Busch: Government Creates Uncertainty and Then Creates More

As the markets and businesses delve into the recent major pieces of legislation, they find the bills contained onerous provisions that mandate non-economic activity and increases in costs.

As an example in section 9006 of the health care law, there is a requirement that vendors and small businesses are required to file 1099 forms for any goods purchases that total over $600.

This would force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor and tax accountant.


The WSJ reports, “The reporting rules have also come under fire from the National Taxpayer Advocate, an independent office within IRS. It said in a July report that the costs to businesses may outweigh any benefit the IRS gleans from the added information.”

This provision generated some speculation within Washington that the main reason for including this in the health care bill was to create the infrastructure for a value added or national sales tax.

Given this burden, US businesses will have higher costs and less money available for job creation. Therefore, they will be more cautious about hiring.

The good news is that there is movement in Congress to repeal or change this provision. Unfortunately, this is delaying action on another program for expanding federally subsidized bond for infrastructure projects.

I think you can see the uncertainty domino effect beginning to build here. One government miscue leads to a chain reaction of additional miscues and anxiety.

Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.