I hate to be cynical and distrustful of my government. But lately it seems to be the only attitude that makes sense. The latest reason - the new rules buried in the ObamaCare legislation requiring 1099 reporting of any business transaction over $600. You don't suppose these rules have some purpose beyond "healthcare reform" do you?
Jeff Cornwall posted yesterday about this issue. This is a huge change in the use of 1099 forms and will generate millions of 1099 forms to the IRS. As Jeff says ...
There is a change coming in 2012, that could drown small business under a sea of paper work. It involves a huge expansion in the requirements to file 1099 forms. Historically, 1099 forms were used by the IRS to capture income paid to freelance workers and other independent contractors. But not anymore. Now 1099's will need to be filed for hundreds and even thousands of transactions entered into by small businesses.
Jeff's post points to some other sources if you want more detail on the regulations.
But my question is WHY! Why has our governing class imposed this new regulation on business? What purpose is served? What purpose is served by the additional costs on businesses of all sizes to conform to these new regulations? What purpose is served by the additional governmental costs associated with processing, auditing, etc. these regulations? And what the heck does it possibly have to do with ObamaCare and the "reform" of the American healthcare system? How is healthcare improved by forcing me to tell the IRS that I purchased $1200 in tea from a wholesaler in Oregon or paid $3000 to a web design firm in Franklin, TN?
Again, I hate to be cynical, and I'm usually the first to make fun of conspiracy theorists, but it seems to me that one distinct possibility is that this regulation is intended to help set the stage for a Value Added Tax (VAT). There has been a lot of buzz out of Washington about the need to generate more revenue to pay down the massive increases in the federal deficit being generated by the Obama administration and its friends in Congress. The favorite means for raising that additional revenue is a VAT. A Value Added Tax works by adding a layer of taxes on top of goods and services at each step in the value chain. For a VAT to work, the tax authorities must have documentation on all of those transactions from business to business to business all along the path to the ultimate final consumer. And what does this new 1099 regulation do? It creates exactly such a paper trail.
If one were distrustful of the motivations of our governing class, one might suspect that having mandatory tax paperwork for every meaningful business-to-business transaction was setting the stage for introducing a VAT at sometime in the near future. If such reporting, or some meaningful subset of such reporting, is already mandated, the government can show how little incremental cost impact the VAT would have on businesses. But one would have to be very cynical and distrustful of our government to believe such a thing. Of course, one also has to believe that our government can think that far ahead on anything, so there is that factor working against my theory.