Free Markets, Free People

penalties

Quote of the Day–lefty logic edition

When is a penalty not a penalty?  Ask Rep Shelia Jackson-Lee (D-TX).  Yesterday she told the House Judiciary Committee that the requirement imposed on individuals to buy health insurance doesn’t really constitute a penalty for non-compliance:’

“I would make the argument, one, that instead it is an incentive to do right–that it is not penalizing because penalty is punishment,” Jackson-Lee told the Judiciary Committee.

[…]

“You’re not punished if you have health insurance, in fact. And so you are, in fact, incentivized to have health insurance, rather than take the negative which is to suggest that because we have a penalty you are being punished,” Rep. Jackson-Lee said.

“I am helping you. I am helping you not to have 26 percent un-insurance in the state of Texas. I’m helping children be insured. I’m helping diverse minorities be insured,” said Rep. Jackson-Lee. “And I know during the civil rights argument–even though we were arguing under the Constitution–there were many policy statements being made: Do we want to live in a nation that discriminates against a person because of the color of their skin? In addition to the constitutional argument, do we want to live in a nation where there are people being uninsured causing catastrophic costs unto the nation and others have to pay. I think that is the question that needs to be considered by the courts.”

Unfortunately for Rep. Jackson-Lee, who may have never actually read the bill, the law is quite specific about non-compliance.

“If an applicable individual fails to meet the requirement of subsection (a) [having a government-approved health-insurance policy]… there is hereby imposed a penalty with respect to the individual.”

And:

Elsewhere, in a section entitled “Payment of Penalty,” it says that individuals failing to carry a government-approved health insurance policy must pay a maximum penalty of $750.

Meanwhile back in the runaway logic train of Ms. Jackson-Lee:

“But I also need to say whether or not it is more an incentive than it is a punishment,” said Rep. Jackson-Lee. “I am more inspired by incentive. And I welcome it being a parking ticket. We get parking tickets all the time, and no one complains about being required to do the right thing.”

*Sigh*

One of those bright stars – because of the level of intrusion we’re allowed this government to make – who are making decisions about your life.

~McQ

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More good news vis a vis ObamaCare – Small business’s won’t grow (update)

Or at least they won’t be given much of an incentive to do so if they provide health care:

A study by the National Center for Policy Analysis shows that tax credits in the new healthcare law could negatively impact small-business hiring decisions.

The new law provides a 50 percent tax credit to companies offering health coverage that have fewer than 10 workers who, on average, earn $25,000 a year. The tax credit is reduced as more employees are added to the payroll.

The NCPA study finds the reduction in tax relief to be a cost concern for companies looking to hire additional workers, but operate on slim profit margin yet still provide employee health coverage.

A couple of points – A) the tax credit is temporary (until 2016), and, only covers a small part of the cost of hiring an employee. However, B) it is a available to all small companies with 25 employees or less already offering health insurance. The stated purpose of the tax credit is to encourage those small businesses who fit the template (10 or fewer workers averaging about $25k a year, up to 25) to continue to provide health care and encourage those who aren’t to do so. But it provides the tax credit on a sliding scale, and that scale discourages hiring at the scale breaks:

Using insurance premium cost projections supplied by the nonpartisan Congressional Budget Office (CBO), the study states that the credit reaches its optimal point at 13 workers, with relief peaking at $36,400 for qualifying business.

After the 13th worker the economics surrounding the credit change, the study says.

For employers with 15 workers, taking on an additional hire will reduce the credit by $1,400. For a company looking to expand from 20 to 21 workers, the credit will shrink by $3,733. And businesses will take a $5,600 reduction on the credit when hiring the 25th worker.

The credit phases out for companies with at least 26 employees.

If the company is already at 13, it most likely won’t hire 14, or 15. If it is at 20, it’s most likely not going to hire 21. And 26 is most likely out of the question.

Bill Rys, tax counsel at the National Federation of Independent Businesses, told The Hill that while demand is the primary driver for hiring decisions, costs related to new hires is a key factor.

“To the extent that a tax credit is related to the benefits that you’re paying your employees, it is going to be a factor in determining what is the cost of the employee,” he said. “The fact that you’re losing a portion of the credit because you brought in a new employee is going to have to factor into the cost of who you’re hiring.”

So there is a negative incentive – at least as long as the tax credit exists – to hire people if it will lessen the tax credit. Instead:

“If a business can make a decision to substitute capital for labor – say, contract the procedure out or automate it – I believe [losing the tax credit] will play an important part in the reluctance to hire,” Villarreal said, adding, “It’s puzzling that we have this perverse incentive not to have businesses grow by not encouraging them to hire additional workers.”

Brilliant.

UPDATE: Even more good news as companies read through the legislation and discover little hidden nuggets of penalty and cost.  For instance:

About one-third of employers subject to major requirements of the new health care law may face tax penalties because they offer health insurance that could be considered unaffordable to some employees, a new study says.

It seems the law deems insurance that is unaffordable by a family to be an insurance cost that is more than 9.5% of their household income. Of course, few if any companies know the “household income” of their employees. That’s because, mostly, it’s none of their business. But also because it may be comprised of a second or third income, dividend, disability or even retirement income.

But, if it is over 9.5% of that household income, companies can be fined up to $3,000 per employee. Of course they won’t know that until and unless the employee files for a federal tax credit because he or she has determined their insurance cost is over 9.5% of their household income (is that gross or AGI?):

If an employer’s health plan is deemed unaffordable, the worker may qualify for a federal tax credit, or subsidy, to buy coverage in a new state-based marketplace known as an insurance exchange. A person claiming a credit must disclose income information to the exchange. The exchange will then notify employers if any of their workers qualify for subsidies.

Along with notifying the employer of this info, I suppose the “exchange” will also notify the appropriate government agency that is responsible for levying the fine.

Wow – no incentive there to just drop coverage for everyone, is there?

What a monstrosity the Democrats have brought upon us.

~McQ

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