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  • Side Effects: IRS and Businesses Unite Against Obamacare?

    The Internal Revenue Service (IRS) recently unearthed yet another undesirable side effect of Obamacare—one that will hit the taxman as well as business owners.

    The Taxpayer Advocate Service, “an independent organization within the IRS whose employees assist taxpayers,” reports that both the IRS and taxpayers will have trouble complying with the health care law’s extensive new tax reporting regulations.

    The regs will affect 40 million businesses, from international mega-corporations to Mom-and-Pop shops on Main Street. The Taxpayer Advocate Service says it “may propose administrative or legislative recommendations to modify the provision.”

    Starting in 2012, Obamacare requires any business, tax-exempt organization, or government entity to file a 1099 form detailing purchases from all vendors that have sold over $600 of goods to the company. The Taxpayer Advocate gives the following example: “If a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases.”

    The National Federation of Independent Businesses says it would be a “crippling” burden for small business. The Taxpayer Advocate agrees that the new reporting scheme could have “distortionary effects” on taxpayer behavior, pushing businesses toward larger vendors at the expense of smaller local suppliers.

    The requirement would trigger a paperwork avalanche at the IRS. The report notes that the tax agency “currently is neither structured nor funded to do the job effectively.” Nina Olson, head of advocate services, says, “If the IRS continues to ramp up enforcement while reducing taxpayer service programs, I would be concerned about its ability to administer the new health care credits and penalty taxes in a fair and compassionate way.”

    The Taxpayer Advocate warns that this provision “could exacerbate underassessment of penalties in some cases and overassessment of penalties in others.” Bottom line: “It is highly likely that the IRS will improperly assess penalties.”

    Rather than increase the size and scope of the IRS, the better solution would be to get rid of this entirely unnecessary requirement. The Taxpayer Advocate reports that this 1099 provision was “likely intended to detect unreported income or gross proceeds.” In other words, this provision was included to find new revenues to fund Obamacare.

    It’s doubtful this provision will yield any significant tax revenue. But its costs to 40 million employers will be immense. That means less money available for pay raises, job creation… or even employee benefits—like health care!

    Attempts to repeal this provision of Obamacare are currently underway in Congress. Who knows, perhaps lawmakers won’t stop there, but will continue to push for the repeal of the entire health care overhaul.

    Posted in Obamacare [slideshow_deploy]

    6 Responses to Side Effects: IRS and Businesses Unite Against Obamacare?

    1. George Colgrove says:

      It has always been my belief that the way we collect taxes is redundant. So much so, that we end up losing valuable economic resources in the collection of those taxes. In most places, we have three tax collecting agencies stacked on top of each other. Some places we have more. First, for most there is the local property (or even a local sales tax) tax collection agency which can represent a city, town, or county. The next level is the state tax agency collecting income and sales tax and then at the top, the federal tax collection agency (IRS). Include the private sector tax support companies, this is probably the single most employed sector of our economy – collecting taxes. Why not have a tax collection system based at the single local level.

      We need to eliminate the property tax and the sales tax, two of the most anti-growth instruments in our economy. Property tax has always been more of a penalty of success and is rooted in jealousy. Property tax has prevented people from making their dwellings the best they dreamed it could ever be. It prevents people from buying the best cars they can afford. Ridding the economy of property tax will spawn massive and instant economic growth as people add decks to their houses, improve siding, repaint or build that add-on they always dreamed of. Eliminating sales tax would even make this boom even greater as a 100% of each dollar spent on these improvements will go into the economy.

      Base everything on a flat rate income tax. Allow for a standard deduction for up to two children and two adults. Make that deduction one quarter of the accepted poverty line for a nuclear family of four. Tax all income after those deductions at a flat rate. I would recommend that all taxpayers pay a minimum tax so that all have "skin in the game" so to speak, and will be concerned about how the resources are used. This can be done on a 5×8 card. Using the single payer concept – loved by the liberals – people pay their onetime tax payment to the local entity. The local entity will then keep a cut, and then send the rest to the state. The state in turn keeps a cut and sends the rest to the feds. This can be based on formulas to allow for minimal redistribution for cash strapped towns or states. I am not in favor of this, but if I have to compromise somewhere, this is the place.

      This solution will eliminate two redundant rather large layers of government bureaucracy with significant savings to the taxpayer. It will eliminate paperwork individuals are required to do. Paying taxes will become simple; thereby transferring the costs of doing taxes to boosting the rest economy.

      As part of this overhaul, recognize that there is no business tax, since it is only passed onto the customer anyway. I would no longer tax businesses (small or corporate). Eliminate the term "Non-profit". Tax only what the employee or owner defines as income in a fair open way. Get rid of tax shelters or hidden advantages only few have. Make the system one size fits all so everyone plays by the same rules. Get rid of all federal business regulatory bodies (SEC comes to mind) and replace with multiple competing private professional based organizations or associations with small business and corporate memberships to act as a self-regulator. To really capitalize on the "think global, act local" slogan, this solution returns the power of the economy where it has always flourished; it eliminate federal muck that has killed the American economy and it will foster a new competitive advantage to American entrepreneurs to once again take the lead in global economic growth. Something America once excelled at.

    2. A. Scott says:

      Paperwork storm – that is the ultimate progressive goal is it not – to cripple the businesses and bring about a stoppage of capitol exchange as in sales and purchases?

    3. MrShorty - Arizona says:

      It is time that America recognize that anything that Reid or Pelosi pushed is bad for America and needs to be repealed along with both of them.

    4. Benson, Ohio says:

      A bold and interesting plan but before implementing we need to change our representation local, state and Federal. Then we need to do something government never thinks of we need to run pilot programs to see how it works.

    5. Drew Page, IL says:

      It should be painfully clear to anyone with an IQ equivalent to plant life that Mr. Obama cares nothing about the cost of things. I am certain that Mr. Obama sees the potential hiring of 100,000 more IRS employees to keep up with his taxing schemes as a good thing. More unionized federal employees, or should I say patronage workers, to vote for Mr. O and his Democrat accomplices.

    6. Pingback: States’ Rights on Trial - RSample.com

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