Bad as this provision is in itself, even worse is the broader idea that such items should be "slipped in" to omnibus statutes that are so indecipherable that no reasonable legislator or member of the public can know all that is in it before it becomes law. It is indecent that such items should pass and get signed into law without meaningful debate as to their implications and without any form of public scrutiny whatever. In the meantime, we the taxpayers are stuck with the consequences.
As an entrepreneur who can start his business in many countries around the world, I'm wondering why on earth, literally, I would want to start another one in the U.S.
I don't go into business to fill out paperwork and keep track of ridiculous crap like this. I go into business to generate revenue and make the lives of my customers and others around me better. This kind of law makes my life worse. Perhaps they want fewer businesses to compete with their big corporate donors.
This year, on the IRS tax form, where it says, "I attest under penalty of law that this information is true and correct [or whatever]." Well.. I can't actually sign that because it's impossible for me to know what I can deduct, what I can't, what I should report, etc... If the IRS wants my money, let them come and get it. I just refuse to put up with this crap anymore. It's absurd.
I'm wondering why on earth, literally, I would want to start another one in the U.S.
The US is still in the top 10 list of countries with the fewest headaches for starting a business. In addition, it's the biggest market for almost everything. If you want to sell in the US (which you almost certainly do) you'll have to establish a business entity there, anyway.
The EU isn't really a single market. While Amazon.com, Yahoo, Google, MS and others were able to start with a single product or service for the entire country, they each have many multiple offerings in various EU countries.
You can't just make a quality OS or a website in English and start selling all over Europe. You can do that in the US and be a market leader in every state.
That's not actually true. It's [arguably] a single market, but it's not a single currency - large parts of the EU do not use the Euro (Britain, Sweden, Denmark and all of the newer entrants to name a few - it's only I use by 16 of the 27 member states).
Bingo. I spoke with an entrepreneur at PyCon who started his company in Singapore, not only because of the IRS, but because Singapore is happy to give a visa to anyone in the world he wants to hire.
I don't think the calculation for "economic freedom" works the same for HN-ers. All of the places above the US have either significant political problems (China, Singapore) or are much worse for startups.
I would gladly move out of the US, if there was someplace significantly better. There isn't right now.
Regardless of what you call yourself on the Internet, someone's going to want to tax you. Sometimes I wish I could just move "online" and not have to worry about issues like borders, countries, taxes, and governments, paying for services as I need them and incurring no burden on anyone that I don't pay for directly. Until that becomes possible I'll just do the best job possible to be accurate and honest with my finances. Alas, bridges to nowhere have to be funded somehow.
Edit: Not to mention that any country that the Internet's light pipes run through will want to control those pipes, pass laws limiting what can be done with them, etc.
Infrastructure costs have to be paid somehow. Though a lot of the money is squandered on crap like 'bridges to nowhere,' there are other more deserving projects that languish (like maintaining our current bridges/infrastructure).
The economic freedom of the world reports by the Fraiser institute provide rankings based on things like costs of tax compliance, respect for contracts, legal systems, etc.
I think this is a one-sided argument: So you want to make money and make the lives of your customers better, and to do that you feel free take advantage of the functions of society around you but feel no need to contribute to the running of those functions....
If government really is a net detriment to your business, why don't you move to a place that has no functioning government (like Somalia) and see how good it is to run a business there.
The opposite of the U.S. is not what I'm talking about. I'm talking about a society that rewards creativity, pragmatism, and the entrepreneurial spirit by making it as easy as possible to run a business.
Laws like this do the opposite. They add resistance to independence. There will be people who say, "All this paperwork is a nightmare. It's easier to keep my day job." And they'll make more money in the short term, so this law is counter productive in a capitalist economy.
If capitalism is what made America great, then laws like this are making America not great. The politicians are making lives more difficult for everyone else and that means the business people who make this country great, or have for quite some time, will simply leave.
In a world of free trade, we -- individuals -- are free to do business anywhere. I can easily go to Canada and that's what will start happening if America continues to display this kind of arrogance within the leadership.
