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Washington Watch - April 1, 2009


Ramped Up Task Force Could Focus On Self-Employed
The Obama Administration recently announced its plans to step up the search for non compliant taxpayers as one method for offsetting a massive budget designed to help shore up economic losses for the nation. A newly formed Task Force on Tax Reform will concentrate on the tax gap – a $300 billion difference between what the Internal Revenue Service is owed and what it collects.

In the past, lawmakers have pointed to under reporting by the self-employed as a significant contributor to the tax gap, a claim the NASE has worked hard to refute. The association has countered that an effective strategy to increase tax compliance should include overall simplification of the tax code, the elimination of issues that are inequitable to entrepreneurs, and greater access to reliable taxpayer education and outreach, not just an increase in enforcement activities.

Under the Bush Administration and the previous Congress, tax gap proposals placed an undue burden on micro-businesses. Those included imposing withholding on non-employee payments, specifically payments made to independent contractors; requiring information reporting on all payments of $600 or more to corporations; and demanding businesses that utilize contractors to obtain and verify an accurate Taxpayer Identification Number (TIN) for those contractors receiving payments of $600 or more.

Unfortunately, one tax gap proposal involving the use of credit and debit cards was actually passed into law in 2008. It requires credit and debit card issuers to report annually to the IRS the electronic transactions of their business merchants. This troubling law may put entrepreneurs at risk, since it is likely to add significantly to the cost of starting up and running a business that requires credit and debit card transactions.

While the NASE believes the IRS should be able to collect all the money owed, increasing the burden on micro-businesses is not the most effective way to increase compliance. Visit the NASE in Action page to read recommendations on how to increase tax compliance without burying the nation’s entrepreneurs under burdensome regulations by clicking here.

 


Check Card Legislation Deemed Harmful To Small Business

The Small Business and Entrepreneurship Council recently released a study entitled, “Credit Cards and Small Business: The Benefits, Opportunities and Policy Debate.” The report explains the history of credit cards and discusses the benefits of credit cards for small businesses, but ultimately finds that government regulation of the credit card industry is detrimental to small business.

While the report focuses on recent proposals surrounding the so-called “interchange fee” - the fee card companies charge merchants on every card transaction - the NASE also has come to the conclusion that this and other legislation such as the electronic transactions reporting provision of the 2008 Economic Recovery Act will only be harmful to small firms.

“Contrary to the claims made about monopolies and/or monopoly power, the payments industry is competitive and dynamic, and government interference ultimately would do more harm than good with respect to credit card use and access for small-business owners and their customers,” stated Chief Economist Raymond J. Keating in the report. “Among the negative consequences would be lost investment, innovation, competition, service and production.”

The effects of government intervention on small businesses would be many – from higher costs to use credit cards for business purchases to decreased services and reward programs from card companies and possibly lower sales due to fewer consumers using cards.

Kristie Arslan, Executive Director of the NASE’s Legislative Offices, testified before the House Committee on Small Business in June 2008 against the annual reporting of electronic payment transactions to the IRS. Although some have supported this measure as a solution to the tax gap, the NASE is opposed to this legislation because of the increased tax regulation it places on small businesses and because it likely would not boost tax compliance.

 


More Aid To Community Health Centers, Says HHS
The Department of Health and Human Services (HHS) recently announced that another $338 million of its approximately $137 billion in economic stimulus funding will be going to community health service centers. The centers also received $155 million in stimulus funds earlier this month.

Community health service centers typically provide basic and preventive health care to uninsured and low-income Americans. The agency estimates that these funds will provide care to an additional 2.1 million patients over the next two years, including about one million uninsured people.

“More Americans are losing their health insurance and turning to health centers for care,” said Mary Wakefield, the Health Resources and Services Administrator. “These grants will aid centers in their efforts to provide care to an increasing number of patients.”

In applying for the grants, centers were required to explain how these funds would allow them to expand services – by adding new physicians or extending operating hours, for example. Grants will be given to 1,128 federally qualified health centers to be used over the next two years.



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Visit NASE Advocacy to view archived editions of Washington Watch. While you’re there, read the latest updates from the Washington, D.C. office, write your Congressperson, and find out how you can join the fight for micro-business.


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