A lot of things help a person or group of people decide whether to start (or continue) a business. Do they have the capital to sustain themselves while they get the business up and running? Do they have the skills to provide good products or good services at competitive prices?
Other important factors, though, are government’s imposition of taxes and paperwork.
Even if a business can draw customers, will it make enough to pay — in addition to wages and benefits — the taxes that federal, state and local governments levy? And how complicated will it be to fill out the various types of paperwork mandated by government? If taxes are too high or paperwork is too burdensome, a would-be entrepreneur may decide not even to try starting a new business, or an existing company may fold. That hurts the economy.
So it is discouraging that the U.S. Senate has upheld a massive new paperwork requirement that is part of the ObamaCare socialized medicine law. Starting in 2012, 40 million U.S. businesses will be required to file tax forms for every vendor from which they buy at least $600 worth of goods. The new rule is a way for government to be sure that some of those vendors are not avoiding paying all their taxes. The rule would raise an average of $1 billion to $2 billion per year, and the money would help pay ObamaCare’s massive costs.
Ironically, even some Democrats who support ObamaCare admit that the filing rule will be a bureaucratic nightmare. And yet, when the issue came up for a vote recently, the Senate refused to overturn the rule.
That’s shortsighted. Yes, the requirement will let Washington collect some extra taxes. But it will also discourage people from starting up businesses, and it may be the “last straw” that causes some businesses to fold.
Who knows? The economic shrinkage that the filing rule creates may ultimately mean a net loss in government revenue rather than the gain that some hope for.