ObamaCare’s huge new burden for small business

Posted July 16, 2010, at 8:46 p.m.

Last March, before the ObamaCare health legislation passed the Democratic Congress, we heard one of the most shocking statements ever made by a high-ranking federal official. Speaker of the House Nancy Pelosi told an audience, “We have to pass the health care bill to find out what’s in it.”

It’s hard to think of anything that could have been more appalling and frightening to the American people. Remember, this bill came to more than 2,400 pages and 400,000 words. It will transform one-sixth of the U.S. economy and personally affect every American. It will create more than 100 new federal agencies and impose massive taxation on the productive members of our society. It is one of the most far-reaching and nation-changing laws in our history. And Nancy Pelosi’s attitude was, “Trust us.”

The American people are now learning more about ObamaCare and they don’t like what they see. The Democrats who wrote the bill behind closed doors and strong-armed it through Congress had to bribe their own members with special breaks to vote for it — the “Cornhusker Kickback,” the “Louisiana Purchase” and similar cash for cloture deals. All Republicans voted no. They knew this was a terrible bill that would spawn vast and damaging consequences for our economy.

As of now, most Americans want the whole thing repealed. President Obama boasted that people would like the new law once they got to know it. Instead, just the opposite has happened. The more people know about it, the less they like it — with good reason.

I want to focus on one of the problems, a tax provision that will have an extremely negative impact on small business. Like much of the ObamaCare bill, it has nothing to do with health care but rather with putting our economy under stringent federal control.

We know that small business is the backbone of our economy and creates about 80 percent of all new jobs. With the persistently high unemployment rate, we’re all counting on small businesses to put folks back to work. But thanks to ObamaCare, small companies will soon face a huge new burden when it comes to the use of IRS Form 1099, making it much less likely that they will pick up the hiring slack.

Right now, these tax forms are issued in a few limited situations, such as when paying outside consultants and freelancers. But with little discussion, the Democrats sneaked in a provision to the Tax Code’s Section 6041 that will force companies to file 1099s on business-to-business transactions beginning in 2012. This costly new requirement will create an avalanche of paperwork demanded by the IRS. Congress hopes to raise $17 billion through this new mandate because it knows ObamaCare will cost much more than advertised.

A Cato Institute breakdown of the law says businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. In a $14 trillion economy, that’s a lot of transactions. The changes will force millions of businesses to issue hundreds of millions, or perhaps billions, of additional IRS Form 1099s. A typical company could have to file more than 200 every year.

When a small business buys a used car, it will have to gather information on the seller, including a Taxpayer Identification Number, and mail 1099s to the seller and the IRS. The seller will do the same. If the vendor does not supply you with a TIN, you are obligated to withhold taxes on your payments.

When a small-shop owner pays her rent, she will have to send a 1099 to the landlord and the IRS, complete with the TINs. Buy a new set of tools, issue another one. It cuts across the entire business spectrum — software, office supplies, airline tickets, hotels, rental cars, gas for a truck, janitorial services and so on. A Laundromat owner who buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up the purchases.

This will pose a huge administrative burden even for businesses with computerized record keeping. For the millions of small businesses that still do bookkeeping by hand, the cost in both time and money will be devastating, adding to their already-unmanageable federal paperwork burdens. The potential for mistakes, mismatches and lost forms is tremendous, and with errors would come audits and penalties. No wonder the IRS is hiring 16,000 new agents to police the health care bill.

Private transactions are the core of a market economy. Now the Obama Democrats are imposing a vast web of red tape on billions of these growth-generating private exchanges. And for what? To squeeze even more money out of the business community so our spendthrift Congress can fully fund ObamaCare, which the nation clearly doesn’t want.

Rep. Andre Cushing, R-Hampden, is the ranking Republican on the Legislature’s Labor Committee.

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