Well, for now. If there are people who use the economy as a basis to keep immigrants from flooding in, just imagine the reaction if citizens start flooding out.
In all fairness, the "[or whatever]" you said above includes "to the best of my knowledge". So you can sign it unless you are aware that something is incorrect.
From my own past experience of being a business, and of working with businesses, this is largely-unjustified alarmism. You already wanted to 1099 anyone you'd done that much aggregate business with, since it provided an extra form of documentation of your own (deductible!) expenses.
It is amazing to me how many critical aspects of an open democracy are dependent on rules of house/congress/parliament.
This sort of unrelated/obfuscated clause insertion and the 60-vote requirement to defeat a filibuster are two prime examples.
Will there have to be constitutional amendments saying1) bills must be clear and address only one topic, and 2) simple majorities shall always rule, expect in pre-specified cases, and no parliamentary rules shall override simple majority in letter or in spirit.
Will there have to be constitutional amendments saying1) bills must be clear and address only one topic
Random historical tidbit: the Constitution of the Confederacy (for non-Americans: the Southern states which seceded during our civil war) had this requirement built in (one subject per bill, and the subject must be clearly stated). It also had a line-item veto, and placed strict limits on federal spending.
Of course, it also had text permanently establishing slavery...
My goodness, could you imagine it? The entire Bill of Rights would fit in the preamble of Amendment 28... quite possibly the entire Constitution as amended. (Because we all know Congress isn't serious about something unless it produces a bill measured in thousands of pages... and stop questioning their wisdom in creating such bills, you ignorant plebes.)
I've often wondered if there wasn't some way to make it illegal to create riders on bills. I realize we're talking about lawyers, but not even a lawyer could realistically claim that this 1099 crap has anything to do with health care. It should automatically be thrown out, and the person responsible for slipping it in should be automatically barred from penning legislation.
Rule #1 from history class: only trust the primary source. And since none of the main articles about this issue seem to be quoting the primary source in full, here you go:
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) In General.--Section 6041 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsections:
``(h) Application to Corporations.--Notwithstanding any regulation
prescribed by the Secretary before the date of the enactment of this
subsection, for purposes of this section the term `person' includes any
corporation that is not an organization exempt from tax under section
501(a).
``(i) Regulations.--The Secretary may prescribe such regulations
and other guidance as may be appropriate or necessary to carry out the
purposes of this section, including rules to prevent duplicative
reporting of transactions.''.
(b) Payments for Property and Other Gross Proceeds.--Subsection (a)
of section 6041 of the Internal Revenue Code of 1986 is amended--
(1) by inserting ``amounts in consideration for property,''
after ``wages,'',
(2) by inserting ``gross proceeds,'' after ``emoluments, or
other'', and
(3) by inserting ``gross proceeds,'' after ``setting forth
the amount of such''.
(c) Effective Date.--The amendments made by this section shall
apply to payments made after December 31, 2011.
In this case, the primary source appears to be indecipherable to anyone except for a lawyer who already understands section 6041 of the Internal Revenue Code of 1986 and all of the amendments that have been applied to it since it was enacted, so I'm not sure what good you're doing by quoting it.
Maybe we should try to have them put the statutes into git so we don't need to waste lots of time looking at the diffs.
In this case, the primary source appears to be indecipherable to anyone except for a lawyer who already understands section 6041 of the Internal Revenue Code of 1986 and all of the amendments that have been applied to it since it was enacted, so I'm not sure what good you're doing by quoting it.
Most open source code is indecipherable to anyone but a programmer, but seeing it can at least provide some reassurance. Most political and legal processes are indecipherable or opaque to the general population, yet attempting to understand them is a positive thing.
Having the primary source to hand is useful to ensure that you're not having the wool pulled over your eyes by a biased secondary reporter. A news site could easily misinterpret legalese.
Cato is hardly the National Enquirer, but even so, they only cite a) a tax research paper that costs $75 to obtain, b) a tax CPA whose words are not reproduced anywhere else, and c) the venerable "Air Conditioner Contractors of America." There aren't enough references to primary sources to rule out a less-than-sincere attempt at shaping public opinion (not that that is necessary the case, just that it could be).
