Whose Fault Is It: Obamacare's or Accounting's?
FT Alphaville has a truly useful elaboration of last week's billion dollar hit to corporations. Yours truly didn't do her research (happens) and blamed it all on Obamacare. Nope. In reality, it's 79% Obamacare, 15% stupid ass tax loopholes/subsidies and 6% accounting. Those percentages are approximate and as always, why are you taking anything I say seriously anyway?
Currently many corporations, particularly in the industrial and telco sectors, receive a 28 per cent subsidy towards paying for prescription-drug coverage. They are also able to deduct the total amount they spend on such drugs from taxes.
Under the new law, companies will still receive the subsidy but will no longer be able to write off the subsidy against taxes, which will cause their tax bills to rise.
Still, the damage appears worse than it is. Because of accounting rules, the companies have to take the entire charge now even though the impact of the health-care law won’t be felt until 2013, when their yearly tax bills will increase – but only modestly.
More ominously however, the new legislation looks like it might cause the affected companies to take another look at the benefits they provide workers.
“As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company,” AT&T said in its regulatory filing.
Praise Obama, our prayers have been answered!
Market Ticker and I both jumped the gun. Now if we end up getting stabbed by it later, you know why.