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Posts Tagged ‘Red Tape’

We’ve looked at this issue before, but this new CNN article fleshes out the awful IRS rules in the new healthcare bill:

The massive expansion of requirements for businesses to file 1099 tax forms that was hidden in the 2,409-page health reform bill took many by surprise when it came to light last month. …The result: A blizzard of new tax forms that the Internal Revenue Service will begin rolling out next year. …Starting in 2011, financial firms that process credit or debit card payments will be required to send their clients, and the IRS, an annual form documenting the year’s transactions. …The 1099 changes attached to the health care reform bill are another kettle of fish. These massively expand the requirements for filing the “1099-Misc” form, which companies use for recording payments to freelance workers and other individual service providers. Until now, payments to corporations have been exempt from 1099 rules, as have payments for the purchase of goods. Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you’re making the payment to — even if it’s a giant retailer like Staples or Best Buy — at the time of the transaction, or else facing IRS penalties. …SMC’s survey found that extending 1099s just to services purchased from corporations would push that number to at least 200 filings per year for a typical small business — adding an estimated $6,000 to the cost of preparing the average tax return. And that’s without even accounting for the requirement that 1099s be filed for purchases of goods, a provision that Henschke’s group didn’t see coming when it conducted its survey last year. “These folks are doing their paperwork in the evenings and on the weekends already,” he says. “This certainly adds to the burden substantially.”

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In a previous blog post, I showed a cartoon joking about Obamacare as a Trojan Horse for the IRS, but with each passing day we are learning new – and always unpleasant – details about the mammoth legislation that was imposed by the left. The excerpt below from the Boston Globe reveals that businesses will face costly new reporting requirements to the internal revenue service because of government-run healthcare:

Tucked away in just 23 lines of Section 9006 of the Healthcare reform bill be a dramatic change in the 1099 reporting requirements.  No longer will corporations or payments for merchandise be exempt 1099 reporting.  This new law is effective January 1, 2012.  A large majority of payments made by a business will now be reported on a 1099.  …There is no doubt this will be an administrative nightmare for many businesses in the first year or two.  Taxpayer identification numbers need to be collected for all vendors.  Have a large business related meal at a restaurant, this will need to be reported on a 1099.  Spend a week in a hotel in Waco Texas, you will need to send a 1099.

My Cato colleague has more details in one of his recent blog posts.

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Even though today is tax day, let us not forget that taxation is just one of several ways that government dimishes propserity. Government spending financed by borrowing also is destructive, as is most regulation since red tape imposes substantial inefficiences and generally fails a cost-benefit test.

The folks at the Competitive Enterprise Institute have just released their annual estimate of the regulatory burden. The publication, entitled Ten Thousand Commandments, includes the following depressing factoids:

• A very rough extrapolation from an evaluation of the federal regulatory enterprise by economist Mark Crain estimates that annual regulatory compliance costs hit $1.187 trillion in 2009.
• Given 2009’s actual government spending of $3.518 trillion, the regulatory “hidden tax” stood at 34 percent of the level of federal spending itself. (Because of the recent federal spending surge, this proportion is lower than the near–40 percent level of recent years.)
• The dramatic reality that regulations and deficits now each exceed $1 trillion a year is an unsettling new development for America. In 2008, regulatory costs were more than double that year’s $459 billion budget deficit. Now, the 2009 deficit spending surge has catapulted the deficit well above the costs of regulation ($1.414 trillion compared to $1.187 trillion, respectively).
• The game has changed, with respect to government spending versus government regulation. Although the spending and deficit levels eclipse federal regulatory costs now, unchecked government spending can translate, in later years, into greater regulation as well…
• Regulatory costs dwarf corporate income taxes of $147 billion.
• Regulatory costs exceed estimated 2009 individual income taxes of $953 billion by 25 percent.
• Regulatory costs of $1.187 trillion absorb 8.3 percent of the U.S. gross domestic product (GDP), estimated at $14.253 trillion in 2009.
• Combining regulatory costs with federal FY 2009 outlays of $3.518 trillion implies
that the federal government’s share of the economy now reaches 33 percent.

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Here’s a new Economics 101 video about the cost of the tax code from the Center for Freedom and Prosperity. I won’t spoil the surprise by giving the details, but you if you’re not angry now, you will be after watching.

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