A very small item in the recent US Obamacare legislation will mean a huge increase in tax compliance paperwork:
Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.
[. . .]
But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.
The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.
Taken together, the two seemingly small changes will require millions of additional forms to be sent out.
“It’s a pretty heavy administrative burden,” particularly for small businesses without large in-house accounting staffs, says Bill Rys, tax counsel for the National Federation of Independent Businesses.
Eliminating the goods exemption could launch an avalanche of paperwork, he says: “If you cater a lunch for other businesses every Wednesday, say, that’s a lot of information to keep track of throughout the year.”
For a one-person business, this change could double or triple the tax-related paperwork right there. Given that a lot of people have started new businesses in the last couple of years — partly because big businesses downsized and haven’t been hiring again — this will be a significant discouragement to self-employment.
H/T to Virginia Postrel for the link.
Update: It may not stand: there’s a bi-partisan coalition in the Senate to repeal that provision.

General Motors has emerged from bankruptcy and taken initial steps to repay its federal bailout money — two good bits of news, although the taxpayer remains on the hook for many billions of dollars extended to GM. Specialty electric-car maker Tesla Motors also had a successful initial public offering and is being celebrated as some kind of testament to the entrepreneurial spirit. For Tesla, this is pure PR.
The other absurd vehicle in development is the Terrafugia flying car, which just won exemption from a federal airworthiness safety standard. Surely you will feel secure when a flying car exempted from safety standards buzzes your neighborhood, especially when you learn that another federal waiver means the pilot needs only 20 hours of experience before he or she takes off. Maryland, my state, requires 60 hours behind the wheel before receiving a driver’s license. But fly after 20 hours? Hey, wheels up! Surely few of these accidents-looking-for-a-place-to-happen will sell on the free market. So — scan the horizon for a bailout. The Terrafugia company just got a piece of a $65 million military contract to research a flying Jeep-like thing; don’t hold your breath. If patriotism is the last refuge of scoundrels, defense contracting is the last refuge of bad business plans.

