News
From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman
For Immediate Release CONTACT: Press Office
June 12, 2008 (202) 226-3636
Committee Reviews Potential Effects of Proposed
Electronic Payments Tax Reporting
“At first glance, this measure
seems like a reasonable means of tracking financial records and a sensible way
to plug the nation’s tax gap. Upon further review, however, it becomes clear it
could have some potentially disastrous effects on small businesses,” said
Committee Chairwoman Nydia Velázquez. The Chairwoman added she would be sending a
letter to Ways & Means Chairman Rangel on the matter and asking the General
Accounting Office to conduct a study detailing the costs of implementing the
proposal.
Chairwoman Velázquez also went on to say
that: “Rather than driving new revenue,
the measure would saddle small firms with a myriad of privacy concerns and
undue financial burdens.”
On a logistical level, the proposal
would make for an accounting headache of colossal proportions: For a small business owner who receives
thousands of electronic payments—many for sums of $20 or less—reconciling
returns with records would be a painstaking, time-consuming process. Banks,
meanwhile, would be required to report merchants’ Social Security numbers on
these returns, opening a Pandora’s Box of potential privacy concerns:
“Given the vast array of
privacy issues already facing Americans, a tax proposal that compounds the
problem just doesn’t make sense,” said Chairwoman Velázquez. “It’s troubling to think that we would knowingly increase
the potential for identity theft.”
The proposed measure would
also place an undue financial burden on many small businesses. Entrepreneurs could
see up to 28% of their proceeds siphoned off and sent to the IRS. In other
words, a small business with earnings of $100,000 would only receive $72,000. The additional $28,000 would languish in IRS
coffers. With the majority of small firms operating on tight
profit margins, a 28% earnings loss could force many small businesses to close
their doors permanently.
Chairwoman Velázquez added, “This proposal would
do far more damage than good. When it comes to running a successful business,
entrepreneurs have enough on their plates—the last thing they need to worry about
is losing capital or having their identities stolen.”
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