The White House has obviously become concerned enough about the narrative that Barack Obama is hostile to business to send the President on the road for photo ops at sub shops to talk up the administation’s efforts for small businesses. Obama tried countering the gathering consensus of his hostility towards the private sector by pushing for Congress to pass his proposed tax cut and credit plan while ordering a sandwich:
“Surely, Democrats and Republicans ought to be able to agree on this bill,” Obama said despite the consistent lack of any such consensus on Capitol Hill. Obama said he told Republican leaders at the White House a day earlier that key elements of the bill are ones that the GOP has supported for years.
“Helping small businesses, cutting taxes, making credit available,” Obama said from a presidential lectern that had been brought into the restaurant. “This is as American as apple pie. Small businesses are the backbone of our economy. They are central to our identity as a nation. They are going to lead this recovery.”
The bill in question is designed to help small businesses get the capital they need to buy equipment, hire workers and expand their operations. Obama took the opportunity to recite the stories of local business owners and tout his efforts to help them before acknowledging that more government help is needed.
What might be needed is less government — especially ObamaCare. David Frum wrote yesterday about a little-discussed codicil within the health-care overhaul that threatens to drown small businesses in red tape, IRS audits, and overhead:
They have reason to be afraid. Right now, business owners file two forms when they employ people: a W-2 for employees and a 1099 for freelance contractors. A typical small business files 10 such forms, at a cost of 3-5 hours of time per year.
Embedded in the new healthcare law, however, is a staggering requirement: using a new form — the 1099k — small businesses will have to start reporting all their purchases of goods from other businesses. (You can see a draft version of the 1099K form on the IRS website.)
Did you rent a car or stay in a hotel? 1099K.
Buy ink and paper from Staples? 1099K.
Lease space in a local mall? 1099K.
Collect revenue from PayPal, eBay or Amazon merchants? 1099K.
And don’t forget to collect each company’s taxpayer ID number while you are at it!
I wrote about this in April, as yet another item on Nancy Pelosi’s list of nuggets we couldn’t find in ObamaCare until it passed. This puts small businesses at a huge competitive disadvantage. The overheads costs on this kind of activity are only moderately scalable, which means that large businesses with robust G&A staffs can handle it better than a mom-and-pop business that runs on thin margins already. They have the ability and manpower already to deal with more paperwork, and the addition of more people will put a smaller pressure on their prices than at small businesses.
If the small businesses don’t get the 1099s, they can’t take their businesses expenses as a deduction against earnings any longer, where receipts sufficed before. Riding herd on the avalanche of paperwork will require small businesses to hire more people, which will put a lot more pressure on their prices and make them less competitive in relation to larger companies in their markets. They’ll either fail, or the larger companies will eat them up, consolidating markets and leaving consumers with fewer choices — and workers, for that matter.
If Obama really wants to help small businesses, he could start by repealing ObamaCare, or at the very least repealing the 1099 requirement that threatens to strangle them. Congress has already done enough damage.