Many years ago, I had the pleasure of teaching the Logic of Collective Action, by Mancur Olson, to a group of University of Waterloo students. (I believe that the book is out of print, but it is a wonderful classic of great interest to franchisee association leaders, their executive and staff, especially those in government relations.)
One of the topics, the role of associations and their influence on the legislative process is very relevant to a recent discussion of the pro's and con's of the passage of Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4).
Legislation always has costs and benefits; an association wants the lion share of benefits to accrue to its members or constituents and the costs to be visited on its competitors. Naturally, not all associations can win this game and the role of rational governance is to make sure that this game of musical chairs doesn't get so intense as to remove the entire benefit of anyone playing it.
Today's letter, April 5th, 2011, from AICPA, the Accountant's trade association, sets out with clarity the cost issues related to the repeal of 1099 reporting requirements.
"Both of the 1099 reporting requirements were intended to raise revenue. To pay for repeal, the bill will increase the amount of the new IRC § 36B health care premium assistance credit that is subject to recapture. Under this amendment, taxpayers whose household income is over 400% of the poverty line for a particular tax year would have to pay back their advance health care premium assistance credit payments (previously this provision applied to taxpayers whose household income was over 500% of the poverty line). For taxpayers whose household income is less than 400% of the poverty line for a particular tax year, the amount of the increase in tax under section 36B(f)(2)(A) due to excess advance payments of the credit will be limited to the applicable dollar amounts in this table:
The associations successfully persuaded the legislature that the regulatory position taken by the IRS would not decrease significantly the compliance costs associated with 1009 and the repeal has now passed.
The IRS position and AICPA response is nicely summarized by the AICPA letter of February 14th, 2011.
"In May 2010, Commissioner Shulman stated that the IRS plans to use its “administrative authority to exempt from this new requirement business transactions conducted using…credit cards and debit cards.” This potential exemption may mitigate some burden; however, we are still concerned with the overall level of burden placed on taxpayers. Thus, we remain convinced that repeal of section 9006 of the PPACA and section 2101 of the SBJA is the best solution for both taxpayers and the government."
The Wall Street Journal neatly summarized the trade-off as follows:
The approved repeal would make up for taxes lost to vendor evasion by requiring low- and middle-income Americans who receive a tax credit for buying their own health insurance to repay the credit if their income winds up being too high. The repayment obligation would show up as a tax charge during the tax filing season.
Now, after this legislation has passed, all the associations will explain to their members why they are economic winners and the costs associated with the repeal of 1099 will be visted on other people. Of course, not all of these associations can be right anymore than we can all be above average in height, intelligence and looks.
So some associations must have backed the wrong horse, as a matter of pure logic.
Who do you think will be the winners and losers among those associations who lobbied for the repeal, now that we know how the Healthcare Act is going to be funded?
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