But this "tax gap" of unreported business income is largely a Beltway myth, and no less than the Treasury Department's National Taxpayer Advocate Nina Olson says the costs will be "disproportionate as compared with any resulting improvements in tax compliance."This is what happens when a mammoth bill is rushed through without proper vetting and hearings. Democrats want to claim that they didn't know or understand about this provision and they would have never, ever wanted to burden small businesses in this way. They all want to seem like they're the protectors of big business. If that were so, they would have paid more attention to what they were voting for.
Meanwhile, small businesses are staring in horror toward 2013, when the 1099 mandate will hit more than 30 million of them. Currently businesses only have to tell the IRS the value of services they purchase from vendors and the like. Under the new rules, they'll have to report the value of goods and merchandise they purchase as well, adding vast accounting and paperwork costs.
Think about a midsized trucking company. The back office would have to collect hundreds of thousands of receipts from every gas station where its drivers filled up and figure out where it spent more than $600 that year. Then it would also need to match those payments to the stations' corporate parents.
The White House supports an amendment by Bill Nelson that would range the 1099 threshold to $5,000 and exempt businesses with fewer than 25 workers. Way to push an incentive to businesses to limit how many employees they hire.
Businesses would still have to track all purchases, not knowing in advance which contractors will exceed $5,000 at the end of the year. It also creates a marginal barrier to job creation—for a smaller firm, hiring a 26th employee would be extremely costly. The Nelson amendment also includes new taxes on domestic oil production, as every Democratic bill now seems to do.Republicans want to excise the measure entirely. We'll see how many Democrats are just interested in the face-saving vote rather than truly rescinding a stupid and harmful provision. The White House fears that allowing this measure to be repealed will be but the beginning of a trend to repeal unpopular aspects of their unpopular bill. May it be so.