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April 5, 2011

1099 Repeal

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Mr. COATS. Mr. President, I am here to essentially support the hard work of a colleague, Senator Johanns, in bringing to the floor tomorrow a vote to repeal the 1099 provisions in the current health care bill.

As I campaigned throughout the State of Indiana over this past year, meeting with businesspeople and individuals running shops in a small town

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and large businesses on the outskirts of busy manufacturing centers, several themes were repeated over and over and over. One was that we continue to have problems in creating jobs because of the massive amount of regulations that are flowing out of Washington that, at a time of fiscal down turn in particular, are keeping our businesses from going forward and hiring people, being competitive. We spend time in the back room with paperwork, filling out what seems to be unnecessary burdens imposed upon us by regulatory agencies.

Some of these regulations are necessary. We all know that for purposes of health and safety, there are regulations that are important in keeping companies' feet to the fire in terms of making sure their workplace is a safe and healthy place to work. These are important, and there are others. But clearly there is an excess. What I heard people saying all across the State of Indiana was that our government has grown too big, it spends too much money and it overregulates. In particular, when it comes to business, that overregulation and overtaxation is impeding our ability to compete on a worldwide basis to provide the kinds of jobs and services America is used to providing in such a successful way.

Tomorrow, this vote will deal with an aspect of the health care bill that was passed in the last Congress. Tucked away in that health care bill is a provision requiring every company, every church, every charity to submit a separate IRS 1099 form for taxes detailing and describing the goods they purchase in order to run their church, run their hospital, run their business, run their charity.

I have talked to hospitals--small and rural, big and large--across the State of Indiana, and they say: Do you realize how many separate items we purchase every year of over $600? Do you understand how many hundreds, if not thousands, of prescription drugs we purchase in order to have them available here to perform our services in this hospital, how many bandaids, how many cotton patches, how many sophisticated drugs?

Hundreds of thousands of items are purchased by large companies every year, and each one of those now has to be calculated as to whether the purchase price was more than $600 for the lot they buy, and it has to be detailed and then sent to Washington. There are not enough bureaucrats in Washington to begin to process the paperwork that would flood into this city. There are not enough buildings in this city to house those bureaucrats processing those forms. There are not enough warehouses in this city to store the forms that would flow in here. All for what reason? Because supposedly this is a way to collect more taxes on companies that have not submitted forms where they have actually purchased this particular material, even though they are required under the tax laws to honestly--and I believe it is almost unanimous; maybe 99 percent of the time--do just that. So it is a solution without a problem.

Clearly, what Senator Johanns has been attempting to do over the past several months and even in the last Congress is bring forward a bill that would repeal this onerous provision of the health care law.

The U.S. Chamber of Commerce said this about the 1099 reporting requirement:

At a time when they can least afford it, entities will have to institute new complex record-keeping, data collection and reporting requirements to track every purchase by vendor and payment method. This provision will dramatically increase accounting costs and could expose businesses to costly and unjustified audits by the IRS.

Even the IRS Information Reporting Program Advisory Committee has ruled against this, deeming this mandate ``burdensome'' with ``no measurable purpose.''

Forcing businesses to spend time in the back room to fill out all these forms and do all this record keeping--and particularly those small businesses that do not have the back room, where the owner and the proprietor of the business is the one who has to fill out these forms instead of being out there selling his services or running his business--they are particularly burdened by this unnecessary regulation.

Clearly, if we want to promote our businesses, help them hire more people, and get more people back to work, we have to release them from the burden of unnecessary regulation and, I would also add to that, taxation. So tomorrow, when this vote comes up, let's adopt the Johanns amendment to repeal this unnecessary and costly provision and send it to the White House for the President's signature.

While we are at it, let's also continue to take a look at the health care bill because if this provision somehow survived scrutiny before passage, there must be many more of these in there. Let me just mention one of them that directly impacts my State.

Medical device companies are a key industry in the State of Indiana. In fact, we are one of the leading States, if not the leading State in the country, for the number of people engaged in producing medical devices. That industry was slapped with a 2.3-percent sales tax on medical devices under the new health care law simply as a means to pay for the new health care law.

This is an innovative industry, an industry which is at the cutting edge of technology, one of our best exporting industries. They sell all over the world. We talk about the loss of American capacity to manufacture. We have a skilled workforce in place, with thousands of people employed throughout the State of Indiana, with several hundred companies producing medical devices. They have developed the innovation and the skill to be the best in the world. Yet, just out of the blue, because we are looking for a pay-for in the health care bill--that had nothing to do with their production of that product or their business--they were slapped with this $20 billion impact tax, a 2.3-percent sales tax, which turns out to be about $20 billion under the health care law.

I have given these statistics for just the one State of Indiana. I know Minnesota and a number of other States also are engaged in the medical device business. But singling out, though, the medical device manufacturers to help pay for the massive costs of the health care law, hinders job growth and stifles innovation. This is a resource-rich, research-rich industry in America that needs to be encouraged, not discouraged, that needs to have incentives to go forward, not disincentives, that does not need more regulation and higher taxes but needs to be viewed as producing a product that is the best in the world and what the world wants to buy.

So as we look at the health care bill, I am sure there are many provisions that need to be addressed. I, of course, am on record for repealing and starting over for reasons I have stated before and will not go into now. I think it is fatally flawed. I think starting over would give us a far more cost-effective, incremental improvement in ways to address our health care needs in this country without breaking the bank.

Nevertheless, if we cannot do that, we need to keep looking at situations such as what we are going to be addressing tomorrow, the 1099 repeal, and situations such as I have just described with the medical device tax.

Mr. President, with that, I will close by urging my colleagues to come and vote for the repeal of the 1099 provision that has been brought forward by Senator Johanns.

(Senate - April 4, 2011)

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