ATR President Grover Norquist last week sent the following letter to House Ways and Means Chairman David Camp:

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I write today to reiterate the support of Americans for Tax Reform for H.R. 705, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.”  I also wish to clarify that H.R. 705 is a net tax cut, and is therefore not a violation of the Taxpayer Protection Pledge.

Two bills in the last Congress (one of which was Obamacare) greatly increased “1099-MISC” information reporting for small employers, and introduced this reporting for the first time to families renting out real property.  These requirements are unnecessary, onerous, and would lead to major compliance issues—as the IRS itself admits.  H.R. 705 repeals these two provisions, which is a victory for taxpayers.

The official score of H.R. 705 from the Joint Committee on Taxation (JCX-14-11) shows that this bill is a net tax cut.  By repealing the 1099-MISC provisions, taxes are cut by a gross amount of $24.7 billion from 2011-2021.  By requiring erroneously-obtained Obamacare exchange credit advances to be paid back by more recipients, JCT scores a dual effect from the bill.  Gross taxes would increase by $5 billion, and spending (“outlay effects,” as shown in footnote 2) would be reduced by $19.9 billion.

Thus, the gross tax cut effects of repealing the 1099-MISC reporting requirements are “paid for” by a small gross tax increase and a large spending cut.  Overall, the bill is a net tax cut of $19.7 billion from 2011-2021. 

Because no bill which is a net tax cut can possibly be in violation of the Taxpayer Protection Pledge, the latter simply does not apply in this matter.  Americans for Tax Reform has always followed JCT scoring methodology in this area, including when JCT disaggregates between spending and revenue effects of tax legislation.  Spending cuts should never be confused with tax increases, and JCT does a good job pointing out when spending policy is present in tax bills.  Those trying to call this bill a net tax hike are simply seeking to mislead the public, or cannot accurately read a JCT score.

I encourage all Members of Congress to support this tax cut/spending cut bill when it is considered by the full House.

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