Monday, May 3, 2010

See the below article, then read my comments at the end. Article comes from:
http://www.cato-at-liberty.org/2010/04/26/costly-irs-mandate-slipped-into-health-bill/
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Costly IRS Mandate Slipped into Health Bill

Posted by Chris Edwards

Most people know about the individual mandate in the new health care bill, but the bill contained another mandate that could be far more costly.

A few wording changes to the tax code’s section 6041 regarding 1099 reporting were slipped into the 2000-page health legislation. The changes will force millions of businesses to issue hundreds of millions, perhaps billions, of additional IRS Form 1099s every year. It appears to be a costly, anti-business nightmare.

Under current law, businesses are required to issue 1099s in a limited set of situations, such as when paying outside consultants. The health care bill includes a vast expansion in this information reporting requirement in an attempt to raise revenue for an increasingly rapacious Congress.

In a recent summary, tax information firm RIA notes the types of transactions covered by the new 1099 rules:

The 2010 Health Care Act adds “amounts in consideration for property” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(1)) and “gross proceeds” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(2)) to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee. Thus, Congress says that for payments made after 2011, the term “payments” includes gross proceeds paid in consideration for property or services.

Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.

Tax CPA Chris Hesse of LeMaster Daniels tells me:

Under the health legislation, the IRS could be receiving billions of more documents. Under current law, businesses send Forms 1099 for payments of rent, interest, dividends, and non-employee services when such payments are to entities other than corporations. Under the new law, businesses will be required to send a 1099 to other businesses for virtually all purchases. And for the first time, 1099s are to be sent to corporations. This is a huge new imposition on American business, costing the private economy much more than any additional tax that the IRS might collect as a result.

There appears to have been little discussion before this damaging mandate was slipped into the health bill and rammed through Congress, but a few business groups did raise concerns. Here’s what the Air Conditioner Contractors of America said:

The House bill would extend the Form 1099 filing requirement to ALL vendors (including corporate) to which they pay more than $600 annually for services or property. Consider all the payments a small business makes in the course of business, paying for things such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services.

In order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.

Private transactions are the core of a market economy, and the source of America’s growth and prosperity. Now the federal government is imposing a vast new web of red tape on perhaps billions of these growth-generating private exchanges.

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.

I’m stunned that there wasn’t a broader debate before such a costly mandate was enacted. If it goes into effect, it will waste vast quantities of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. The struggling American economy can’t afford anymore suffocating tax regulations. This mandate is a giant deadweight loss. It should be repealed.
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Do you think this could open up the incentive for an effective barter system? An online credit transfer system? Like eGold or eBullion where the transfer isn’t dollars but a weight of a specific commodity? We’re talking literally hundreds of billions of dollars in productive wealth lost nationally every year. This money doesn’t all go to the government as taxes as many think, this money will be wasted in compliance.

This WILL provide new jobs, at the expense of old jobs. Corporations will need SUBSTANTIALLY more accountants or paper-pushers as well as more attorneys to defend them from the IRS. This money will have to come from other areas such as increasing final cost or lowering current expenses such as lower priority services and lowering payroll elsewhere.

I think these necessary HUGE changes will cause many already struggling companies willing to make drastic changes and re-think their current business model and modus operandi. Were these companies offered a solution that is well implemented and quickly adaptable, a new market would emerge and regulations would be revealed as exactly what they are: anti-freedom, anti-life.

Friday, April 30, 2010

Why Everyone Wins With Free Trade

Awesome article I found online today:
http://www.foxnews.com/opinion/2010/04/29/john-stossel-free-trade-american-companies-general-motors-ipod-mike-huckabee/
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Why Everyone Wins With Free Trade
By John Stossel
- FOXNews.com

When free trade is unmolested, the world is richer and has more choices.
Trade is win-win. Two people trade only because each values what he gets more than what he gives up. That's why in a store both customer and clerk say, "Thank you."

At the international level, trade is also win-win because it allows countries to specialize in what they do well and trade the extra for things they don't make as well. When free trade is unmolested, the world is richer and has more choices.

