Obama administration continues its war on free enterprise

Early last year, I penned a column "Inmates in Charge of the Asylum " that sketched out a program that Barack Obama and his allies on the left would undertake to choke off free enterprise in America. That prediction was not prescient. After all, anyone who took off their rose-colored glasses and looked beyond the media cheerleaders for Obama saw the man for what he was: an ideologue who saw capitalism as the enemy (not, say, Iran, Russia, Hugo Chavez, Islamic terrorism) and had disdain towards America.

We now see a raft of taxes that will hit small business very hard: increased taxes on income, capital gains, interest income; new taxes imposed on small businesses to pay for ObamaCare with deficits that will lead to a regime of higher taxes for everyone; estate taxes that will make it tougher to keep small businesses in tact when owners die and want to pass them on to their children.
One could go on and on.

Often the most pernicious "taxes" are camouflaged as something else (this is an administration that relies on the thesaurus to turn this reign into one long 1984): fees, regulations, fines, mandates.

A lot of this job killing will take place under the radar screen through executive orders, interpretation of existing rules that stretch credulity; personnel choices (think Van Jones); and stepping up the enforcement brigades (such as the many thousands of IRS agents that are being hired to be "Big Brothers," monitoring our tax returns to ensure ObamaCare tax hikes are imposed).

The latest: a drive to re-categorize independent contractors as employees.

For decades the IRS has played a game of find-the-freelancer at businesses where independent contractors remain on the payroll for months or even years. Companies, especially small ones, increasingly rely on such workers because they offer greater flexibility-and because they're cheaper. Employers can save as much as 30% on wages by avoiding payroll taxes, unemployment insurance, worker's compensation coverage, and benefits they provide regular employees.

Now both the IRS and state agencies across the country are redoubling efforts to uncover long-term "temps." In February the IRS launched a three-year program that will examine 6,000 companies to find permanent workers misclassified as freelancers in violation of the Tax Code. President Obama's proposed 2011 budget includes funding for 100 additional federal staffers to pursue such cases, and it would repeal a 32-year-old rule allowing companies in industries ranging from construction to health care to legally classify long-term employees as independent contractors....

Most of the IRS action on independent-contractor violations will target small businesses and the self-employed, the General Accountability Office reports. Over the past decade the average size of small businesses has fallen, an indication that they're using more free­lancers....

When small companies are scrutinized by the IRS or other agencies, they have a hard time mounting a challenge to any penalties they might face.

Big Brother is watching you and will bully small businesses to fess up and pay up. Even if small businesses have a legitimate claim that workers are independent contractors, will they spend money on lawyers to defend themselves against Big Bully?

But the true costs will be less flexibility for small business to expand: to take risks , say, in entering a new field or venture that they might explore by hiring freelancers. Now they will face increased risks of the IRS coming down on them like a sledgehammer. One option just might make existing workers work harder; another might be to just hire overseas workers (made so much easier thanks to the internet superhighway and the Freidman "Flat World"); another might just be not take risks.

The unmentioned benefit to the government confiscators: as independent contractors are re-classified, the number of "employees" of a business increases. Once the level hits 50, all the rules , fines, regulations, and mandates involved in ObamaCare kick in-and deliver to small business owners some additional quick kicks.

At a time when incentives and tax breaks should be used to spur job growth , the administration seems focused on strangling small business-the job growth engine of America.

This assault on free enterprise will not end well for Democrats (as Democratic campaign strategist Doug Schoen warns today in the Washington Post ). ..or for our nation.


Early last year, I penned a column "Inmates in Charge of the Asylum " that sketched out a program that Barack Obama and his allies on the left would undertake to choke off free enterprise in America. That prediction was not prescient. After all, anyone who took off their rose-colored glasses and looked beyond the media cheerleaders for Obama saw the man for what he was: an ideologue who saw capitalism as the enemy (not, say, Iran, Russia, Hugo Chavez, Islamic terrorism) and had disdain towards America.

We now see a raft of taxes that will hit small business very hard: increased taxes on income, capital gains, interest income; new taxes imposed on small businesses to pay for ObamaCare with deficits that will lead to a regime of higher taxes for everyone; estate taxes that will make it tougher to keep small businesses in tact when owners die and want to pass them on to their children.

One could go on and on.

Often the most pernicious "taxes" are camouflaged as something else (this is an administration that relies on the thesaurus to turn this reign into one long 1984): fees, regulations, fines, mandates.

A lot of this job killing will take place under the radar screen through executive orders, interpretation of existing rules that stretch credulity; personnel choices (think Van Jones); and stepping up the enforcement brigades (such as the many thousands of IRS agents that are being hired to be "Big Brothers," monitoring our tax returns to ensure ObamaCare tax hikes are imposed).

The latest: a drive to re-categorize independent contractors as employees.

For decades the IRS has played a game of find-the-freelancer at businesses where independent contractors remain on the payroll for months or even years. Companies, especially small ones, increasingly rely on such workers because they offer greater flexibility-and because they're cheaper. Employers can save as much as 30% on wages by avoiding payroll taxes, unemployment insurance, worker's compensation coverage, and benefits they provide regular employees.

Now both the IRS and state agencies across the country are redoubling efforts to uncover long-term "temps." In February the IRS launched a three-year program that will examine 6,000 companies to find permanent workers misclassified as freelancers in violation of the Tax Code. President Obama's proposed 2011 budget includes funding for 100 additional federal staffers to pursue such cases, and it would repeal a 32-year-old rule allowing companies in industries ranging from construction to health care to legally classify long-term employees as independent contractors....

Most of the IRS action on independent-contractor violations will target small businesses and the self-employed, the General Accountability Office reports. Over the past decade the average size of small businesses has fallen, an indication that they're using more free­lancers....

When small companies are scrutinized by the IRS or other agencies, they have a hard time mounting a challenge to any penalties they might face.

Big Brother is watching you and will bully small businesses to fess up and pay up. Even if small businesses have a legitimate claim that workers are independent contractors, will they spend money on lawyers to defend themselves against Big Bully?

But the true costs will be less flexibility for small business to expand: to take risks , say, in entering a new field or venture that they might explore by hiring freelancers. Now they will face increased risks of the IRS coming down on them like a sledgehammer. One option just might make existing workers work harder; another might be to just hire overseas workers (made so much easier thanks to the internet superhighway and the Freidman "Flat World"); another might just be not take risks.

The unmentioned benefit to the government confiscators: as independent contractors are re-classified, the number of "employees" of a business increases. Once the level hits 50, all the rules , fines, regulations, and mandates involved in ObamaCare kick in-and deliver to small business owners some additional quick kicks.

At a time when incentives and tax breaks should be used to spur job growth , the administration seems focused on strangling small business-the job growth engine of America.

This assault on free enterprise will not end well for Democrats (as Democratic campaign strategist Doug Schoen warns today in the Washington Post ). ..or for our nation.


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