Among the first things members of the U.S. Senate should do when they return from their August recess is approve Nebraska Republican Sen. Mike Johanns's amendment to repeal Section 9006 of Obamacare. Not familiar with Section 9006? That's the provision requiring that every business, charity, and state and local government file a separate IRS Form 1099 listing every purchase of goods or services worth $600 or more. Yes, you read that right, every single purchase of $600 or more gets its very own IRS return. Your office got a $601 phone bill last month? Goes to the 1099. Those Xeroxes your office staff can't live without and cost more than $600 in paper? Goes to the 1099. And so on and so on.
If Section 9006 is allowed to stand, it will mean crushing new expenditures of time and money for at least 40 million small businesses. According to the National Taxpayer Advocate Service, which is an IRS ombudsman, at least 26 million sole proprietors will be required to comply with Section 9006's reporting requirement. Johann reports that one of his small business constituents estimates the provision will add $23,000 to his firm's tax compliance costs. Every dollar that goes to preparing more paperwork for the IRS is one less dollar available for investment in new jobs. Considering the Congressional Budget Office's prediction Friday that unemployment is going to remain above 9 percent for months to come, Section 9006 could not be more ill-timed.
Because Section 9006 will result in a flood of new paperwork for the IRS to process, count on a massive increase in the number of processing errors, revised returns, mistaken fees and penalties, and a hundred other bureaucratic hob-gobblins complicating everyone's life. Here's something else to think about: One of the first things companies will do to cope with Section 9006 will be to consolidate as much of their purchases as possible, meaning more business for Wal-Mart and less for smaller distributors and retailers, with the result that more jobs will be lost.
The Johanns amendment is a straightforward repeal of an ill-advised provision of Obamacare. The Senate is likely to also have before it a Democrat alternative amendment submitted by Florida's Sen. Bill Nelson. The Nelson amendment would exempt businesses with 25 or fewer employees from compliance with Section 9006. That may sound reasonable but it will simply complicate things even more by introducing another wrinkle in the inevitable bureaucratic jumble. The Nelson amendment will contribute to more unemployment as businesses with 25 employees think twice about adding a 26th and thus taking on Section 9006 compliance costs. Section 9006 was a bad idea and it ought to be repealed straight up by passing the Johann amendment.