There's a lot to be said for trusting news sources in order to save time, but taking a look at the primary source yourself in many instances can prove illuminating, and is certainly a responsibility for anyone who's going to proceed to get upset/angry or campaign against whatever the news/article is covering.
Flip back through the pages of history: during the few hundred years that the Roman Empire was collapsing, the tax collectors became so violent and generally oderous that in some cases Romans living on the geographic fringes of the Empire welcomed invaders because a change of government looked good to them.
I expect the same to happen in the USA. Local governments and the federal government need money to operate on. In the best case scenario, two things would happen: drastically reducing government spending on the military and not-so-essential social services, and, slightly raising taxes. Neither of these reasonable things will get done.
There were also related exactions like forcing people to continue the carrer of their father, because of course that type of job was heavily taxed.
This is also thought to be the start of European feudalism. As things broke down and Rome's ability to enforce its will waned, becoming the vassal of a local boss was a way to escape this mess.
It's huge so it's hard to tell who was specifically responsible, but it was sponsored by Sen. Reid and cosponsored by Senators Dodd, Baucus, and Harkin
No, it's not. Last time I was in business for myself, 1099s were more common than physical handshakes. Hell, I haven't been a "business" (in the sense of deriving most/all of my income from my own ventures as opposed to salary) in about five years and I still chew through at least a handful of 1099s every year. They're good documentation, both for yourself and for the IRS, when trying to figure out and then deduct your expenses.
This won't last. One truth of politics is that pissing off a few people is easy, pissing off everyone is hard. (That's how the rich and youth end up getting screwed all the time). If you force this on literally every single company and contractor in the country you will be losing a lot of campaign donations in the next cycle. If it comes into effect as described it will be modified/repealed within a year.
Worse, it's like diffs for congress without any version control:
"Title Blah Section BlahdyBlah(c)(4) shall be amended as follows: by striking 'shall not' and replacing it with 'may, phase of the moon permitting', and by striking 'foobars' and replacing it with 'all foobars, foreign and domestic, and any bazes and quuxes appertaining thereto'."
The language of the Constitution and its amendments is wonderfully tacit and accessible. Why can't statute law be so? Oh, right, because then it would obviate many uses for lawyers. Can't have that...
And it's not just for $600 or larger transactions, it's an accumulation of said transactions for a tax year. This is going to be a paperwork nightmare.
Well to be fair the original way of doing it was an accumulation over a year, they simply expanded what they were covering. Not saying I am happy about it.
I know you are joking and this is something I think about. I heard about a protest at JP Morgan where people where chanting and wanted to deliver a letter to the CEO.
However, I really hope it isn't a violent incident. We don't need a war here anymore than we need a war in the middle east. Civil wars are bloody and costly and horrible.
Agreed. I promise to only carry a torch and take notes of anybody I see with a pitchfork. :)
I read an analysis once that said that the problem wasn't that representatives weren't responding to the people's wishes, it was that the mob basically ruled. This is why you have governments making more promises than they can pay for and the continuous search for the current Dr. Frankenstein to go storm his castle.
Not sure of the veracity of that analysis, but I found it both counter-intuitive and interesting.
We're technical guys. We should know complex systems. We should know how people design and interact with complex systems.
I believe our system of government is becoming legacy code. That's not by any means to call for violence. I simply mean that the system has become too complex for most practitioners to understand, too complex to micro-manage, too complex to be able to design results by committee, and too complex to be able to maintain effectively.
Beats me where you go from there, but after seeing a dozen failed complex computer systems, I know a failed system that is spinning off into complexity land when I see one.
I also agree. Vote them all out. Enact term limits now, before we start a new generation of Earls and Dukes -- professional politicians with a lifer mentality.
I don't know anything about this mandate, and when I tried to google for more information I could only find citations on right-wing blogs. Nothing in any news source, nothing from an independent source, nothing.
