17 November 2011
Last March's "Patient Protection and Affordable Care Act" included dozens of tax provisions designed to help pay for substantive healthcare reform. But one requirement raised howls of protest almost immediately. Specifically, the law mandated that all businesses, tax-exempt organizations, and federal, state, and local governments file a Form 1099 at the end of the year for any business they spend more than $600 with. (We're talking 26 million sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farms, a million charities, and 100,000 government entities.)
The goal was to help pay for healthcare reform by making it harder for businesses to underreport their income. The problem, unfortunately, is that it was the bureaucratic equivalent of using a howitzer to kill a fly. Let's say Joe the Plumber wants to make an honest buck in a tough economy. Now he's got to collect taxpayer identification numbers and file 1099s with every gas station, plumbing supply shop, equipment rental store, and quick-lube shop he patronizes during the year. Oh, and he'll also have to track the 1099s he gets from all his business clients!
Washington cranked the pain even higher in September with the Small Business Jobs Act, extending the 1099 requirement to landlords filing Schedule E.
House Republicans drew a bullseye on the 1099 requirements before they even took office this year. President Obama agreed and called for repeal in this year's State of the Union Address. So on April 15, appropriately enough, Washington made life just a little bit easier for those of us who work and pay taxes in the real world.
In Economic News 
ING announced on 11/3 that they were going to cut 2,700 jobs or about 10% of their workforce. ABN AMRO is set to shed 2,350 jobs or 9%. "Income is coming under pressure in the current environment. We need to make sure we remain competitive," ING Chief Executive Jan Hommen said on a conference call with analysts. My 2 cents: We have seen this across the board the last 3 years since the 2008 financial crisis became evident and hit the stock markets. Companies saw their revenues dramatically decrease and the only way for them to stay as profitable, as they were during the credit bubble crisis, is to reduce their workforce. Now, company profits are back up but what will happen when the next big economic recession hits? Will enough people be hired between now and then to substantially lower the unemployment rate? If the companies decide not to hire replacements between now and the next crash, will these large firms be able to fire more people and still operate competently?
“The Fed kept rates at zero Wednesday and Chairman Ben Bernanke practically guaranteed more action by the central bank to boost the economy during his press conference following the FOMC meeting.” – The Daily Ticker by Aaron Task on 11/3. The average rate on the 30-year fixed mortgage fell to 4 percent this week, nearly matching the all-time low hit just one month ago. My take: The visual picture is of a dead person with people giving that dead person mouth-to-mouth and jolting it with electric surges to bring the person back to life. This is exactly what Japan has done for 20 years, and it simply has not worked. In China, the government did devalue their currency and the economy did seem to show some growth afterwards.
We have cut jobs and reduced interest rates, I don’t know what else the Fed can do other than to print money again. The good news in all of this is that the US savings rate has gone up and the amount of credit card debt has gone down, during this crisis. So in the background of this Great Recession our citizens have been getting in better financial shape. It will be interesting to see if all of the money printing and low interest rates will cause Americans to start spending more. The government is counting on it because they need higher tax revenues to pay back all of their debts.
