It doesn't say that. And if it did, they wouldn't be able to enforce that even if that was all they did.
Actually (and again any CPA types here feel free to correct me) it kind of does. There are amounts that don't matter - and everything declared doesn't owe a tax. But think about it - $600 isn't a lot of money in today's world and companies are being told to report all of it. My bank has to send me a 1099, if they pay me $3 in interest. So yeah, their goal is to have all money, all transaction accounted for.
As for the second part - you are absolutely right - or at least, you would've been in the past. But today, compared to 20-30 years ago, the ability to crunch mountains of insignificant data has increased a thousand fold (at least). Including the ability for their computers to keep track of something like... a person that receives a 1099 reporting $600 in revenue (not income, just misc. revenue) should have something like that declared on their electronically submitted returns. If they don't, it will trigger an inquiry - usually an automatic electronic one looking for an explanation... "We see you received $600 from so and so and yet, we can't find that $600 dollars on your return. Please explain." And if he doesn't, he'll likely get a bill for the tax on $600 at least - at worst, it will trigger an audit. But they don't need to audit to collect all of these small amounts - they just need to inquire and then bill, if the response is inadequate. Tons of audits will now be people requesting them - needing a one-on-one in order to better explain something.
Sure when returns were on paper and had to be scanned or be looked at by a human, this amount of scrutiny would never pay for itself. But with today's computer systems and everything coming in as digital data - millions of such connections can be tracked and cataloged effortlessly and automatically - including contacting the tax payer for an explanation and reviewing their response long before any human agent has to be involved at all.
So no - it is now possible to keep track of, inquiry about and enforce penalties on millions of these small issues with little to no human involvement at all. (My CPA drug his feet for years resisting filing returns electronically for just this reason - until, of course, there was eventually no choice.) It is - for good and bad - a whole new world.