There are other things in the bill, of course. As a matter of fact, there's a little something here targeting the self-employed, something I bet nobody on Capitol Hill is going to claim credit for including.
Those vociferously fiscally-responsible Congressional Democrats, who want to pay for what they do but know they can't raise taxes under this President, have spent the last couple of years lusting after a way to narrow the tax gap. The tax gap, in case you were wondering, is the difference between what the Treasury Department estimates it should receive in tax revenues and the amount it actually does receive.
Since the majority of taxpayers responsible for the tax gap (57% of them) have been identified as self-employed (Schedule C filers) and since the currently known tax gap would put a significant dent in the federal budget deficit, a lot of Congressional Democrats seemed to be trying to summon the courage to move their favorite proposal forward.
Parenthetically, the self-employed comprise 57% of taxpayers responsible for the tax gap but only 23% of the money involved -- $67 billion of $290 billion, to be precise. Make of that what you will.
The proposal goes like this: credit and debit card issuers will be required to report electronic transactions of business merchants to the IRS. They will also be required to collect and verify Taxpayer Identification Numbers (TINs) and, if they cannot verify a merchant's TIN, to immediately begin withholding 28% of that merchant's transactions, which will be remitted to the IRS.
Advocates like the National Association for the Self-Employed have already pointed out that this is a stupid plan (although they were more polite about it than that). For starters, electronic credit and debit card transactions are already well documented and are unlikely subjects for willful under-reporting. So, this isn't likely to make much of a dent in the tax gap.
It is likely, though, to add significantly to the costs of credit and debit card issuers, who will almost certainly pass those costs on to their microbusiness merchants.
Just what we needed right now, huh? Something else to increase our costs of doing business.
The provision was inserted into the bill as an offset for the new $7,500 one-time tax credit for new homebuyers. I doubt it will actually generate enough additional revenue to serve as a real offset, of course, but it probably looks good on paper. And, by sneaking the provision into this huge housing bill, the lawmakers involved even got to dispense with the need to summon any political courage.
I guess making life more difficult for the self-employed was more politically palatable than hitting up any of the other potential constituencies around.
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About the Author: Dawn Rivers Baker, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the editor and publisher of The MicroEnterprise Journal. She also blogs at The Journal Blog. Dawn is a member of the Small Business Trends Expert Network.