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Tuesday, September 14, 2010

Repealing Obamacare One Provision At A Time

"We have to pass the bill so that you can find out what is in it"-- Nancy Pelosi

It has already started. People, politicians, are already starting to realize what they voted for when they passed Obamacare and WSJ reports the first provision under the microscope is the 1099 provision.

Most Democrats now claim they were blindsided and didn't understand the implications of the 1099 provision—which is typical of the slapdash, destructive way the bill was written and passed. As the critics claimed, most Members had no idea what they were voting on. Some 239 House Democrats voted to dump the 1099 provision in August, and the repeal would have passed except Speaker Pelosi rigged the vote procedurally so it needed a two-thirds majority. She thus gave Democrats the cover of a repeal vote without actually repealing it.

In the Senate today, Nebraska Republican Mike Johanns will offer his amendment to scrap the new 1099 rules altogether. But the White House is opposing this because it fears it would set a precedent for repealing the larger health bill. Over the weekend the Treasury Department pronounced the Johanns amendment "not acceptable in its current form."

It would have been handy if those Democrats that are claiming they were "blindsided" by the ramifications of this provision, had actually read the bill they voted for, in it's entirety, before they passed it.. yes?

CNN Money reported on this 1099 provision back in May, explaining it.

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

Taken together, the two seemingly small changes will require millions of additional forms to be sent out.

The US Chamber of Commerce explains the negative impact in a petition letter sent to Congress:

If this provision is implemented, the 1099 reporting mandate will impose substantial paperwork and reporting burdens on the backs of governments, nonprofits, and businesses—especially small businesses. In order to comply, these entities will have to institute new complex record-keeping data collection and reporting requirements that track every purchase by vendor and payment method. This provision will also serve to dramatically increase accounting costs, expose businesses to costly and unjustified audits by the IRS, and subject more small businesses to the challenges of electronic filing. In the end, the increased costs will heavily penalize honest taxpayers, creating an even more unlevel playing field between those that pay their fair share of taxes and those that do not.

Moreover, the new 1099 reporting mandate will alter behavior in the marketplace, which could lead to dramatic negative consequences for smaller merchants by driving purchases away from small vendors and startups. In order to minimize reporting, government, nonprofits, and businesses may consolidate their purchases with several large vendors with a broad geographic presence and a more diverse product line instead of a number of smaller ones.

Additionally, the cost of repealing this provision should not be accomplished by levying increased taxes on or removing existing tax incentives from business, thereby eroding American competitiveness and private sector job creation. At a time in which we have seen an unprecedented growth of the federal government, it is imprudent for lawmakers to saddle any one segment of the business community with the obligation to pay for the repeal of this ill-conceived, expanded information reporting mandate.

Just one of the many portions of Obamacare that Americans will be made aware of now that it has passed and people are finally starting to read the massive bill.