Senate votes to repeal 1099 reporting requirement in health care law
portfolio.com
portfolio.com
A profoundly unrealistic tax law that, even if it were feasible, most people wouldn't have even tried to obey, anyway?
It would have only served to underscore just how out of touch the political class is, and to remind Americans that priority #1 is squeezing us for every cent possible without causing a riot. With the right spin from the smaller government crowd, perhaps, if it had lasted, it would have done more good than ill?
I guess I'm among the minority, though, in preferring more rapid oppression to the baby steps that our government is so good at. The boiling frog, etc.
I've talked about this quite a bit in the tax industry, and there are a few popular opinions. My favorite so far is that this was designed to fail to show just how bad our tax code can get, which would then be used to usher in simplification/reform, i.e., VAT.
Was there a rider attached for some other crazy rule?
Gotta find that website that shows who exactly voted for what...
This is interesting though, all 17 were democrats despite that for months, President Obama asked them to repeal the provision. Senator Debbie Stabenow is the one that finally made the proposed amendment to axe it.
"The amendment that passed directs the Office of Management and Budget to tap up to $44 billion in unspent funds appropriated for other purposes to cover the revenue that would be lost by repealing the 1099 requirement.
[...]
The amendment sets "a terribly dangerous precedent," said Senator Daniel Inouye, a Hawaii Democrat, who chairs the Senate Appropriations Committee.
Difficult decisions on how to reduce spending lie ahead, he said, and its Congress’ responsibility to determine where these cuts will be made. Delegating these decisions to the executive branch "may be politically expedient," Inouye said, but it also is "thoughtless and rash.""
I agree that it is absurd.
There are a very small number of criminal underground businesses that are not declaring income, but those purchase are not made with check or credit cards, they are cash-only, no receipts. The customers buying blackmarket or illegal goods from these sketchy places are mostly not legit themselves. Mostly it is drug dealers and undocumented alien sole proprietor gardeners, not licensed legitimate long established businesses. They are not going to start filing 1099s. Maybe a few of them will though, and this will bring in an additional 10 million in income tax. That's a huge exaggeration, undoubtedly it will be less. But let's say 10 million.
Consider though the 99.999% of businesses that have always done legit business and report income who will be massively burdened by this and to process their 30 billion submitted 1099s each year is going to require new IRS personnel to the cost of way more than $10 million. In addition, a lot of companies will forgo purchases rather than have to deal with the additional paperwork. Submitting requests and filling out these forms and tracking it all to make sure you got them all is going to mean hiring more people (yay more jobs?) to handle it, but that means prices go up, or you have to lay off somewhere else. It's not stimulating the economy to hire people to do busy work at the cost of producing and earning less, it's stimulating to actually produce more and do well.
When we have a customer that needs IRS forms to be filled out with a purchase (often W-9s), it is never ever a simple request. It always comes coupled with very dense bureaucratic requirements from the other company (usually some government institution or contractor) which mean in addition to tracking and filling out forms, there is several hours of busy work, emails and phone calls because the people that demand this level of bureaucracy are like little helpless children, but very uptight ones. We have a W-9 filled out and available. This is followed by requests that they "entered it into the system and it came back wrong". Entered into what system? "The IRS validation system." IRS doesn't have that, do you mean an third party one? Did you type in the name of the business correctly? Yes. Try it again. I already did that, please mail us the W-9 form again. Two weeks later, same problem. Four weeks later, oops, they misspelled the name of the business, or the EIN, or they are using some dodgy company for validation which only has a small fraction of companies nationally. And never mind that W9s are not required for retail sales of $20 in off the shelf software as it is, that doesn't matter, it "is their policy." Likewise, every institutional purchaser is going to demand several days of work to deal with 1099s as well now for a $20 purchase, because their policy will now be to collect on ALL purchases regardless of size just in case they happen to go over that $600 limit. To manage all this, it will be approved vendors only, which will be large institutional supplier/resellers who charge ten times normal retail in order to deal with bureaucracy. What happens to tuition then. And what happens to the small companies locked out of the system. No longer will it even be an option to buy the best product or lowest price, it will be whatever the approved vendor asks.
All this burden to find hidden income from a tiny blackmarket and illegal sector that isn't going to file these forms anyway.
The software guys salivating at the chance to sell software to manage all this stupidity should be ashamed of themselves, that is pathetic. Our economy has collapsed because of greedy non-producers who siphon off value from economic activity in order to benefit themselves financially while contributing nothing of real value. This selfishness is what is destroying our country and the world.
So there are a zillion different games playing out here. Until the reporting requirement is actually repealed, it could all end up smoke and mirrors.
Because of the complexities involved, I'm really interested in the 17 senators that wanted to keep such a monstrosity. 90%+ of the business community is up in arms and a full sixth of the senate sees some reason that this is not worth voting for? To me this is the most interesting part of the story -- and the part not covered by the article. Some quotes from the dissenters would have been great.
Fortunately there's a hearing in two weeks about the Durbin amendment to Dodd-Frank, and if it's ever going to come up, it might as well be then.
Not much more to say.
EDIT: so people really think this is a burden? For my company of 25 it is trivial. Just a little more info to send to ADP.
As I said above, the extra work will have benefits.
That means that if you buy one laptop, a 1099. If you spend that much at Office Depot, a 1099.
Without, the healthcare bill will increase the deficit to an even greater extent.
Now, one might argue that this is essentially the equivalent of a tax increase, and that's sort of true. The left wing version of that argument is that it's a dumb and complicated scheme when it would have been simpler to just raise revenue and pay for health care directly.
But the core point is that whoever told you the health care bill "increases the deficit" was lying to you.
However, it would have provided a solid bit of business for supporters of the accounting lobby, who have - I suspect - contributed to the campaigns of each and every one of those 17 who heard what the IRS had to say, and backed this anyway.