[Congressional Record (Bound Edition), Volume 156 (2010), Part 9]
[Senate]
[Pages 12803-12804]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       INCREASED PAPERWORK BURDEN

  Mr. JOHANNS. Mr. President, I rise today to speak about something I 
think is enormously important in terms of our businesses and job 
creation. There are many unintended consequences contained in the 
health care bill that was recently passed, but I think one of the most 
egregious is the effect on small businesses that are, by all agreement, 
the engine of our economic growth. In fact, various analyses have been 
done, and they conclude that 65 percent of the new jobs created come 
from the small business engine in our Nation.
  Section 9006 of the new health care law will have a profound impact 
on small businesses in Nebraska--but not just Nebraska, across this 
great Nation. Beginning in 2012, if a business purchases more than $600 
of goods from another business, it will be required to provide the 
business and the Internal Revenue Service a 1099 tax form. Previously, 
such disclosures were only required for the purchase of services. Now 
routine business expenses will be subject to an increased paperwork 
burden at tax time.
  Let me give some examples of the impact that is going to have. Think 
about the phone costs for that small business, Internet, simple office 
products, even the cost of shipping goods from point A to point B now 
are going to generate this requirement of a 1099 tax form.
  Back in my State what that means is, if a rancher buys $100 worth of 
feed every month, then that rancher is going to have to submit a 1099 
to the feed store and then file it with the IRS. If the restaurant 
owner up the street buys $600 worth of napkins or ketchup or menus or 
garbage bags over the course of a year, guess what. They start building 
that stack of 1099s.
  Think about how that paperwork is going to burden that small 
business. This includes transactions with corporate as well as 
noncorporate entities. It also applies to government entities at the 
local, State, and Federal levels.
  Businesses in my State, but I am confident across the country, are 
absolutely up in arms about this provision, and they should be. Last 
week, the National Taxpayer Advocate, an Internal Revenue Service 
ombudsman, issued a report with some very startling admissions. This 
provision, they say, will affect 40 million businesses, including about 
26 million sole proprietorships not counting farms. That is 10 times 
the number of job creators than the administration asserts will benefit 
from the small business tax credits.
  We need to look for ways to help small businesses, not hammer them. A 
Nebraska small business owner wrote to me recently. This business owner 
pointed out that he owns three small town lumber yards and wanted to 
weigh in on this provision. I am quoting from that letter:

       As you know, it is difficult to survive as a small business 
     in rural communities. . . . Putting on additional burdens 
     involving time, paperwork and money does not help.

  That small business owner went on to say this:

       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 of the 1099 proposal.

  I could not agree with this businessman more. This new provision is a 
one-two punch for our small businesses. It will require them to spend 
more money and time on paperwork and reporting. It does nothing to 
create jobs other than maybe at the Internal Revenue Service. This 
increases the overhead costs of staying in business. It will require 
them to spend more time and more money on paperwork and, no doubt about 
it, it is going to be tough for them to comply with the standards set 
so low at $600.
  Expenses to comply with Federal tax compliance regulations are 
already astounding. According to the Small Business Administration, 
small businesses that employ fewer than 20 people spend on average 
$1,304 per year per employee. In contrast large companies spend on 
average $780 average per year per employee. So we can see the IRS tax 
compliance regulations already disproportionately disadvantage small 
businesses compared to large companies. Why are we adding insult to 
injury with this new requirement? We should be doing all we can to 
reduce overhead costs, help them to be more competitive not increasing 
their burdens. Why on Earth are we slapping Americans with more 
mandates that are counterproductive? Congress should be reducing 
businesses' overhead, helping them stay competitive.
  Section 9006 creates a perverse incentive for companies to 
consolidate suppliers. Think about that. Guess who loses in those 
circumstances. Our small businesses, the same small businesses that we 
are counting on to create the new jobs and lift us out of this 
recession. Larger, more diversified suppliers will be more attractive 
as a way for the purchaser to reduce the paperwork. The fewer different 
transactions that total $600 or more, the less paperwork. So the little 
guy loses.
  The National Taxpayer Advocate said recently they are ``concerned 
that the new reporting burden, particularly as it falls on small 
businesses, may turn out to be disproportionate as compared with any 
resulting improvement in tax compliance.''
  The Advocate report lays out several reasons this new provision of 
the law is causing so much concern. The report questions whether the 
new data will lead to better tax compliance. ``The IRS will face 
challenges making productive use of this new volume of information 
reports.''
  For example, the new 1099's will not match tax returns due to 
returned goods or other technical reasons. The report predicts the IRS 
will improperly assess penalties for not filing forms. Again, I am 
quoting:

       It must abate later, after great expenditure of taxpayer 
     and IRS time and effort.

  Finally, a chilling prediction in the report says:

       Small businesses that lack the capacity to track customer 
     purchases . . . may lose customers, leaving the economy with 
     more large national vendors and less local competition.

  It is clear that section 9006 attacks small businesses across this 
country. That is why I am introducing legislation to eliminate this 
barrier. My effort, which I call the Small Business Paperwork Mandate 
Elimination Act, would fully repeal section 9006 of the health care law 
and eliminate this ridiculous paperwork burden. I urge my colleagues to 
support me in this effort. Overburdening our job creators is not good 
policy, especially in this time in our economic recovery.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. WHITEHOUSE. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

[[Page 12804]]


  Mr. WHITEHOUSE. Mr. President, may I speak for up to 15 minutes as in 
morning business?
  The PRESIDING OFFICER. Without objection, it is so ordered.

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