Costly IRS 1099 Mandate Slipped into Health Bill
cato-at-liberty.org
cato-at-liberty.org
I don't go into business to fill out paperwork and keep track of ridiculous crap like this. I go into business to generate revenue and make the lives of my customers and others around me better. This kind of law makes my life worse. Perhaps they want fewer businesses to compete with their big corporate donors.
This year, on the IRS tax form, where it says, "I attest under penalty of law that this information is true and correct [or whatever]." Well.. I can't actually sign that because it's impossible for me to know what I can deduct, what I can't, what I should report, etc... If the IRS wants my money, let them come and get it. I just refuse to put up with this crap anymore. It's absurd.
This is why civilizations crumble.
The country tables can be found at: http://www.freetheworld.com/2009/reports/world/EFW2009_ch4.p...
All chapters, including collection methodology can be found: http://www.freetheworld.com/release.html
Methodology is explained in detail on the site.
(Fair amount of "socialist" in that list, too)
http://gregmankiw.blogspot.com/2010/03/taxes-per-person.html
(And partly it's because there's a lot more that goes into the ranking than just tax rate.)
I would gladly move out of the US, if there was someplace significantly better. There isn't right now.
Remember this global networked communication thing we've got going?
Edit: Not to mention that any country that the Internet's light pipes run through will want to control those pipes, pass laws limiting what can be done with them, etc.
The US is still in the top 10 list of countries with the fewest headaches for starting a business. In addition, it's the biggest market for almost everything. If you want to sell in the US (which you almost certainly do) you'll have to establish a business entity there, anyway.
You can't just make a quality OS or a website in English and start selling all over Europe. You can do that in the US and be a market leader in every state.
The EU has no internal borders; it is a single market on a single currency.
And it's far from homogeneous in terms of laws which would apply to you doing business in its various member nations.
From my own past experience of being a business, and of working with businesses, this is largely-unjustified alarmism. You already wanted to 1099 anyone you'd done that much aggregate business with, since it provided an extra form of documentation of your own (deductible!) expenses.
If government really is a net detriment to your business, why don't you move to a place that has no functioning government (like Somalia) and see how good it is to run a business there.
Laws like this do the opposite. They add resistance to independence. There will be people who say, "All this paperwork is a nightmare. It's easier to keep my day job." And they'll make more money in the short term, so this law is counter productive in a capitalist economy.
If capitalism is what made America great, then laws like this are making America not great. The politicians are making lives more difficult for everyone else and that means the business people who make this country great, or have for quite some time, will simply leave.
In a world of free trade, we -- individuals -- are free to do business anywhere. I can easily go to Canada and that's what will start happening if America continues to display this kind of arrogance within the leadership.
Well, for now. If there are people who use the economy as a basis to keep immigrants from flooding in, just imagine the reaction if citizens start flooding out.
This sort of unrelated/obfuscated clause insertion and the 60-vote requirement to defeat a filibuster are two prime examples.
Will there have to be constitutional amendments saying1) bills must be clear and address only one topic, and 2) simple majorities shall always rule, expect in pre-specified cases, and no parliamentary rules shall override simple majority in letter or in spirit.
Random historical tidbit: the Constitution of the Confederacy (for non-Americans: the Southern states which seceded during our civil war) had this requirement built in (one subject per bill, and the subject must be clearly stated). It also had a line-item veto, and placed strict limits on federal spending.
Of course, it also had text permanently establishing slavery...
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) In General.--Section 6041 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsections:
``(h) Application to Corporations.--Notwithstanding any regulation
prescribed by the Secretary before the date of the enactment of this
subsection, for purposes of this section the term `person' includes any
corporation that is not an organization exempt from tax under section
501(a).
``(i) Regulations.--The Secretary may prescribe such regulations
and other guidance as may be appropriate or necessary to carry out the
purposes of this section, including rules to prevent duplicative
reporting of transactions.''.
(b) Payments for Property and Other Gross Proceeds.--Subsection (a)
of section 6041 of the Internal Revenue Code of 1986 is amended--
(1) by inserting ``amounts in consideration for property,''
after ``wages,'',
(2) by inserting ``gross proceeds,'' after ``emoluments, or
other'', and
(3) by inserting ``gross proceeds,'' after ``setting forth
the amount of such''.
(c) Effective Date.--The amendments made by this section shall
apply to payments made after December 31, 2011.
Maybe we should try to have them put the statutes into git so we don't need to waste lots of time looking at the diffs.
Most open source code is indecipherable to anyone but a programmer, but seeing it can at least provide some reassurance. Most political and legal processes are indecipherable or opaque to the general population, yet attempting to understand them is a positive thing.
Having the primary source to hand is useful to ensure that you're not having the wool pulled over your eyes by a biased secondary reporter. A news site could easily misinterpret legalese.