Before everyone gets up-in-arms about this, it might be wise to at least try to seek out some real citations. The Cato study may be correct, but it's impossible to tell from the linked story.
The first blockquote from Thomson-Reuters Ria refers to the reconciliation bill section that I linked to via OpenCongress. For tax purposes, RIA is a very good source and is certainly independent. Unfortunately, it appears like you can't read the report for free. However, reading the bill text it does look like the they are saying 1099's are no longer for wages alone.
That looks like it's a pretty good starting point. I just get nervous when I see articles talking about the impacts of a bill and their only sources are other articles talking about the impacts of a bill, and not the bill itself.
Although these changes were passed in the new health bill, they are not new ideas. The White House and Congress have been trying to require corporate reporting for years. The measure was included in budget proposals issued by Presidents Bush and Obama.
"This has bipartisan support," says Doug Rogers, director of consulting services at IRSConsulting. "It was never a matter of if, but when."
Or Home Depot, or the grocery store, or your favorite restaurant, or...
I understand that the law applies to corporations, but if you take your company out to lunch once a week a handful of times on company money, assuming your company has 10 people or more and your restaurant is ten dollars per plate, you'll have to file a 1099 if you go there for more than six weeks. Or if you buy more than $600 worth of equipment in a year from Wal-Mart or Home Depot or anything like that, you'll have to file a 1099 for them, too.
That's how I understand it anyway. Someone please correct me if I'm wrong.
Time to get rid of all federal taxes except a national sales tax. Our Rube Goldberg tax system has got to be the single biggest drag on economy. Imagine the money that goes into complying with taxes doing something constructive.
People just don't seem to get it: We have a byzantine tax code to made people do X instead of Y and to not do Z in favor of Q.
Congress wants to do these things, and the tax code is the easiest way to do them. Congress will STILL want to do these things even if you do fair tax.
If the fair taxers get their way, we'll likely end up with income AND vat 10 years down the line. Ech.
And you realize: Fair Tax would ALSO cover all investments? Buy a house: 40% to the governement. Buy stocks: 40% to the governemnt, etc.
"Congress wants to do these things, and the tax code is the easiest way to do them. Congress will STILL want to do these things even if you do fair tax."
Well, I think that's a step backwards, but at least that would mean you were willing to admit that what we're doing right now isn't working any more. [immediate edit:] Most of us have too much knee-jerk nationalistic pride to think about changing the system on a fundamental level.
there's nothing like going all meta during a discussion to kill one's political power ;). Arguing over the details is a lot safer than looking at the big picture, I would think.
Bhutan had a king that everyone loved. He decided that his country would degrade under a new king after him who may not be so benevolent, so he instituted a Democracy.
The country has since degraded. Families have broken up over arguments about who should be elected, which laws should be passed, etc...
The current Fair Tax legislation is tied, not merely to abolishing income taxes, but also to repealing the 16th amendment. Last I read about it, it would not go into effect, even if it passed, until Congress lost all ability to levy income tax at all.
And FairTax has a pretty narrow conception of what constitutes consumption. Certainly not stocks, as you suggest. Investments in general are excluded. And any used items--used homes in your example--are excluded.
This may be true, but how sure are you that the proponents of the FairTax will keep control of the process to ensure that outcome?
The income tax gives politicians tremendous power over the entire above ground economy and almost all the population, why would they give that up?
Since when have tax reforms in the West resulted in a wholesale replacement of one type of tax by another, instead of a layering? If you could point to a few exceptions I'd be interested.
It's not a question of history, but of the way the bill is written. In stark contrast to the law that is the topic of this thread, the bill has been online to view for years, and even has a summary in plain english: http://www.fairtax.org/PDF/PlainEnglishSummary_TheFairTaxAct...
How do I know the income tax will really be gone? Section I of the bill abolishes all income, estate, payroll and gift taxes, repealing sections A, B, and C of the Internal Revenue Code in their entirety. Sec 301 disbands and defunds the IRS, and requires that all its records be destroyed in a year. And sec 401 contains a sunset clause that negates the whole thing (both the sales tax and the abolishment of the income tax) if the 16th amendment to the constitution is not repealed within seven years. Thereafter, any attempt by congress to bring back an income tax would be, not merely unpopular, but actually unconstitutional. And they'd have to build up the infrastructure from scratch.