But I keep hearing about unfair trade. I'm told that trade allows American companies to exploit people in poor countries and makes Americans jobless.

Tom Palmer of the Atlas Economic Research Institute, one of my guests on my Fox Business News show tomorrow night, says those are myths.

Do we exploit people in Third World countries?

"The evidence does not show that," Palmer said. "Multinational companies pay a wage premium. They pay more than local companies pay ... because they want to attract good workers. Look at the Shanghai factory of General Motors. They pay three times what Chinese-owned factories (pay)."

Yet House Speaker Nancy Pelosi says that liberalizing trade with Central America would exploit workers.

"People want to work at those factories. They line up. They compete. Are they competing to get exploited? They're competing for higher-wage jobs. I think that those people know their interests better than Nancy Pelosi does."

Sen. Byron Dorgan called free trade "a race to the bottom. This says to American workers if you can't compete against 30-cents-an-hour labor in some other country, you lose your job."

"Again, evidence doesn't support that," said Palmer. "Look at the iPod. It says, 'Manufactured in China.' But if you look in the back, it says, 'Designed in California.' Most of the value is added by American workers." My colleague at Fox News, former Arkansas Gov. Mike Huckabee, said, "In a country we can only be free if we can feed ourselves, fuel ourselves and fight for ourselves. When we start outsourcing everything, that's a road to being enslaved."

"I hope that Gov. Huckabee thought about that when he was governor of Arkansas, and made sure there was no jobs outsourced to Virginia
or Texas," Palmer replied. "He should have protected the people of Arkansas, right?"

But that's different. We can count on Pennsylvania in a time of war. I don't know that I can count on China.

"If you're trading with them, it makes war much less likely," Palmer said. "We're not going to go to war with Canada. It's our biggest trading partner -- $600 billion a year going across the U.S.-Canada border in trade along the longest non-militarized border in the world. Five thousand miles, counting Alaska. That is trade creating peace."

As the French economist Frederic Bastiat put it, "When goods don't cross borders, soldiers will."

Palmer offered another way to think about trade: as a machine -- "a machine that allows Florida farmers to turn oranges into (phones). They can't grow cell phones on their trees in Florida. They grow oranges really well. What they can do is take those oranges and trade them for cell phones."

And when people do this worldwide, they get richer. "Just like the case of you buying some coffee at the Starbucks. You could have made your own coffee. But your time might have been better spent doing something else. So you outsourced your coffee production. You made yourself better off. And that young lady who sold you the coffee made herself better off."

Palmer points out that China was once the most advanced society in the world. It had developed the clock, printing, the compass and more. Not coincidentally, while it was advancing technology and science, it was a major world trader.

"And it crumbled because they destroyed their trade. They made it illegal to trade with foreigners. And they turned inward. That set in process a stagnation that only now is being undone. We shouldn't do that to our country."

We're different, aren't we? We know how to make everything we need. "There's always opportunities for new progress. ... Remember watching "Star Trek" as a kid and they had that weird communicator? Everybody has one now. ... (T)rade made that possible."

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at www.johnstossel.com. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

Wednesday, April 28, 2010

Financial reform? Not exactly.

I was sent a link to this opinion piece and although I disagree with his quick blurp on the solution to the problem (mostly because it's an incompletely described idea), I think the article does show merit. Enjoy!
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This article was written by David Frum. David Frum writes a weekly column for CNN.com. A special assistant to President Bush in 2001-02, he is the author of six books, including "Comeback: Conservatism That Can Win Again" and is the editor of FrumForum.
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Washington (CNN) -- Financial reform? Not exactly. The bill before Congress does nothing to address the fundamental background causes of the crash of 2008.

Wall Street may have been the instrument of the crash. But the crash was made elsewhere: in Washington's failed policies for middle-class families -- and in China's distorted rush for economic growth.

The story is not a simple one. But I hope you will pay attention to the details. If you don't, you may find that the pocket that has been picked is your own.

As you've heard, the crash begins with the huge excess load of debt built up in the last two decades by American households. Why did Americans borrow so much? Some like to tell a story of irresponsibility: We borrowed too much because we were self-involved yuppies who just could not deny ourselves the latest flat-screen doodad for our McMansions.

