Monday, May 17, 2010

President Obama promised Americans “health care reform.” So far, “health care form” is more like it. Obamacare is devolving into the Paper Industry Salvation Act of 2010. This new law spans 2,562 tree-killing pages. Far worse, it will force Americans to spend countless, irritating hours completing, transmitting and filing endless reams of federal paperwork.

The scariest news for America’s forests may be a brand-new mandate that will compel each business - from General Electric to the neighborhood handyman - to file an IRS Form 1099 for every business on which it spends at least $600. Form 1099 today applies only to independent contractors, e.g. a graphic artist who earns $1,000 for designing a sales brochure. Come 2012, Obamacare vastly will expand 1099s to sellers of goods as well as services, and not just the self-employed, but also businesses - large and small.

“This will create a two-fold whammy for small businesses,” predicts Rep. Dan Lungren, California Republican, who is sponsoring legislation to repeal this provision. “They will have additional accounting costs that will consume time and money,” Mr. Lungren tells me. “They will be required to keep a running tab with every vendor, all the way from restaurants to anything they buy - a piece of equipment, an airline ticket or a hotel room. And when they reach the $600 threshold, they will be required to file 1099s for each of those vendors.”

“Second,” Mr. Lungren adds, “small companies most likely will see less business. Most people will streamline this process by moving to large vendors. Why go to your local hardware stores, since you will have to keep track of several tabs? Why not go to one big-box store? As for restaurants, why not go to the chain rather than local restaurants?”

An independent contractor, for instance, will find it easier to consolidate his purchases and send one 1099 to Home Depot, rather than sprinkle his spending among smaller outlets, track those expenditures, and then submit multiple 1099s for Joe’s Ladder Company, HammersRus, Kaminstein Bros. Paints and Wally’s Wallpaper Warehouse.

“On average, small businesses spend more than $74 per hour on meeting their compliance obligations, which represents the most expensive paperwork burden that the federal government imposes on small business owners,” states Brad Close of the National Federation of Independent Business. Imagine that a small company sacrifices the equivalent of just two hours each month to perform these calculations and file 1099s at tax season. Every year, this would cost - get this - $1,776.

Many struggling businesses would waste even more money on this fresh headache. Every dollar spent to spew out 1099s is one less dollar that could pay new employees, train existing staffers, or develop new products, services and markets.

In perhaps the most surreal aspect of this idiotic new drag on the economy, the IRS has yet to write the specific regulations to govern this measure. It is waiting for guidance from none other than the Secretary of Health and Human Services.

What does this ticker-tape parade of paperwork have to do with overhauling the U.S. health care system? Yet again, here comes Uncle Dracula to suck every corpuscle of blood from any available taxpayer to finance Obamacare. Over 10 years, this measure would extract $17 billion from the jugulars of America’s already anemic small businesses.

Atop this, the Galen Institute’s Grace-Marie Turner reports that Obamacare will require employers to evaluate their health plan’s affordability by calculating each employee’s household income, not just that worker’s individual wages. This likely will involve, at a minimum, collecting income declarations from every staff member.

Even more paper will fly as employers investigate whether their employees have oxymoronic adult children between ages 18 and 26. If so, companies must determine whether these “kids” carry their own health insurance or remain on their parents’ plans.

Congress should halt this growing misery and repeal Obamacare. If not, it should launch a new program to treat paper cuts.

Deroy Murdock is a syndicated columnist with the Scripps Howard News Service and a media fellow with Stanford’s Hoover Institution.

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