Small Business Paperwork Mandate Elimination Act
By Mike Johanns
I don’t know a single person who would deny that businesses face a mountain of paperwork to comply with a whole host of laws, most significantly tax laws. Remarkably, the recently passed health care law will dramatically increase that paperwork mountain, unless we stop it.
Section 9006 of the new health care law requires that all businesses, charities and local and state governments file 1099 tax forms if they purchase $600 or more in goods from another business throughout the year. This includes supplies, shipping costs, phone and Internet services – you name it – all in the name of compliance.
Now consider this: The National Taxpayer Advocate Service, a division of the Internal Revenue Service, reports that the IRS “will face challenges making productive use of this new volume of information… In our view, 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.”
Why would we pass legislation that would knowingly make the government more inefficient and less effective? Nothing about this provision makes sense, including its timing. It baffles me that, at a time when we desperately need to hire workers and grow our economy out of a recession, Washington would pile on a massive new paperwork mandate that would wrap both our government and our businesses up in more red tape.
The paperwork mandate is a double whammy for small-business owners. Not only will their tax reporting burden increase because of additional tax filing requirements, but 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, they will be less likely to work with small businesses.
This provision of the health care law has nothing to do with health care. Moreover, it creates a perverse incentive for companies to consolidate suppliers, cutting small businesses out of the picture. If you want purchases to go only to the giant retailers, Section 9006 of the health care law is for you. If you want vibrant Main Streets where small businesses thrive, then my legislation hits the mark.
The Taxpayer Advocate Service recently estimated that this mandate will affect as many as 40 million American businesses, including about 26 million sole proprietorships, not counting farms. This is 10 times the number of firms the administration asserts will benefit from the small-business tax credits contained in the law. It will create a negative rippling effect across the country and throughout our economy.
A lumberyard owner from my home state of Nebraska recently wrote to me to describe the reality of this new mandate: “As you know, it is difficult to survive as a small business in the rural communities,” he wrote. “Putting on additional burdens involving time, paperwork and money does not help...The building supply industry is struggling to survive the housing and economic crisis, and employers like myself would be severely impacted by the additional costs and paperwork burdens such as the 1099 proposal.”
Small-business owners across the country need support and relief from Congress, not more mandates.
This appears to be a classic case of addition by subtraction. The administration promised that health care reform would help American businesses stay viable, yet this provision actually disadvantages our job creators. It creates more hoops to jump through, more boxes to check, more papers to file and more regulations to meet.
At what cost? It would wrap our job creators up in more bureaucratic red tape. It would wilt the confidence of the business community to boldly grow without fear of future mandates being inflicted by their government. It would further complicate the efficiency and effectiveness of our already inefficient tax system.And it would cut right at the very livelihood of small businesses across the country.
Small businesses create 65 percent of our jobs and have been the foundation of job creation for years. In an economy starved for them, such new burdens are counterproductive and wrong-headed.
The Small Business Paperwork Mandate Elimination Act is simple. In fact, it would do just what it says: repeal this new unjust and unwarranted provision imposed upon American businesses. Proponents and opponents of the new health care law should be able to agree that stifling American business has no place in a health care law, or any law for that matter.
I look forward to advancing this legislation on the Senate floor, and I hope all my colleagues will see the merits in supporting American job creation and rejecting senseless mandates by passing this bill.
About the Author
Mike Johanns, Republican Senator for Nebraska, serves on five committees: Agriculture, Nutrition, and Forestry; Banking, Housing, and Urban Affairs; Commerce and Transportation; Veterans' Affairs; and Indian Affairs. He is the Ranking Member on the Agriculture Committee's Domestic and Foreign Marketing, Inspection, and Plant & Animal Health Subcommittee.