Michael Young alerted me to an under-exposed piece of Obama’s recent health care bills which seems to promise quite a problem for business in the US after 2011 unless sufficient pressure can be brought to bear to reverse the relevant legislation.
Mind you, there are already reporting and taxing mechanisms in place for the same business transactions that the new onerous regulations will address. Sales tax and income tax are already being levied for these. Its just that the new regulations would require businesses to garner information and submit 1099s for every business transaction accumulating to US$600 or more per annum.
That means if–for example–your business buys a computer in 2012, you will need to collect a Tax Identification Number (TIN) for the vendor that sold you the computer before you are legally permitted to pay the vendor for the product. And then you need to go through the hassles and effort of providing a 1099 for the vendor for that purchase, or cumulatively for the year of you bought more from that vendor.
Or in effect, so argues Chris Edwards in Costly IRS Mandate Slipped into Health Bill.
The extra paperwork comprises a kind of tax on labor. The extra gazillion forms will require a large increase in accountant and IRS labor to reconcile the redundant filings. No doubt errors will increase. Risk to identity theft will necessarily increase with wider distribution of TINs.
And while the outcome may increase business honesty and government revenue, at the same time it will decrease efficiency and add significantly to the costs of running both business and government. Whether the bottom line for the government will be an increase in revenue or not is uncertain.
If the regulations kill business, any positive change from the government perspective can only be more dubious. Health care reform apart from new 1099 reporting promises to burden many businesses already on an economic brink. Such businesses know they either cannot afford to hire new employees because of the increase in required employee benefits, or they must lay off workers they could have paid without health benefits. And government control of health care decreases competition in related industries, which historically in various economic sectors has been shown to increase consumer (or patient) costs while decreasing quality.
The recent health care legislation was passed under a mountain of private and public debt. Early news suggests the health care legislation will increase spending requirements for government rather than as promised, reduce it. Interest in government raising taxation must be matched by the opportunity and ability to make a profit. With less profit, there is less to tax. Under a mountain of public and private debt, business, government, and consumers suffer.
And 1099 reporting legislation that has promise to do nobody any good in economic hard times needs closer scrutiny. Am I misguided on this? Please comment.
Tags: health care reform, taxation
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