Does changing the 1099 rules set the stage for a new value added tax?

The value added tax has met with strong resistance by small business owners. The administration could be building the framework for the VAT by changing the 1099 rules.

J. Scott Applewhite/AP/File
President Barack Obama signs the health care bill in the East Room of the White House on March 23. Changes to the 1099 rules are included within the health care bill.

Ever since I wrote the post yesterday about the 1099 time bomb disaster that awaits small business owners in 2012 I have been trying to theorize why the government is making this move. Why now? And why bury it in the healthcare bill?

Clearly the motivation is to keep better track of the transactions going on between businesses. And hiding it shows that it must be part of a bigger plan.
John Wark offers a compelling theory at New Dog Old Trick:

"...I hate to be cynical, and I'm usually the first to make fun of conspiracy theorists, but it seems to me that one distinct possibility is that this regulation is intended to help set the stage for a Value Added Tax (VAT). There has been a lot of buzz out of Washington about the need to generate more revenue to pay down the massive increases in the federal deficit being generated by the Obama administration and its friends in Congress. The favorite means for raising that additional revenue is a VAT. A Value Added Tax works by adding a layer of taxes on top of goods and services at each step in the value chain. For a VAT to work, the tax authorities must have documentation on all of those transactions from business to business to business all along the path to the ultimate final consumer. And what does this new 1099 regulation do? It creates exactly such a paper trail."

Remember that the VAT tax has met with strong resistance, as it is being proposed as an additional tax to be added on top of income tax And it is an additional tax that will add even more burdensome paperwork to small business owners.

Wark may be on to something here.

Those in power seem to be becoming more clever and much less transparent with their socialist agenda. They have learned that they can achieve their intended ends by building necessary structures -- piece by piece over time -- while America is busy paying attention to more important issues such as last episode of Lost and the latest incarnation of American Idol.

Rather come right out and say we want government run healthcare, they build the framework with this year's legislation. It won't happen right away. Many elements will be put in place with this bill, but some will not take effect right away. And believe me, they know which other elements will need to be added hidden in future mega-bills over time.

If Wark is correct, they may be playing the same game with VAT. They may be using 1099 to lay the foundation for this massive new tax program.

But, hey, the next season of So You Think You Can Dance is about to begin. So why worry!!!

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