Maybe that describes some people. But many millions of middle-class families plunged into debt for a very practical reason. Their incomes were not keeping pace with the cost of crucial items of the middle-class lifestyle: housing, medical care, college tuition. At the same time as housing, medical care and tuition were jumping in cost, the cost of borrowing was dropping to historic lows.

Adjusted for inflation, the typical American family earned less in 2007 than that family had earned in 2000. Meanwhile, everyday necessities such as energy were becoming more expensive: By 2007, the typical American family paid more for energy than it did for clothes and entertainment combined.

As everyday bills piled up, families borrowed to pay extraordinary bills. Mom needs nursing care? Junior got admitted to Chapel Hill? The roof needs refixing? No worries -- just cash out with a cheap refinance deal.

In the 1950s, the total debt of all American households amounted to less than one-third the nation's gross domestic product. In 1980, household debt amounted to less than one-half. As recently as 1990, it was still under 60 percent. In 2000, it was under 70 percent. On the eve of the 2008 crash, total household debt had bulged to 96 percent of gross domestic product.

All this borrowing might look like the road to ruin. And in fact it was the road to ruin. But that's not how it looked at the time. At the time, it looked like a bargain. Between 1980 and 2008, the household debt load doubled as a share of the economy. Yet the interest cost to carry that debt rose much more modestly. In 1980, the average American family devoted about 13 percent of its disposable income to debt service; by 2008, the average family was spending about 17 percent of its disposable income to service debt.

Why was debt so cheap?

This takes us to another fundamental cause of the crisis: the growth of China.

Maybe you've heard that we bought a lot of goods from China and now we are deeply in debt to China. That's true obviously -- but the cause and effect are upside down.

China lent us a lot of money so that we would keep buying Chinese goods.

Export booms do not usually last very long. The exporting country accumulates more and more of the importing country's currency. Eventually the exporting country decides it wants to use some of that currency. It exchanges the importing country's currency for its domestic currency -- and that has the effect of making its exports more expensive. The boom bumps up against its own natural limits.

That did not happen with China. Desperately eager to create more and more jobs to employ the tens of millions of peasants flowing into China's huge cities, China not only accumulated dollars by the hundreds of billions -- it held them. Then it went into the foreign currency market to buy still more billions of dollars, sometimes $1 billion a day.

All that dollar buying prevented China's currency from going up in value, which would have increased the price of China's exports -- and that kept China's factories turning.

What do you "buy" when you buy "dollars"? There are only so many Benjamins in the world, nowhere near enough. Buying "dollars" means buying dollar-denominated debt, and far and away the biggest source of U.S. dollar debt is U.S. mortgage debt.

With China so eager to buy, U.S. bankers went to work to create mortgage paper to sell. It didn't have to be good-quality paper -- the Chinese didn't really care about that. Did you get a great deal on your refi in 2005? Thank the Central Bank of China.

American homeowners borrowed because they could not earn enough. China loaned to keep its factories turning. Money flowed in a frenzied torrent across the Pacific. And somebody had to make it all happen: Wall Street. It created the debt instruments China wanted to buy and packaged the mortgages that Main Street felt pressured to sell. With trillions of dollars changing hands, even a small percentage fee could pay a lot of people a lot of billions in fees.

No doubt some of those fee-takers did abusive things. But the whole dynamic was abusive and dangerous. And so-called financial reform is a petty distraction from that larger, more important, and more urgent dynamic: raising American incomes so Americans borrow less, and redirecting Chinese trade to the home market so that the Chinese lend less. Until we achieve those two things, any recovery will only invite the next disaster.

The opinions expressed in this commentary are solely those of David Frum.

Thursday, January 28, 2010

Bernanke gets a second term?

