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Using Healthcare to Destroy Capitalism PDF Print E-mail
Monday, 18 October 2010 01:17

Healthcare - I've written about it before (here, here, and here), but now we see the true extent of the abomination that has become known as Obamacare in the way it will seriously cripple - if not outright destroy the engine that creates jobs in this economy, small business.  It comes from a little-mentioned-during-debate clause about that most innocuous of IRS forms, the 1099.  And it has the power to seriously damage our economy, not to mention be an insidious first step towards a VAT-style tax in the US.



A 1099 is a form that used to be used to document payments to non-corporations.  If you were a business - big OR small - and you paid a non-business/corporation (in other words, you paid an individual) more than $600 throughout the year (a cumulative amount, whether in 1 lump sum, or 52 payments of $11.54 each) then you needed to submit to the IRS and that recipient of funds a 1099 form.  This would document for the Government that income was paid to that individual.


Companies/corporations were always excluded on the basis that they need to document all income and expenses anyway, so there was no requirement to provide such forms between companies.  No more.  Now we have new IRS regulations that require all businesses to provide these 1099s to ANY entity - regardless of tax status or size - for the same $600 amount.  If you're a small restaurant, prepare to send 1099s to Costco where you buy your paper cups, and to your supplier of meat and vegetables.


If you're a CPA, prepare to send 1099s to Staples and Office Depot for the 1099 pre-printed forms you'll buy so you can fill them out for that small restaurant client, as well as your other clients.


If you're Costco, prepare to receive millions of new 1099s to deal with.  And prepare to send 1099s to each of your suppliers for the jeans, Cheetos, and Cetaphil you sell throughout the year.


If you're Frito-Lay, prepare to send 1099s to the janitorial companies who clean your plants, the company that makes your packaging, and Archer Daniels Midland for the wheat and corn you buy.

If you're ADM, prepare to send 1099s to Monsanto, ExxonMobil, and thousands of other vendors you use.


If you're a traveling salesman, prepare to send ExxonMobil, Texaco, BP, Shell, CITGO and others their 1099s for the gas you buy during the year while driving on your trips.  Not to mention to Expedia and the airlines for the purchases you make.

If you're a good boss, prepare to send 1099s to Dominos or Pizza Hut for the pizzas you bought the office throughout the year.


In essence, nearly every business-to-person or business-to-business transaction will now how additional annual tax paperwork required.  Nearly every dollar spent in the US economy will now be tracked by 1099s to the Government. And in doing so, the sheer volume and cost of paperwork for small businesses just increased by an order of magnitude.  For small businesses, estimates are that it will create 200 additional forms for each business, at the cost of $6000.  And this doesn't include the cost of actually filling out and filing those 1099 forms.  For a one or two man operation, that can be a death knell.  It will definitely stifle the creation of jobs which overwhelmingly come from small businesses.


But it goes beyond that.  The Obama Administration - from President Obama on down - is on record calling for a VAT for the US.  This is the most insidious form of taxation, as it is hidden from the taxpayer.  They do not see the taxation - multiple and deep as it is in the chain of the economy - built upon the price.  They only see the price of what they buy increase, and so vent their anger on the businesses as being "greedy" or "evil".  Thus the Government can increase taxation without knowledge by the taxpayer, and deflect the blame to another - get the benefits of taxation without any of the penalties.


To implement a VAT, you first need to know how much is spent between companies, on essentially each transaction.  Requiring 1099 reporting is a huge first step towards that; once the Government knows that Company A paid Company B $601 for widgets last year, then the Government can send a tax bill to Company B for VAT% of that specific set of transactions.  Rather than being a tax on overall profits of the company/entity, it will be on each transaction.


And, as one would expect, small businesses will bear the biggest brunt of this nightmare.  Not only from the absolute increase in reporting and form filing (double it again for VAT implementation), but the anger of the consumer.  Small businesses typically operate on smaller margins and are less able to defray compliance and reporting costs across large organizations.  As such, they inherently pass on more of their costs to the consumer.  And if the VAT becomes a significant cost, then that is passed on more to the consumer.  Driving the consumer away from those smaller, more expensive solutions to the bigger, cheaper options.  Good bye job growth!


How this is supposed to help healthcare, I haven't a clue.  Letters sent to my Congressional members (both Senators and my Congressman, all 3 of whom voted for Obamacare) refused to answer.  Apparently requiring businesses to report essentially all transactions between themselves, and prepping the US economy for a VAT, is fundamental to making sure the uninsured receive their newly-found God-given "right" to free healthcare.  We must punish small businesses beyond just mandating they provide health insurance; we must cripple them with overwhelming paperwork requirements and ultimately a VAT simply as a means to control - for the fewer businesses there are, the fewer businesses that must be controlled/overseen.


Ultimately, the over-reaching Obamacare bill will bring about a significant change in the way business is done in the US.  The 1099 requirement will significantly stifle our jobs-creation engine, and guarantee another 20 years of 9+% unemployment, while allowing the Government ever-more taxation and regulatory control, further moving us from a capitalist system towards a fascist State.  As bad as it was before, it will only get worse.


Here's hoping enough conservatives and GOP members are elected in November 2010 to overturn at least this one part of the abominable Obamacare bill.

Last Updated on Monday, 18 October 2010 01:56