Research Briefing

Senate Dems Stand In The Way Of Repealing ObamaCare’s Job-Killing 1099 Requirement

Today, Democrat Senators Reid, Feingold, Murray, Gillibrand, Boxer, And Others Voted Against Repealing The Job-Killing, Bureaucracy-Growing 1099 Requirement In ObamaCare.   (HR 5297, S. Amndt. #4596, Roll Call Vote #231, Rejected 46-52, R: 39-0, D: 7-52, I: 0-2, 9/14/10)

1099 REPORTING REQUIREMENT IS A PAPERWORK NIGHTMARE FOR SMALL BUSINESSES

ObamaCare Will “Swamp U.S. Businesses With A Flood Of New Tax Paperwork” By “Radically Alter[ing] The Nature Of 1099s.” “An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork. … The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.” (Neil deMause, “Health Care Law’s Massive, Hidden Tax Change,” CNNMoney.com, 5/5/10)

Starting In 2012, Companies Will Have To Send 1099s To Contract Workers, Individuals, And Companies If They “Buy More Than $600 In Goods Or Services [From Them] In A Tax Year.”  “Section 9006 of the health care bill – just a few lines buried in the 2,409-page document – mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.” (Neil deMause, “Health Care Law’s Massive, Hidden Tax Change,” CNNMoney.com, 5/5/10)

• “Buy One Airline Ticket At $600, For Example, And A Business Would Have To File A Form With The IRS And Send One To The Airline Itself. Ditto If A Small Company Buys $600 Worth Of Sandwiches From Subway, Spends $600 A Year For Starbucks Coffee Or Purchases $600 Of Gas At The Nearly Shell Station.” (Jeffry Bartash, “Pressure Builds On Congress To Junk ‘Nightmare’ Tax Rule,” MarketWatch, 8/4/10)

A Coin Dealer In Michigan Predicts She Will Need To Fill Out Between 10,000 And 20,000 Tax Forms A Year To Comply With The Law. “Pat Heller, who owns Liberty Coin Service in Lansing, Mich., deals with around 1,000 customers every week. Many are individuals looking to protect wealth in an uncertain economy, he said, while others are dealers like him. . . . With spot market prices for gold at nearly $1,200 an ounce, Heller estimates that he'll be filling out between 10,000 and 20,000 tax forms per year after the new law takes effect.”  (Rich Blake, “Gold Coin Sellers Angered by New Tax Law,” ABC News, 7/21/10)

• “‘I’ll Have To Hire Two Full-Time People Just To Track All This Stuff, Which Cuts Into My Profitability,’ He Said.” (Rich Blake, “Gold Coin Sellers Angered by New Tax Law,” ABC News, 7/21/10)

THE COST OF COMPLIENCE WILL STIFLE PROFITS AND HINDER GROWTH

“‘It's A Pretty Heavy Administrative Burden,’ Particularly For Small Businesses Without Large In-House Accounting Staffs, Says Bill Rys, Tax Counsel For The National Federation Of Independent Businesses.” (Neil deMause, “Health Care Law's Massive, Hidden Tax Change,” CNNMoney.com, 5/5/10)

“An IRS Ombudsman Estimated That 40 Million Businesses, Including 26 Million Sole Proprietors, Will Be Affected.” “Chris Walters of the National Federation of Independent Business pointed to owners such as Pat Felder of Baton Rouge, who estimates that her auto parts supply business will have to start filing 1099s on several hundred vendors - including office supply stores, gas stations, even the grocery where she gets meat for company barbecues.” (N.C. Aizenman, “Health-care funding provision could face repeal,” The Washington Post, 8/29/10)

1099 Provision Will Substantially Cut Into Small Business Owners’ Profits. “Felder, who employees 25 workers, said she'll have to hire one more just to keep track of receipts. At $30,000, the extra salary will eat into about 6 percent of her profit. ‘You plow every penny you can right back into the business," she said. ‘When I think of everything else I could use that money for, it's huge.’”(N.C. Aizenman, “Health-Care Funding Provision Could Face Repeal,” The Washington Post, 8/29/10)

The Chairman Of The American Institute Of CPAs Says That The Requirement Will “Significantly Contribute To The Hurdles To Growth And Formation That Businesses Face.” “The revised 1099 law ‘may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face,’ wrote Alan Einhorn in a letter to Congress last week. Einhorn is chairman of the AICPA's tax advisory committee.”  (Jeffry Bartash, “Pressure Builds On Congress To Junk ‘Nightmare’ Tax Rule,” MarketWatch, 8/4/10)

