Wednesday Jun 02 2010
Small business shouldn't be IRS enforcers
By: Rep. Dan Lungren, Third Congressional District
Another point of view
In April, I had the opportunity to introduce legislation that will provide relief to millions of small business owners who would otherwise face an enormous tax-reporting burden under the recently enacted health care bill. Section 9006 of the Patient Protection and Affordable Care Act (PPACA, PL 111-148) has not received much attention. It comprises a mere 170 words — a drop in the bucket compared to the 2,300-page, 384,000-word health care reform package. But this little provision was calculated to be a big “pay for,” raising $17 billion in tax revenue over 10 years to help offset the cost of the PPACA. It will require business owners to provide a separate 1099 tax reporting form for every company with whom they do more than $600 worth of business in a given year. This means that California’s 3.6 million small business owners will face an onerous new tax-reporting mandate for basic, everyday business expenses such as phone and Internet service, shipping costs, office supplies and utilities, just to name a few. What the drafters of Section 9006 have done, under the guise of health care reform, is essentially draft small businesses as a new enforcement arm of the IRS. Congress has seemingly determined that conscripting companies to snitch on one another will serve as an effective enforcement tool, much like it does in organized crime cases. This reveals a disturbingly jaundiced view of the business community as nothing but egregious tax evaders. This provision is a two-punch combination against small business owners. Not only are they faced with an enormous new tax-reporting burden, but Section 9006 will change the way companies select their vendors. Businesses will think twice before purchasing goods and services from smaller companies if they have to fill out an additional 1099 form for each individual vendor with whom they do business. It will be easier to rely on a single large supplier than to negotiate with a number of small companies. This mandate could not come at a worse time for California businesses. It will prove to be a particular burden for small business owners, who already find themselves in a challenging economic environment. The National Federation of Independent Businesses has estimated that the cost of tax compliance is two-thirds higher for small companies as compared to large ones. Section 9006 is especially devastating for the Sacramento region, where nearly 90 percent of all businesses employ twenty or fewer employees. In a region where unemployment rates are among the highest in the nation, we cannot afford to needlessly encumber small business owners. It is for this reason that I introduced H.R. 5141, which will repeal Section 9006. Small businesses are the economic engine of our nation, creating more than 65 percent of new job growth. Imposing yet another tax burden on them is bad medicine for all Americans. Dan Lungren represents California’s Third Congressional District.