DJOU STATEMENT ON H.R. 5297
Washington, DC — Congressman Charles K. Djou (HI-01) issued the following statement after voting against nearly $15 billion in increased taxes contained in H.R. 5297, the so-called “Small Business Jobs and Credit Act of 2010”:
“While I agree with the expressed goals of this legislation, the provisions of the bill—the means by which the goals are to be accomplished—will impede our fragile recovery and harm the American people.
“Instead of taking the simple step of offering small businesses the assurance that their taxes will not go up in a matter of months, this bill deepens our nation’s debt and provides no long-term incentives to create jobs. In fact, this bill permanently raises taxes by nearly $14.5 billion dollars. We cannot tax our way out of recession.
“Another harmful provision of this flawed bill is the IRS Form 1099 reporting requirement which would subject all recipients of rental income to report all rental property expense payments, piling on more paperwork and costs. This burdensome regulation carries steep penalties that might be good for the Department of the Treasury but are bad small businesses and part-time landlords, who may only own one rental property.
“With a tax hike, 1099 reporting requirement and other harmful provisions, this bill takes one step forward and four steps backward. Our nation’s small businesses need certainty. They don’t need higher taxes. High taxes stifle innovation and business growth, which in turn leads to less investment, fewer jobs and ultimately less tax revenue.
“Congress needs to get its financial house in order by balancing its budget, cutting waste, holding the line against calls to increase income tax rates and affirmatively reducing the tax on capital gains. Pursuing these policies will create jobs and help the people of Hawaii and our nation.”
The Joint Committee on Taxation estimates that tax provisions amended in H.R. 5297 will provide $12.038 billion in temporary small business tax relief while permanently increasing taxes by $14.457 billion. The net total tax increase for this bill is $2.419 billion over 10 years. Additional information on specific provisions in the bill is set out below.
According to a recent survey by the National Federation of Independent Business, 8% of the small businesses surveyed cited a lack of credit as an immediate problem. More than 22% of the same businesses cited uncertainty about the economy as an immediate problem.
On the 1099 reporting requirement:
The bill mandates an IRS Form 1099 for rental property expense payments. The provision subjects all recipients of rental income from real estate to the 1099 reporting requirement, with exceptions for individuals who rent their principal residence on a temporary basis, receive minimal amount of rental income, or would experience a hardship under this provision. The Department of Treasury has the authority to determine what constitutes a “minimal amount” of rental income and what constitutes a “hardship.”
The reporting requirement is overly burdensome, especially to owners of one or two real estate properties. For example, this provision would require taxpayers who rent out a single condo or housing unit to send large corporate hardware stores (e.g. Lowe’s, Home Depot) a Form 1099 if they purchase more than $600 in supplies over the course of a year.
On the fund created:
H.R. 5297 would create a $30 billion small business lending fund and authorize the Treasury Secretary to make capital investments in banks with less than $10 billion in assets.
The Secretary will use the fund to purchase of preferred stock and other financial instruments from eligible institutions. Preferred stock would have to be redeemed within 10 years of the date of the capital investment.
We’re headed toward government ownership of business. There is no constitutional authority for the federal government to purchase ownership interests in banks. Moreover, the measure does not even require institutions to lend to small businesses. Instead, the bill merely attempts to provide incentives to lend. Thus, taxpayer resources may be handed out on terms much more lenient than the market. The market for capital for small banks is currently requiring a 10% dividend or more.