Whether or not you think the Fair Tax is a good idea (and obviously I do), it's a model for how law ought to be made. In public, with a lot of visibility and discussion up front, a lot of time for question and answer, the full technical details exposed. The bill is not a tangled mess of amendments, but a well thought out and cohesive whole.
Ummm, what magic set of legislative rules would allow this bill to get a single up or down, no amendments, vote?
There's also the inconvenient fact that no Congress can tie the hands of a future Congress.
The only way to accomplish this in our system would be to get a single amendment to the Constitution that would simultaneously repeal the 16th Amendment and replace it with the FairTax, and then get 3/4ths of the states to ratify it.
It does apply to new houses, but you can't consider the sales tax in isolation. It's offset by the fact that you get to keep your entire income. Not just the portion on the pay stub, either; your employer would no longer owe payroll taxes. In general, you would get some or all of those, too.
Financing a 30% more expensive house and paying for it out of a 30% bigger paycheck would be somewhere between neutral and a win for most people.
It makes a silly imbalance between new and old properties. The immediate second you buy that new house, it's price drops in value 30%. So you have little incentive to buy new as you can get 30% more house for buying slightly used.
Doesn't seem to stop people from buying new cars. ;)
Nah, the sale of a used house is a totally private transaction. It's not as though there's a magical base price for a house of that size, and then a tax. It'll be sold for whatever the seller can get for it. If it's practically new, it might be the original price including the tax. Heck, it might be higher.
The original builder doesn't get to keep as much of the retail price as a subsequent private owner would. That's the distinction between new and used.
Nor is it as though buying a fixer-upper avoids the tax entirely. Materials and labor for renovations are taxed. That can be a significant portion of what's put into a home.
There's nothing inherently complicated about a progressive income tax; it's the fact that we insist on having a deduction for mortgage interest, R&D, asset depreciation, hiring new workers and hundreds of other things that all individually might be things we want to encourage, but together add up to a complex and cumbersome system.
A sales tax is regressive. The lower your income, the higher your tax burden as a percentage of income. Even the fair tax understands that which is why most versions of it has a huge tax credit per year.
A sales tax doesn't have to be regressive. If you tax luxury items while not taxing essentials you'd probably get an even more progressive system than we have now.
That's true, but making a sales tax progressive creates the same complication that exists in the current system, only with even more incentive for corporations to lobby for special exemptions, reclassifications, credits, etc., for the products that they produce.
It wouldn't be that difficult. Lots of states that have sales tax don't tax food. Simply make the essentials untaxed or any product of a particular category under a particular price untaxed. We have these measures in the current system. If you earn under $6,000 you pay no tax.
The benefit is that you take the burden off the individual and leave it all to computers. There's a "Taxable" flag and the equation is simple. IF (item.category == Food or price < (select minprice from categorylimits where categorylimits.category = item.category)) then tax = 0 else tax = 0.25 * item.price
Exactly; all the companies who make goods that might conceivably qualify for an exemption start spending a lot of their focus on getting that (since it's a big discount if they do) instead of focusing on providing the best product/best price/whatever.
The tax system is complicated not because of the taxes themselves, but because of all the tax credits created to incentivize behaviors.
The vast majority of tax cuts are really just government spending in disguise -- pork for a special interest group that gets allocated by the constituents' accountants instead of in a spending bill, and adding directly to the national debt instead of through the budget.
This nails exactly what wrong with the tax system. In the history of civilization, the ebb and flow of empires has always consisted of tax disputes wedging factions into alliances who fight for more control. Taxes cause this process! It doesn't matter what the tax is, who pays, or who is paid, just that there's all this extra drain on the natural activity of flowing capital.