This just in: Bernanke was just confirmed for a second term as Fed Chairman. Anyone guess how the market responded? Down $115.70. The vote passed 70-30. Anyone else curious who voted 'yea'? Let's see: (info as per senate.gov)

Grouped by Home State
Alabama: Sessions (R-AL), Nay Shelby (R-AL), Nay
Alaska: Begich (D-AK), Nay Murkowski (R-AK), Yea
Arizona: Kyl (R-AZ), Yea McCain (R-AZ), Nay
Arkansas: Lincoln (D-AR), Yea Pryor (D-AR), Yea
California: Boxer (D-CA), Nay Feinstein (D-CA), Yea
Colorado: Bennet (D-CO), Yea Udall (D-CO), Yea
Connecticut: Dodd (D-CT), Yea Lieberman (ID-CT), Yea
Delaware: Carper (D-DE), Yea Kaufman (D-DE), Nay
Florida: LeMieux (R-FL), Nay Nelson (D-FL), Yea
Georgia: Chambliss (R-GA), Yea Isakson (R-GA), Yea
Hawaii: Akaka (D-HI), Yea Inouye (D-HI), Yea
Idaho: Crapo (R-ID), Nay Risch (R-ID), Nay
Illinois: Burris (D-IL), Yea Durbin (D-IL), Yea
Indiana: Bayh (D-IN), Yea Lugar (R-IN), Yea
Iowa: Grassley (R-IA), Nay Harkin (D-IA), Nay
Kansas: Brownback (R-KS), Nay Roberts (R-KS), Nay
Kentucky: Bunning (R-KY), Nay McConnell (R-KY), Yea
Louisiana: Landrieu (D-LA), Yea Vitter (R-LA), Nay
Maine: Collins (R-ME), Yea Snowe (R-ME), Yea
Maryland: Cardin (D-MD), Yea Mikulski (D-MD), Yea
Massachusetts: Kerry (D-MA), Yea Kirk (D-MA), Yea
Michigan: Levin (D-MI), Yea Stabenow (D-MI), Yea
Minnesota: Franken (D-MN), Nay Klobuchar (D-MN), Yea
Mississippi: Cochran (R-MS), Yea Wicker (R-MS), Nay
Missouri: Bond (R-MO), Yea McCaskill (D-MO), Yea
Montana: Baucus (D-MT), Yea Tester (D-MT), Yea
Nebraska: Johanns (R-NE), Yea Nelson (D-NE), Yea
Nevada: Ensign (R-NV), Nay Reid (D-NV), Yea
New Hampshire: Gregg (R-NH), Yea Shaheen (D-NH), Yea
New Jersey: Lautenberg (D-NJ), Yea Menendez (D-NJ), Yea
New Mexico: Bingaman (D-NM), Yea Udall (D-NM), Yea
New York: Gillibrand (D-NY), Yea Schumer (D-NY), Yea
North Carolina: Burr (R-NC), Yea Hagan (D-NC), Yea
North Dakota: Conrad (D-ND), Yea Dorgan (D-ND), Nay
Ohio: Brown (D-OH), Yea Voinovich (R-OH), Yea
Oklahoma: Coburn (R-OK), Yea Inhofe (R-OK), Nay
Oregon: Merkley (D-OR), Nay Wyden (D-OR), Yea
Pennsylvania: Casey (D-PA), Yea Specter (D-PA), Nay
Rhode Island: Reed (D-RI), Yea Whitehouse (D-RI), Nay
South Carolina: DeMint (R-SC), Nay Graham (R-SC), Yea
South Dakota: Johnson (D-SD), Yea Thune (R-SD), Nay
Tennessee: Alexander (R-TN), Yea Corker (R-TN), Yea
Texas: Cornyn (R-TX), Nay Hutchison (R-TX), Nay
Utah: Bennett (R-UT), Yea Hatch (R-UT), Yea
Vermont: Leahy (D-VT), Yea Sanders (I-VT), Nay
Virginia: Warner (D-VA), Yea Webb (D-VA), Yea
Washington: Cantwell (D-WA), Nay Murray (D-WA), Yea
West Virginia: Byrd (D-WV), Yea Rockefeller (D-WV), Yea
Wisconsin: Feingold (D-WI), Nay Kohl (D-WI), Yea
Wyoming: Barrasso (R-WY), Yea Enzi (R-WY), Yea

I think we all know what to do. Let's do it.

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