NCPA - National Center for Policy Analysis

ObamaCare Will Not Reduce the Deficit

February 10, 2011

The federal budget and Federal Register contain thousands of programs that achieve near-immortality by (1) taking small amounts of money from people in large, hard-to-organize groups, and (2) giving large amounts of money to small, easily organized groups.  The 1099 mandate got this formula backward.  It would have required businesses to track all purchases and file a 1099-MISC form whenever they purchased more than $600 in goods from a vendor.  The IRS's taxpayer advocate worried that compliance costs would dwarf the $17 billion in additional tax collections, says Michael F. Cannon, director of health policy studies at the Cato Institute.

  • Both the taxes and the compliance costs would have been concentrated on 38 million corporations, charities, churches, government agencies and farms -- nearly all of which are organized and have armies of lobbyists in Washington.
  • In contrast, it's hard even to identify, much less mobilize, any specific group that might have benefited from the 1099 mandate.
  • Congress "paid for" its repeal by assuming the administration will make $17 billion in unspecified rescissions, butif those cuts aren't even specified who will lobby against them?

The 1099 mandate is actually the second ObamaCare revenue-raiser to fall.  Worried about the political fallout from private insurers exiting the Medicare program, the Obama administration rather transparently forestalled cuts to Medicare Advantage by granting $1.3 billion of "quality-based" bonuses to mediocre and low-performing Advantage plans, says Cannon.

This public-choice dynamic is why the Congressional Budget Office, the chief Medicare actuary and even the International Monetary Fund have discredited the idea that ObamaCare will reduce the deficit.

Source:  Michael F. Cannon, "'1099' Repeal Speaks Volumes about ObamaCare," Kaiser Health News, February 7, 2011.

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