Incredibly Burdensome New 1099 Regulation Slipped Into Health Bill
May 3, 2010 · Posted in Government
The Purpose Behind Government Legislation
It is important to understand the purpose of any bill brought before Congress: To extort present or future money from a large majority of people at gunpoint and hand it over to friends and influential officials under the cloak of new programs, projects, and offices that operate with or without any consumer approval or effective competition so they can get rich as quickly and as effortlessly as possible.
But in order to make the hapless populace acquiesce with such dastardly schemes the bill needs to have a palatable name in its header. “Patriot Act”, “Enduring Freedom”, “Iraqi Freedom”, “Stabilization Act”, “Health Care”, it’s completely irrelevant. Any crap will do, so long as enough fools like the big shiny tag line that flashes on the news.
“I like health, so I support the Health Care bill! How can you not, you evil bastard!?” or “I’m a patriot, I support the Patriot Act, how can you not, you damn flag-burner!?”
Those self styled pseudo-intellectual liberals who whole-heatedly supported the health care bill, helped work into the hands of corruption just as much as those war-mongers who supported the Iraq war. They both unwittingly supported the side that they proudly thought to have “defeated” this time. It is they who make the scam work while proudly trumpeting their empty phrases in shallow debates. :)
The beneficiaries of this scam could really care less. Brainwashed people on the left and on the right will be smashing their heads in, while those on the receiving end rush and work day and night to add in as many earmarks as they possibly can to satisfy themselves and their investors, the lobbyists. Of course the bill has to be large enough so that no single person will ever be able to read the entire bill and get a clear picture of what’s going on. As government inevitably grows, so will the magnitude of new boondoggles.
Thus, any legislative bill is nothing but a gigantic collection of unrelated rip off schemes with an appealing and largely also unrelated title.
New Tax Nightmares
It should thus not surprise us that one of the provisions of the new health care bill requires that from now on all businesses issue a 1099 to any vendor from whom they purchase goods worth more than $600, as Chris Edwards over at CATO writes:
Most people know about the individual mandate in the new health care bill, but the bill contained another mandate that could be far more costly.
A few wording changes to the tax code’s section 6041 regarding 1099 reporting were slipped into the 2000-page health legislation. The changes will force millions of businesses to issue hundreds of millions, perhaps billions, of additional IRS Form 1099s every year. It appears to be a costly, anti-business nightmare.
Under current law, businesses are required to issue 1099s in a limited set of situations, such as when paying outside consultants. The health care bill includes a vast expansion in this information reporting requirement in an attempt to raise revenue for an increasingly rapacious Congress.
In a recent summary, tax information firm RIA notes the types of transactions covered by the new 1099 rules:
The 2010 Health Care Act adds “amounts in consideration for property” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(1)) and “gross proceeds” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(2)) to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee. Thus, Congress says that for payments made after 2011, the term “payments” includes gross proceeds paid in consideration for property or services.
Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.
Tax CPA Chris Hesse of LeMaster Daniels tells me:
Under the health legislation, the IRS could be receiving billions of more documents. Under current law, businesses send Forms 1099 for payments of rent, interest, dividends, and non-employee services when such payments are to entities other than corporations. Under the new law, businesses will be required to send a 1099 to other businesses for virtually all purchases. And for the first time, 1099s are to be sent to corporations. This is a huge new imposition on American business, costing the private economy much more than any additional tax that the IRS might collect as a result.
There appears to have been little discussion before this damaging mandate was slipped into the health bill and rammed through Congress, but a few business groups did raise concerns. Here’s what the Air Conditioner Contractors of America said:
The House bill would extend the Form 1099 filing requirement to ALL vendors (including corporate) to which they pay more than $600 annually for services or property. Consider all the payments a small business makes in the course of business, paying for things such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services.
In order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.
Private transactions are the core of a market economy, and the source of America’s growth and prosperity. Now the federal government is imposing a vast new web of red tape on perhaps billions of these growth-generating private exchanges.
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.
I’m stunned that there wasn’t a broader debate before such a costly mandate was enacted. If it goes into effect, it will waste vast quantities of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. The struggling American economy can’t afford anymore suffocating tax regulations. This mandate is a giant deadweight loss. It should be repealed.
Chris be blessed, but do you really have any reason to be stunned? What do you think the purpose of this whole project was?? In fact, I would be completely and utterly shocked if this piece of paper wasn’t full of many more such “surprises”!
Some people on Mish’s blog, are suggesting that the purpose of this provision is, for the most part, to pave the road for the coming national sales tax, a measure that will conveniently raise taxes for all Americans, no exceptions.
What we are seeing now is only the beginning of a massive shortfall. I followed up on the article above in February:
Now that we have updated figures on coming expenses it’s time to update the deficit predictions:
* $1.65 trillion for 2009
* $1.6 trillion for 2010
* $1.95 trillion for 2011
* $2.2 trillion for 2012
If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new. Taxes have been rising in the US for the past century.
Taxes on all Americans, rich, middle class, and poor? Like a national sales tax? No way, our dear legislators would never consider such a rip off, would they? Why, sure they would … Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look:
With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.
Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.
At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.
I guess it’s pretty clear then … the VAT is coming folks, not immediately, but sometime after 2012 I think we can look forward to it.
“We Know Who You Are”
Rarely does the government advertise its cruelty as blatantly and as out in the open as in this Ad run by the state of Pennsylvania:
And the train wreck rolls on, determined in its course cliff-wards …