Next month, Congress will have a clear choice between standing up for our nation’s job creators or burdening them with unfair and unnecessary regulations.
At the heart of the problem is a flawed provision in the new health care law that places a mountain of new tax paperwork requirements on businesses. It has nothing to do with health care.
To fix the problem, I introduced an amendment which completely repeals this misguided provision. However, an alternative amendment was recently introduced, exempting some businesses from the provision but not others and adding confusion, rather than clarity, to the misguided mandate.
The offending provision, section 9006 of the health care law, would force all businesses, charities, and state and local governments to file 1099 forms if they purchase $600 or more in goods and services from another business throughout the year.
This includes office supplies, shipping costs, and telephone and internet services. Take a quick look around your office and you can imagine the mountain of paperwork this will create for businesses large and small.
Additionally, there are major questions surrounding the usefulness of the new information. The National Taxpayer Advocate Service, a division of the IRS, reports that the IRS “will face challenges making productive use of this new volume of information,” and that “…it is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort.” Simply put, it will be an expensive mess without a lot of new tax dollars collected to show for it.
I listened to the concerns of the small business community and the sentiment was clear: this provision is bad for business, bad for employees, and bad for job creation. My amendment completely repeals the 1099 reporting provision of the health care law, because less time spent filling out paperwork means more time spent growing a business.
A broad range of groups such as the U.S. Chamber of Commerce, the National Federation of Independent Businesses, and the American Farm Bureau agree that this provision should be repealed and I am pleased my legislation is gaining bipartisan support.
The alternate amendment exempts businesses with 25 or fewer employees and raises the filing threshold for businesses with more than 25 employees. In other words, it picks winners and losers with an arbitrary threshold for filing 1099 forms and fails to really fix the problem.
In fact, a conservative calculation shows 415,391 businesses employing about 93 million people across the country will still be subject to the 1099 paperwork mandate under the alternative. Under my amendment, none of these businesses or their employees would be affected.
The problems with the alternative approach are clear: it is unfair and it discourages hiring. Imagine you own a growing business with 23 employees. Under the alternative, you will have to determine whether the addition of more employees is worth the cost of all the new tax paperwork you would be required to file. Is this the kind of decision we want to force our job creators to make in the midst of historically high unemployment?
Despite rhetoric to the contrary, the alternate amendment has a distinct anti-small business bias. To avoid the additional tax paperwork, businesses will likely consolidate suppliers to reduce the number of vendors, thereby reducing the paperwork headache.
This favors major suppliers offering a broad range of products over smaller suppliers. More and more businesses will start buying almost everything from a couple of one-stop-shop mega-retailers instead of the mom and pop specialty stores found in many communities.
They’d rather add only a couple of 1099s for a warehouse club or internet superstore than add a dizzying number of new 1099s for an array of local businesses suppliers. If you are a small business owner, this alternative is a one-two punch of more tax paperwork and a maze of confusing mandates and exemptions.
My amendment is simple: Fix the problem and protect small businesses. Many small businesses are struggling to stay afloat in the current economic climate; Washington shouldn’t swamp their boats with even more burdensome regulations.
Both my amendment and the alternative are scheduled to receive a vote shortly after the Senate returns from the August work period. It is my hope that we will stand up for small businesses, treat them fairly, and fix the problem instead of complicating it.
Sen. Mike Johanns is a Republican from Nebraska.
