASE turns its attention back to another tax gap closing measure - the three percent withholding provision passed into law in 2005. The law requires Federal, state and local governments to withhold taxes from government contractors. In 2009, President Obama signed a law delaying the original 2011 implementation until 2012.

The IRS has since announced that it will further delay the requirement until 2013. The agency will require withholding and reporting to payments made after December 31, 2012. Furthermore, payments made under contracts existing on December 31, 2012, that are not materially modified, will be exempt until January 1, 2014.

Congress has a few bills currently devoted to repealing this requirement. The House bill is H.R.674, introduced by Representative Wally Herger (R-Calif.). There are two Senate bills, S.89, introduced by Senator David Vitter (R-La.), and S.164, introduced by Senator Scott Brown (R-Mass.).

Though the NASE has a very small number of members which contract with the government, we are deeply concerned about the precedent this new withholding requirement sets for future regulations on business owners. For those micro-business owners that are government contractors, the withholding in this provision is based on revenues from gross payments by the government with no relationship to a companies’ taxable income and will impinge on company cash flows needed for day-to-day operations. Those small businesses interested in contracting with the government will be deterred due to this regulation.

Contact your member of Congress here to let them know this law needs to be repealed.


House Approves Repeal Of Funding For Health Insurance Exchanges

Under the Affordable Health Care Act, states will be required to create insurance pooling mechanisms known as Exchanges to increase competition in the insurance market and improve the accessibility and affordability of coverage for individuals, the self-employed and small businesses. The House recently passed a bill (H.R. 1213) to strip funding for states to establish these Exchanges.

Creation of Exchanges, which are health marketplaces within states, is one of the positive components of the health reform law. The goal of these new state-based exchanges is to increase competition in the insurance market and improve the accessibility and affordability of coverage for individuals, the self-employed and small businesses. The NASE strongly urges lawmakers to focus on repealing and improving the more burdensome and unworkable provisions in the health reform law rather than stripping the items that may improve the health insurance market for America's smaller businesses.

As with other bills the House has passed to defund various parts of the health care law, this bill is likely to stall in the Senate.

Stay tuned to Washington Watch for updates on the legislation.


HHS Testifies Before Congress On Agency Priorities

The House Education and the Workforce Committee recently held a hearing, titled "Policies and Priorities of the U.S. Department of Health and Human Services." Secretary Kathleen Sebelius of HHS testified on the president's 2012 budget proposal and how the agency's priorities will fit within the plan. 

In his opening remarks, Chairman John Kline (R-Minn.) described the fiscal challenges facing the nation and the president’s budget proposal. "If we adopt the president’s plan, the Congressional Budget Office reports the federal government will spend $46.2 trillion, impose $1.5 trillion in new taxes, and add roughly $9 trillion to the national debt over the next decade. This is unacceptable.” Chairman Kline continued, "If we fail to promote responsible reforms and make tough choices, our nation will no longer be able to provide assistance to those who need it most.

Secretary Sebelius pointed to several areas in the proposal that included the following funding cuts and changes:

  • Cuts the Community Services Block Grant in half (by $329 million) and injects competition into grant awards.
  • Cuts to the Low Income Home Energy Assistance Program ($2.5 billion) bringing it back to the 2008 level appropriated prior to the spike in energy prices.
  • The Budget redirects and increases funding in the Centers for Disease Control to reduce chronic disease. Rather than splitting funding and making separate grants for heart disease, diabetes, and other 2 chronic diseases, the Budget proposes one comprehensive grant that will allow States to address chronic disease more effectively.
  • The Budget proposes refocusing the Senior Community Services Employment program to better integrate unemployed seniors into their communities through community service employment assisting other seniors to stay in their homes.
  • The Budget redirects prevention resources in SAMHSA to fund evidence-based interventions and better respond to evolving needs. States and local communities will benefit from the additional flexibility while funds will still be competed and directed toward proven interventions.

Read the rest of Sec. Sebelius' testimony.

Watch a webcast of the hearing, including a question/answer session.


GOP, Dems Unveil Economic Boosting Agendas

House Democrats are putting the spotlight back on their "Make It in America" agenda to increase American manufacturing and exports. Their small business priorities include support to high-tech firms and research and development outreach, a 25% tax credit for investment in high-tech and bio-tech businesses, the establishment of tax-preferred business start-up accounts and block grants to underserved areas to increase small business development.
The plan was made public soon after Senate Republicans unveiled a jobs bill. Their plan contains provisions to add a balanced budget amendment to the Constitution, allow small businesses to permanently write off equipment purchases, and provide additional risk pools for small business. The plan would also prohibit the Environmental Protection Agency (EPA) from regulating greenhouse emissions under the Clean Air Act.

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