Yesterday the Chamber co-hosted a forum on the impacts of health care reform on small businesses (bookmark this site). Many problems were discussed, big and small, here is one of the big ones:

Sen. Mike Johanns (R-Neb.) this week continued his push to eliminate a controversial tax-reporting provision of the new healthcare reform law, vowing to offer his repeal bill at every turn...Under the Democrats’ new healthcare reform bill, companies, nonprofits and government offices are required to file 1099 forms with the IRS when goods purchased from another business exceed $600 in a year. Under previous law, the reporting requirement pertained only to services exceeding that amount...

"The most routine business expenses will be subject to this new burdensome paper trail," Johanns said Monday. "This mandate has nothing to do with improving the healthcare of this country and should not be part of this law or any other."

The Chamber of Commerce is backing Johann’s effort, launching a website Monday where small businesses can register their complaints with the new reform law.  "Nothing could be more important than for Congress to hear about what this healthcare law is doing, and to hear it directly from the small-business owners who are being affected by it," said Randel Johnson, the Chamber’s senior vice president of labor and employee benefits. "As businesses begin to feel the impact of 1099 requirements, the employer mandate, and new taxes, our website will serve as a resource for business owners to become informed, speak out, and be heard."

...Democratic leaders are defending the new 1099 mandate, arguing that it will close the business tax gap. Indeed, the Congressional Budget Office estimated that the change will increase government revenues by $17 billion over the next decade. That places a high hurdle before supporters of the repeal effort, who would face pressures to offset that amount with cuts or revenue hikes elsewhere in budget.

Or as progressives want to spin it:

Another deficit reducing piece of #hcr attacked by GOP http://bit.ly/do6V0H

Right, let's bash job-creating small business owners so that we can make political points. A very good example of why passing bad legislation dishonestly is bad business.  Megan McArdle has more:

It could mean that anyone who does freelance would have to issue a 1099 to Amazon--forms that Amazon would have to keep track of and submit.  The IRS, meanwhile, would have to process all this extra data, demanding to know why stated income didn't match. And since businesses don't usually break out their revenue by customer on their taxes (imagine Amazon's filing!), odds are that it would never match, and that it would be hard to untangle why it didn't. Moreover, as I understand it, this raises a fairly trivial sum--about $17 billion over 10 years, if memory serves.  Every little bit adds up, of course, but it's hard to see how the benefits outweigh the cost.  Don't take my word for it; listen to the National Taxpayer Advocate, the in-house watchdog of the IRS:

Yes, please go read the National Taxpayer Advocate report and also this, this and this. But first back to McArdle:

The report goes on to note that this is probably going to require expensive new compliance measures, including e-filing; produce a bunch of reports that the IRS is going to have trouble making use of; cause multiple errors because the amount of revenue will not match the income (revenue-COGS) reported by the business; cause enormous problems when goods are returned; and unfairly enhance the competitive position of large firms that can afford the massive compliance architecture this entails. Indeed, this provision is so bad that I haven't blogged it largely in the belief that it would never be enforced as enacted.  And so far I'm right; the IRS has already said that transactions done by credit and debt cards are exempt.  This is a good thing for freelancers who take a home office deduction, but I think they're still going to have to issue a 1099 to the landlord.  It's still plenty bad, especially for small businesses, which often don't like to use credit cards because of the high transaction fees.

Why not just repeal it?  Well, because we'd have to pay for repeal.  In order to get PPACA across the finish line, Democrats threw just about every financing mechanism they could think of into it (this is why the student loan bill got rolled in) in an effort to ensure that it would score as deficit reducing.  Now we can't take any of them out--no matter how stupid or ill-thought-out--because we don't have any little budget tricks left to offset even trivial losses such as this one.