Cato is hardly the National Enquirer, but even so, they only cite a) a tax research paper that costs $75 to obtain, b) a tax CPA whose words are not reproduced anywhere else, and c) the venerable "Air Conditioner Contractors of America." There aren't enough references to primary sources to rule out a less-than-sincere attempt at shaping public opinion (not that that is necessary the case, just that it could be).
There's a lot to be said for trusting news sources in order to save time, but taking a look at the primary source yourself in many instances can prove illuminating, and is certainly a responsibility for anyone who's going to proceed to get upset/angry or campaign against whatever the news/article is covering.
I expect the same to happen in the USA. Local governments and the federal government need money to operate on. In the best case scenario, two things would happen: drastically reducing government spending on the military and not-so-essential social services, and, slightly raising taxes. Neither of these reasonable things will get done.
This is also thought to be the start of European feudalism. As things broke down and Rome's ability to enforce its will waned, becoming the vassal of a local boss was a way to escape this mess.
Can anyone figure out who inserted this clause?
It's huge so it's hard to tell who was specifically responsible, but it was sponsored by Sen. Reid and cosponsored by Senators Dodd, Baucus, and Harkin
I wonder who lines his pockets? Anybody know?
http://www.opensecrets.org/politicians/summary.php?cid=N0000...
According to opensecrets...
No, it's not. Last time I was in business for myself, 1099s were more common than physical handshakes. Hell, I haven't been a "business" (in the sense of deriving most/all of my income from my own ventures as opposed to salary) in about five years and I still chew through at least a handful of 1099s every year. They're good documentation, both for yourself and for the IRS, when trying to figure out and then deduct your expenses.
"Title Blah Section BlahdyBlah(c)(4) shall be amended as follows: by striking 'shall not' and replacing it with 'may, phase of the moon permitting', and by striking 'foobars' and replacing it with 'all foobars, foreign and domestic, and any bazes and quuxes appertaining thereto'."
The language of the Constitution and its amendments is wonderfully tacit and accessible. Why can't statute law be so? Oh, right, because then it would obviate many uses for lawyers. Can't have that...
Is now the time we get out the pitchforks and torches and go up to the castle? Or should we wait a while longer?
However, I really hope it isn't a violent incident. We don't need a war here anymore than we need a war in the middle east. Civil wars are bloody and costly and horrible.
My suggestion: Vote out all incumbents.
I read an analysis once that said that the problem wasn't that representatives weren't responding to the people's wishes, it was that the mob basically ruled. This is why you have governments making more promises than they can pay for and the continuous search for the current Dr. Frankenstein to go storm his castle.
Not sure of the veracity of that analysis, but I found it both counter-intuitive and interesting.
We're technical guys. We should know complex systems. We should know how people design and interact with complex systems.
I believe our system of government is becoming legacy code. That's not by any means to call for violence. I simply mean that the system has become too complex for most practitioners to understand, too complex to micro-manage, too complex to be able to design results by committee, and too complex to be able to maintain effectively.
Beats me where you go from there, but after seeing a dozen failed complex computer systems, I know a failed system that is spinning off into complexity land when I see one.
I also agree. Vote them all out. Enact term limits now, before we start a new generation of Earls and Dukes -- professional politicians with a lifer mentality.
Before everyone gets up-in-arms about this, it might be wise to at least try to seek out some real citations. The Cato study may be correct, but it's impossible to tell from the linked story.
The first blockquote from Thomson-Reuters Ria refers to the reconciliation bill section that I linked to via OpenCongress. For tax purposes, RIA is a very good source and is certainly independent. Unfortunately, it appears like you can't read the report for free. However, reading the bill text it does look like the they are saying 1099's are no longer for wages alone.
(Bias note: I once worked for Cato.)
That looks like it's a pretty good starting point. I just get nervous when I see articles talking about the impacts of a bill and their only sources are other articles talking about the impacts of a bill, and not the bill itself.
From above:
Although these changes were passed in the new health bill, they are not new ideas. The White House and Congress have been trying to require corporate reporting for years. The measure was included in budget proposals issued by Presidents Bush and Obama.
"This has bipartisan support," says Doug Rogers, director of consulting services at IRSConsulting. "It was never a matter of if, but when."
What was the minimum amount to be exceeded where a 1099 was needed before this law passed? I've received 1099s for work done around $2000 in 1 year.
I understand that the law applies to corporations, but if you take your company out to lunch once a week a handful of times on company money, assuming your company has 10 people or more and your restaurant is ten dollars per plate, you'll have to file a 1099 if you go there for more than six weeks. Or if you buy more than $600 worth of equipment in a year from Wal-Mart or Home Depot or anything like that, you'll have to file a 1099 for them, too.
That's how I understand it anyway. Someone please correct me if I'm wrong.
There's nothing inherently complicated about a progressive income tax; it's the fact that we insist on having a deduction for mortgage interest, R&D, asset depreciation, hiring new workers and hundreds of other things that all individually might be things we want to encourage, but together add up to a complex and cumbersome system.
