When the Democrats rushed through Obamacare last year, they included a section in the bill that, if enacted would have caused a paperwork nightmare for millions of buinesses, farms, charities and churches. For some reason, they didn’t see a problem with a rule requiring businesses to file 1099 tax forms with the IRS every time they spent more than $600 with a single vendor.
Democrats claimed that the point of the legislation was to close the “tax gap”; a nice sounding phase that is pretty much meaningless. While Democrats and more than a few Republicans believe that businesses, particularly Federal contractors, are shortchanging the government by not paying their fair share of taxes, the truth is, they couldn’t more wrong. This is also the failed rationale that gave us the 3% withholding tax boondoggle.
The 1099 reporting element in Obamacare made it through Congress last year on a tidalwave of overwhelming distrust of businesses and corporations. Obama and the Democrats argued loudly that corporations and big businesses were stealing billions of dollars every year.
Soon after Obamacare passed, with the 1099 reporting element intact, Republicans and the business lobby worked to repeal it. Meanwhile, Obama, Tim Geithner and HHS Secretary Kathleen Seblius defended the 1099 rule as a good-faith provision to close the tax gap.
After the 2010 election, Democrats (and Obama) saw the light and slowly began to back off their support of the 1099 rule. And recently, all but 17 Democrats in the Senate joined all Republicans in voting to repeal the 1099 reporting rule. The issue now moves to the House — where it will pass easily.
