STATEMENT
of the
Honorable Nydia M. Velázquez, Ranking Member
House Committee on Small Business
Full Committee Hearing: “Buried in Paperwork: A 1099 Hearing"
February 9, 2011, 2 p.m.

Washington, DC – House Committee on Small Business Ranking Member Rep. Nydia M. Velázquez (D-NY) delivered the following statement today during a hearing entitled “Buried in Paperwork: A 1099 Update”:

“Today’s hearing will focus on an issue that could impact millions of small businesses across the country. While there is often little agreement in Congress on many policies, there is bipartisan consensus that the issue of 1099 reporting must be fixed.

“As we examine the problems this requirement could pose, it is important to understand the concept’s history. While some might like to believe it was created minutes before it was added to the health reform bill, it is a proposal that was years in the making. Originally proposed by the Bush Administration, the reporting provision was intended to ensure accurate income reporting. The Taxpayer Advocate suggested this type of change would reduce the so-called “tax gap,” and level the playing field and ensure all businesses pay their taxes.

“Although there may have been a laudable goal behind the 1099 requirement, the new law would have severe unintended consequences for entrepreneurs with little benefit. Small firms already spend 1.8 billion hours on tax compliance—and the new 1099 rules would add to that burden. It also does little to limit tax avoidance as estimates have found it would improve tax compliance by only one-half percent.

“Clearly, this minimal improvement is not worth the significant economic effects. At a time when America needs to promote economic activity, the 1099 requirements could hamper transactions between businesses. If Congress does not act, businesses would see additional paperwork every time they buy equipment, sell goods or make capital investments.

“Our tax code should reward growth—not serve as a roadblock to growth. That is why repeal is the only solution. It is my hope that we can address this problem immediately. Many businesses are already spending money on compliance. If Congress acts quickly, small firms will see immediate benefits, freeing up capital for growth and job creation. The only reason for delay would be to keep a political issue alive. As the economy continues improving, small businesses need to focus on what they do best—developing innovative new services, bringing additional products to market and creating jobs.

“This hearing can also serve as a starting point to examine other ways to limit burdensome regulations. Today’s discussion offers witnesses an opportunity to expose not just the problems with 1099, but also highlight other regulatory reforms that may help entrepreneurs. Throughout the 112th Congress, I will stand committed to working in a bi-partisan way to remove or revise policies that stifle entrepreneurship, innovation and growth.

“Hopefully, fixing 1099 will be the first of many issues that the Committee can approach with enthusiastic support from both sides of the aisle. I would also hope that our focus today remains on the regulatory burdens facing small firms—and we don’t get bogged down repeating political debates from last Congress. With that, let me welcome Chairman Lungren to the Committee, as well as the small businesses who have taken time from their busy schedules to testify, today.”

 

 

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