The benefit is that you take the burden off the individual and leave it all to computers. There's a "Taxable" flag and the equation is simple. IF (item.category == Food or price < (select minprice from categorylimits where categorylimits.category = item.category)) then tax = 0 else tax = 0.25 * item.price
Done. What a beautiful world that would be.
Congress wants to do these things, and the tax code is the easiest way to do them. Congress will STILL want to do these things even if you do fair tax.
If the fair taxers get their way, we'll likely end up with income AND vat 10 years down the line. Ech.
And you realize: Fair Tax would ALSO cover all investments? Buy a house: 40% to the governement. Buy stocks: 40% to the governemnt, etc.
Sounds to me like Congress is the problem.
The country has since degraded. Families have broken up over arguments about who should be elected, which laws should be passed, etc...
The current Fair Tax legislation is tied, not merely to abolishing income taxes, but also to repealing the 16th amendment. Last I read about it, it would not go into effect, even if it passed, until Congress lost all ability to levy income tax at all.
And FairTax has a pretty narrow conception of what constitutes consumption. Certainly not stocks, as you suggest. Investments in general are excluded. And any used items--used homes in your example--are excluded.
http://www.fairtax.org/site/PageServer?pagename=about_basics...
The income tax gives politicians tremendous power over the entire above ground economy and almost all the population, why would they give that up?
Since when have tax reforms in the West resulted in a wholesale replacement of one type of tax by another, instead of a layering? If you could point to a few exceptions I'd be interested.
How do I know the income tax will really be gone? Section I of the bill abolishes all income, estate, payroll and gift taxes, repealing sections A, B, and C of the Internal Revenue Code in their entirety. Sec 301 disbands and defunds the IRS, and requires that all its records be destroyed in a year. And sec 401 contains a sunset clause that negates the whole thing (both the sales tax and the abolishment of the income tax) if the 16th amendment to the constitution is not repealed within seven years. Thereafter, any attempt by congress to bring back an income tax would be, not merely unpopular, but actually unconstitutional. And they'd have to build up the infrastructure from scratch.
These guys are deadly serious.
Why would politicians give up power like that? Not sure. But there are a lot of them who say they'd be willing to: http://www.fairtax.org/cgi-bin/scorecard.cgi
Whether or not you think the Fair Tax is a good idea (and obviously I do), it's a model for how law ought to be made. In public, with a lot of visibility and discussion up front, a lot of time for question and answer, the full technical details exposed. The bill is not a tangled mess of amendments, but a well thought out and cohesive whole.
There's also the inconvenient fact that no Congress can tie the hands of a future Congress.
The only way to accomplish this in our system would be to get a single amendment to the Constitution that would simultaneously repeal the 16th Amendment and replace it with the FairTax, and then get 3/4ths of the states to ratify it.
Yes, it does apply to new houses. I'm sure builders are all over fair tax.
Financing a 30% more expensive house and paying for it out of a 30% bigger paycheck would be somewhere between neutral and a win for most people.
Nah, the sale of a used house is a totally private transaction. It's not as though there's a magical base price for a house of that size, and then a tax. It'll be sold for whatever the seller can get for it. If it's practically new, it might be the original price including the tax. Heck, it might be higher.
The original builder doesn't get to keep as much of the retail price as a subsequent private owner would. That's the distinction between new and used.
Nor is it as though buying a fixer-upper avoids the tax entirely. Materials and labor for renovations are taxed. That can be a significant portion of what's put into a home.
The vast majority of tax cuts are really just government spending in disguise -- pork for a special interest group that gets allocated by the constituents' accountants instead of in a spending bill, and adding directly to the national debt instead of through the budget.
The logic is Microecon 101: Taxes are the equivalent to the a transaction+holding cost of using Uncle Sam's currency. Use gold, well, then you're paying to store and transport it. If Uncle Sam was smart about his paper, he would make the Federal Reserve into Federal PayPal, having the Federal Gov't charge, oh say, a 0.001% transaction fee on any exchange of US currency. Same difference, amirite?
So while it wouldn't necessarily make cash transactions illegal, it would make them stand out more and be scrutinized more carefully.
According to Cato, many "someones" have read it the same way.
Even if I do... not gonna happen.
And, yeah, this would get into quite a mess. If your company was large enough and paying for the gas, they'd pretty much have make you use a card that would allow them to consolidate the payments with all the other company cars to know if they have to send 1099s.
Quick google says minimum of $50/per, max of $250k per business.
it is careening towards disaster and the fools in Congress just want to rev the engine.
For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry? The business sector is the generator of America’s high living standards, but most federal legislators just see it as a kitty to be raided or a cow to be milked dry.
argh.
Yes. That's why they're generally such train wrecks.
We've all been there... A few nights before a release we realize we have an unmaintainable mess and the deadline needs to be pushed so we can go back to square one. This is what happens when you release anyways.