March 30, 2010
The New York Times is reporting today that several companies who claim they will collectively loose more than a billion dollars due to the new health care law is petitioning President Obama to repeal the provision that affects them. Arguing in their defense is the American Benefits Council, an association that represents hundreds of large corporations. But the “losses” they are claiming is even more ridicules than first reported by many, including CPS News.
As was stated in this post a few days ago, the main stream news media is basically ignoring the details of this story. Instead they and thousands of bloggers are hyping this issue as one of the hundreds of things that is bad about the health care reform law. As I reported, what the companies are upset about is they are loosing a corporate subsidy, compliments of the taxpayers. However, I was wrong — they really aren’t loosing the taxpayer subsidy after all.
From the Times article:
When [a Republican] Congress and President George W. Bush enacted a prescription drug plan for seniors in 2003, the legislation encouraged companies to continue providing prescription coverage to retirees, instead of shifting retirees to Medicare Part D, by having the government give those companies large subsidies for each retiree — and also allowing them to deduct those subsidies from their income taxes.
Under the health care overhaul, the federal government will continue providing those subsidies — amounting to 28 percent of a drug plan’s costs — but companies will lose the tax break. [bold and underline added]
To clarify, those companies receiving free taxpayer money did not have to declare the free money as income, therefore no taxes were imposed. But according to the new law, they still get the free money but will be required to pay taxes on it.
On a personal note, I might add that one of those companies’s that is receiving free money to not shift retirees to Medicare Part D is one that I retired from (not one of the companies mentioned). However, they did indirectly shift us retirees to Medicare Part D. In other words, they “legally” got out of providing us prescription drugs, thus eliminating any cost to them, but got to keep the free tax free money.
American corporations receive more than $100 billion each year in corporate welfare — money provided by us taxpayers. In addition they have been able to avoid paying more than an estimated one trillion dollars each year in taxes due to special tax laws that have been enacted just for them and by taking advantage of certain tax loopholes. And this latest issue was made available through one of those loopholes.
I have no doubt the companies will be successful in getting the provision removed from the new law. And if you think they went on the war path for this one small provision (by comparison), wait until someone gets the bright idea to take them off corporate welfare completely. “We’re for a free market — until we’re not”.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky