Tuesday, January 25, 2011

An Ugly Side Effect ...

OK, this just made me laugh...

An Ugly Side Effect of New 1099 Law: More Tax Evasion
Tax pros now fear that tax evasion could go viral if the health-reform bill’s new 1099 requirement takes effect next year. They say more small businesses will likely opt to do all-cash transactions under the table to avoid the 1099 reporting requirement, and all of its onerous provisions, which are worse than small businesses may realize.

That's the direct opposite effect of what lawmakers had hoped for, and it would pose a bad development for the Internal Revenue Service, which for years has been under pressure from Congress to bring in more tax revenue.
The Law Of (come on now, all together) Unintended Consequences Rides Again!

Let's go back, for just a moment, to a few really fundamental, basic economic principles:
  • People respond to incentives.
  • Subsidize something and you get more of it.
  • Punish something and you get less of it.
The more onerous and punitive and costly you make the process of compliance, the more remunerative and profitable the act of non-compliance, the less compliance you're going to get. A blind man could have seen this coming, but not those super-geniuses that put together this legislative obscenity.

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