The logic is Microecon 101: Taxes are the equivalent to the a transaction+holding cost of using Uncle Sam's currency. Use gold, well,
then you're paying to store and transport it. If Uncle Sam was smart about his paper, he would make the Federal Reserve into Federal PayPal, having the Federal Gov't charge, oh say, a 0.001% transaction fee on any exchange of US currency. Same difference, amirite?
It simply comes down to convenience. It may not be technically illegal to make cash payments for services or goods, but this would mean that you have to track all such payments and who the payee was, in case you paid more than $600 to a given entity. At which point there's enough paperwork already that cutting a check, or authorizing a funds transfer is easier.
So while it wouldn't necessarily make cash transactions illegal, it would make them stand out more and be scrutinized more carefully.
That was my thought too. If I buy a car, do I have to send the dealership a 1099? Worse yet, if I spend $601 on gas at the same gas station in $30 chunks, do I have to keep track of the receipts at the end of the year and send them a 1099? What if it's at three different gas stations all owned by the same company. How do I know? Ask for their EIN every time I pay? This would be a complete disaster. Surely this isn't what the bill actually requires?
And, yeah, this would get into quite a mess. If your company was large enough and paying for the gas, they'd pretty much have make you use a card that would allow them to consolidate the payments with all the other company cars to know if they have to send 1099s.
You should consider that while some laws are not enforced, it's yet another lever that the government can use against you. In this case, it would probably give the IRS even more broad reaching powers to audit people and businesses for not being compliant.
But what counts as a business. If I write a book and get $5000 in royalties on a 1099, do I have to send Amazon a 1099 for the computer I bought to write the book?
Unless you establish a "business", however that's defined by the Congress and IRS (Schedule C at a minimum? It's been too long since I filed one.), and it pays for the computer, no.
What are the penalties of non-compliance? If you just don't bother with the 1099's, what happens? Fines? More taxes? That's really what we need to know. If there are no penalties, there is no law.
Hopefully this means Apple and AdMob will finally have to send me a 1099 for my iPhone app payments. I'm really sick of gathering the numbers by hand, reporting them as individual income, and then praying I don't get audited and have to provide copies of... CSV files from iTunes Connect that aren't even in local currencies?
Could we maybe have a less partisan analysis? I mean, FTA (no joke):
For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry? The business sector is the generator of America’s high living standards, but most federal legislators just see it as a kitty to be raided or a cow to be milked dry.
Won't make a difference, I gather. E.g. previously if you were a business and paid rent to a landlord who was a individual (e.g. he reported that income on his individual income tax forms) you'd have to file a 1099. Now, in all cases, you'll have to file the 1099 (well, unless the rent is less than $600 per year).
All payments after Dec 31, 2011. FWIW, there's already a bill in the House to repeal this section (introduced the same day the article was posted it seems):
http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5141:
I'm having a hard time believing this is true. The language in the bill itself is totally indecipherable (to me), but the only people claiming it would be a huge burden have a clear ideological or political bias.
Thousands of pages of barely parsable legalese, constantly changing in different places to keep different politicians on board, the final copy rammed through before the ink dried, what could possibly go wrong? From an engineering perspective the health bill was a QA nightmare.
Not at all. This bill is notable for its complexity, scope and unpopularity. Day by day people disliked it more and more and everyone involved wanted to get it off the TV as soon as possible. When a bill is more popular there is less thrashing. People don't need to desperately alter things to appease individual politicians. Each of those patches is essentially a hack to cover one corner case. This bill is full of them. Popularity equates to a more stable code base. Politicians are also more productive when doing something popular. They are less likely to "grab what they can" and more likely to contribute to the bill's success and thus their re-election.
We've all been there... A few nights before a release we realize we have an unmaintainable mess and the deadline needs to be pushed so we can go back to square one. This is what happens when you release anyways.
I think it's pretty average. Some are better. Some are worse. The USA PATRIOT act wasn't even available to read, even for the Congressmen themselves, before the voting.
Rammed through, as in, legally voted for by two legislative bodies and signed by the President, the same way every piece of legislation has ever been since the beginning of the USA?
