Megan McArdle is unhappy with my recent piece about the Johanns Amendment. Her basic complaint is captured below, though I recommend that you read the entire column:
As you may already have gathered from the tone of this post, Harold Pollack and I are in substantial disagreement here. In fact, I think that posts like this highlight the reason that so many small business owners vote Republican—and complain that the current health care law is the work of out-of-touch elitists who have never held a real job.
I think that health care wonkery is, in fact, a real job, and a very important one. But so is running a small business, and the amount of hassle that this new law imposes on taxpayers is all out of proportion to the benefit derived. Even the IRS in-house watchdog thinks so. And it's not just going to produce a lot of administrative hassle for the businesses, but for the IRS itself, which will suddenly be inundated by new tax reporting.
McArdle makes some good points. She’s right that I was unduly snippy about the daily lives of small business people. Some entrepreneurs emailed me offline and used barnyard vocabulary to express the same point. I have not experienced the challenges and tribulations many small-business people have. I don’t happen to believe 1099 forms are the worst burden or risks in this life. McArdle writes:
It takes me a full weekend every year to do my taxes, simply because my freelance income makes me a sole proprietor. Most journalists have accidentally underpaid at least once due to a 1099 gone astray.
I, too, earn extra money as a freelance journalist and occasional consultant, albeit at a lower level of success and talent than McArdle in this arena. Entering a bunch of 1099s into Turbotax seems pretty reasonable. If these 1099s weren’t generated, underpayments would, um, rise.
McArdle makes a second good point, which I agree with but was obscured by my bad writing. Of course, the burdens of tax compliance must be balanced with the revenue gained. There is a genuine problem that should be fixed.
The preferred Democratic alternative, the Nelson bill, does exactly that. It would exempt firms with less than 25 employees and set a threshold of $5,000 rather than $600. In my view, this addresses the problem. If you have more than 25 employees and are doing transactions of more than $5,000, you should be filing paperwork with the IRS. That’s not exactly the same as my daughter’s babysitting money and other analogies McArdle presents. It speaks volumes that NFIB and Republicans oppose this reasonable (to my mind, overly solicitous) fix.
McArdle believes that the tone of my article qualifies me as an out-of-touch elitist. Maybe so, in this domain, anyway. Much of my work concerns violence prevention and public health interventions with low-income youth, intellectually disabled people, and injection drug users—exactly the people who would be hurt by zeroing out valuable public health prevention funds.
Heroin users waiting six months to enter methadone treatment or uninsured people who need simple public health services are much more seriously inconvenienced by their predicament than a small business person who has an annoying and time-consuming problem with 1099 forms. Yet our supposedly-sclerotic political system responds with surprising urgency to the latter issues while often leaving the former largely unaddressed.
I disdain the Johanns Amendment because it exemplifies precisely this bias towards the organized and the affluent. Small business has a problem that requires $17.1 billion in offsets to fix: Well lucky us. Here is this public health and prevention fund that is almost precisely the right amount.
That is a more damaging form of out-of-touch elitism than anything I might post at TNR. That’s really a comment about Congress, not about small-business people, though the shrill parochialism of advocacy groups such as NFIB is pretty hard to take.
McArdle tweaks me by writing: “If Harold Pollack thinks that these services are valuable enough to warrant closing loopholes, I happen to have a candidate right here: academic tenure. After all, as I was repeatedly assured by professors during the debate over whether we should end tenure, tenure is a very valuable form of compensation. Without it, we'd have to pay professors much more.”
She spills considerable ink depicting me as an ivory tower policy wonk. Since we don’t know each other, I’m not sure how she knows that my work makes me any more privileged and elitist than she is. But I’ll take the point. Tenure is economically valuable, and has ambiguous implications for social welfare in all sorts of ways.
McArdle and I enjoy greater income and greater security than most other Americans. Asking us both to pay reasonable, probably higher taxes—and to file the appropriate forms—seems quite reasonable to me. So I’m game for a deal. I’ll accept a tenure tax if she will let me spend the resulting revenue on under-funded public health efforts. If some of my economics and business school colleagues down the Midway need to pay a little more, well that’s ok too….
Harold Pollack is the Helen Ross Professor of Social Service Administration at the University of Chicago.