New Burdensome Tax Reporting Requirements In ObamaCare Affects Ten Times More Small Businesses Than The Tax Credit. “BIG NUMBER – 40 million. That’s the number of small businesses that will be subject to the new health reform requirement to file 1099 forms to any vendor where they spend more than $600 in a given year. To put that in perspective, the IRS expects new tax filing requirement to effect 10 times more small businesses than the small business tax credit (earlier IRS estimates placed that number around 4 million).” (Jennifer Haberkorn and Sarah Kliff, “Politico Pulse,” Politico, 7/8/10)

JUST ONE OF MANY PROVISIONS IN OBAMACARE HARMFUL TO SMALL BUSINESSES

Obama Pays For His Government Takeover Of Health Care With Nearly $570 Billion In Job-Killing Taxes On Small Businesses, Investments And Innovation. (Douglas W. Elmendorf, Letter to Speaker Nancy Pelosi, 3/18/10)

Obama's $32 Billion Tax On Health Insurance Would Hit Small Business Hardest. “Small employers would also probably be hit by the taxes ... small businesses tend to pay more for their insurance than bigger employers that can negotiate better premiums ... About 14 percent of small employers, counted as those with fewer than 500 workers, now offer policies that would be subject to the excise tax ... 'That is a very heavy hammer on the cost of your premiums,' said Donna Marshall, the executive director of the Colorado Business Group on Health ... 'You don't want to cause a chilling effect on the employers who are trying to do the right thing.’” (Reed Abelson, "A Proposed Tax On The Cadillac Insurance Plans May Also Hit The Chevys," The New York Times, 9/20/09; "Estimated Revenue Effects Of The Manager's Amendment To The Revenue Provisions Contained In The 'Patient Protection And Affordable Care Act," Joint Committee On Taxation Report, 3/20/10)

Obama's $210 Billion Medicare Payroll Tax Hike Would Hit Many Small Business Owners. “The legislation would be paid for through a ... a payroll tax on the wealthy ..."; "In a 2007 survey, the National Federation of Independent Business found that about 15 percent of small-business owners -- and half of those with at least 20 employees -- said they expected their household income to exceed $200,000.” (Ricardo Alonso-Zaldivar, "Tempers Flare As Senate Debates Health Care," The Associated Press , 12/2/09; Lori Montgomery and V. Dion Hayes, "Small Businesses Brace For Tax Battle," The Washington Post, 4/27/09; "Estimated Revenue Effects Of The Manager's Amendment To The Revenue Provisions Contained In The 'Patient Protection And Affordable Care Act," Joint Committee On Taxation Report, 3/20/10)

“One-Third Of Employers Subject To Major Requirements Of The New Health Care Law May Face Tax Penalties…” “About one-third of employers subject to major requirements of the new health care law may face tax penalties because they offer health insurance that could be considered unaffordable to some employees, a new study says.” (Robert Pear, “Study Points to Health Law’s Penalties,” New York Times, 05/23/10)

• “If An Employer With 50 Full-Time Employees Offers Coverage And 10 Of Those Workers Receive Premium Credits, Or Subsidies, The Employer Would Face A Penalty Of $30,000. If 30 Workers Receive Subsidies, The Penalty Would Be $40,000.” (Robert Pear, “Study Points to Health Law’s Penalties,” New York Times, 05/23/10)

ObamaCare's Small Business Tax Credit's Much-Touted “Broad Eligibility” Falls Short As It "Drops Off Sharply Once A Company Gets Above 10 Workers.” “When the administration unveiled the small business tax credit earlier this week, officials touted its 'broad eligibility' for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. ... Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.” (Ricardo Alonso-Zaldivar, "FACT CHECK: Tax Cut Math Doesn't Add Up For Some," The Associated Press, 5/20/10)

• Springfield, IL: Small Business Owner Says He'd Have To Cut Jobs, Slash Wages To Benefit From The Credit. “To get the most out of the new federal credit, Hoffman said he'd have to cut his work force to 10 employees and slash their wages. 'That seems like a strange outcome, given we've got 10 percent unemployment,' he said.” (Ricardo Alonso-Zaldivar, “FACT CHECK: Tax Cut Math Doesn't Add Up For Some,” The Associated Press, 5/20/10)

National Center For Policy Analysis (NCPA) Study Finds ObamaCare's Small Business Tax Credit “Could Negatively Impact Small-Business Hiring Decisions.” “A study by the National Center for Policy Analysis shows that tax credits in the new healthcare law could negatively impact small-business hiring decisions. The new law provides a 50 percent tax credit to companies offering health coverage that have fewer than 10 workers who, on average, earn $25,000 a year. The tax credit is reduced as more employees are added to the payroll. The NCPA study finds the reduction in tax relief to be a cost concern for companies looking to hire additional workers, but operate on slim profit margin yet still provide employee health coverage.” (Jay Heflin, "Report: Healthcare Law Tax Credits Encourage Small Businesses To Stay Small, Not Hire," The Hill's "On The Money" Blog, 5/23/10)