Free Markets, Free People

Taxes

Where the money goes

Once again, it’s time to look at the state of the Federal budget, and get our heads around how well—or badly—we’re doing as a republic. The short answer is…not well. Let’s take a look at a simple chart of the last full year of federal spending and receipts, which is Fiscal Year 2012. The chart is clickable, so you can see a full-sized version.

2012 Federal Budget

We spent $3,795.55 billion, while taking in $2,469 billion in taxes and receipts. That gave us a deficit for the year of $1.326.55 billion.

Much of the spending is required by law. Mandatory spending includes Social Security, Medicare, Medicaid, and retirement benefits for the military and federal workers. In addition, interest on the national debt of $227.73 billion must also be paid, by law. Overall, $2543.51 billion in spending was legally required. That’s 67% of all federal spending.

Keen observers will note that revenues of $2,469 billion do not cover that amount of mandatory spending. So, we missed being able to pay for required spending alone by by $74.51 billion. Essentially, we borrowed money to pay one-third of the interest on the money we’ve already borrowed.

Actually, we’re pretty lucky when it comes to the whole interest payments deal, because the average interest rate on the debt is hovering at around 2%.  Every additional percentage point in that interest rate translates to about $115 billion dollars in additional interest charges every year. If interest rates were to rise to the historical average of 6%, that would add about $575 billion per year to cost of servicing the debt. That would raise the annual debt service costs from $228 billion to $803 billion. That’s about $44 billion more than we currently pay for defense. So, let’s hope for a weak, struggling economy, right? Gotta keep those interest rates at historical lows.

Anyway, the remaining spending is all discretionary, so, we chose to spend another $1,252.53 billion in discretionary spending. $759.11 billion was spent on killing foreigners. Everything else the Federal Government does—all of the executive departments, science and medical research, the Judicial branch, and giving money to heathen foreigners to try and make them our friends—cost us $492.42 billion. Giving money to the heathen foreigners—also known as foreign aid—accounted for about $38 billion for the year, or 1% of federal spending.

So, what can we extrapolate about the future? Well, we know that, even if interest rates stay steady, mandatory spending on entitlements will rise as the huge population bolus that is the Baby Boom generation begin retiring. Without either significant new taxes and/or significant entitlement cuts, re. That means that, in the not-too-distant future, revenues will not cover even the cost of mandatory entitlement spending.

We can—and probably will—ameliorate this by slashing defense. It’s what the Europeans have done, after all. There’s this huge chunk of money that goes to defense, and it gives us a defense budget larger than the defense budgets of the next 19 largest nations combined. Obviously, we will be told, we’re acting like a bunch of paranoid maniacs, so we can cut defense by at least half, and still have a huge defense establishment in world terms. So, we got that going for us.

So, that’s the situation for FY 2012. In a couple of months, we’ll get a final accounting of FY 2013, and we’ll see where we stand. Revenues were significantly higher in 2013, and spending growth doesn’t appear to have kept pace, so the deficit probably fell to somewhere in the vicinity of $800 billion.

That’s progress, I guess, though one year does not make a trend. Let’s see how much Obamacare is gonna cost us next year, assuming it isn’t delayed because of all the fail.

Anyway, please feel free to show this spending chart to your ignorant friends.

UPDATE: Here’s a more detailed look at federal spending in 2012 by government function:

Government Function Amount (billions)
Social Security $778.574
National Defense $716.300
Income Security $579.578
Medicare $484.486
Health $361.625
Net Interest $224.784
Education, Training, Employment and Social Services $139.212
Veterans Benefits and Services $129.605
Transportation $102.552
Commerce and Housing Credit $79.624
Administration of Justice $62.016
International Affairs $56.252
Natural Resources and Environment $42.829
General Government $31.763
Community and Regional Development $31.685
General Science, Space and Technology $30.991
Energy $23.270
Agriculture $19.173
Allowances $0.125
Undistributed Offsetting Receipts $-98.897
TOTAL $3,795.547

These are total spending amounts by function, and include both mandatory and discretionary spending in each line item.


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Taxes, Spending, and the Fate of the Republic

The direction the country is taking bothers me. Increasingly, I see little hope for a bright prosperous future. Frankly, things cannot continue going in the direction they’re heading without a disastrous result.

Mark Steyn wrote earlier this week:

Generally speaking, functioning societies make good-faith efforts to raise what they spend, subject to fluctuations in economic fortune: Government spending in Australia is 33.1 percent of GDP, and tax revenues are 27.1 percent. Likewise, government spending in Norway is 46.4 percent, and revenues are 41 percent – a shortfall but in the ballpark. Government spending in the United States is 42.2 percent, but revenues are 24 percent – the widest spending/taxing gulf in any major economy.

This is unsupportable, by any measure, and should be seen to be so by anyone with common sense, irrespective of political party, but apparently is not. And it’s important to recognize that the reason revenues are at a historically high 24% of GDP—the historical average is around 18%—is that GDP growth for the last 4 years has been atrociously bad, and well below the 3% historical trend rate of growth.

In a rational world, we would make a decision to settle on a continuum somewhere between cutting government spending to 24% of GDP, and raising taxes to 42.2% of GDP, which would necessarily imply massive tax increases on the middle and, yes, even the lower class.

At the moment, however, it is impossible to cut spending to 24% of GDP. Not just politically impossible, though that appears to be true also, but I mean impossible impossible. The reason it is impossible is that 24% of current GDP will not cover the cost of mandatory entitlement spending and service on the national debt. More than 62% of government spending is mandatory spending on essentially social security and Medicare. Another 6% is interest on the national debt, and it’s only that low because 1) the Fed has been buying massive amounts of US treasury bonds, and 2) interest rates are historically low.

In other words, 68% of the federal budget is taken up by entitlements and debt service, alone. We could eliminate the entirety of the rest of the federal government and, at current rates of taxation, would still run a deficit.

At the current rate of spending, we can expect to add over $12 trillion dollars in debt over the next decade. To combat this, the president has requested an additional 1.6 trillion in new revenue, which he expects to gain by increasing tax rates on only the upper class. Even assuming, arguendo, that such a taxation plan would actually result in that much additional revenue—which it likely would not—we would still add an additional $10 trillion in debt.

And that, of course, assumes interest rates would not rise from their current low levels. A rise to the historical rates of interest would increase debt service costs from $250 billion per year to $650 billion per year, or approximately 15% of the budget.

Neither Congress nor the President are proposing a serious plan to balance the budget, which would require a politically impossible mix of massive budget/entitlement cuts, and/or massive tax increases on the middle and lower classes.

Absent such a plan, we will inevitably default on our debt, or hyperinflate our way out of it, both of which are merely two sides of the same coin. In either case, the dollar will lose its status as the world’s reserve currency, and the life savings of every single person in the country—except, perhaps, those embodied in some classes of hard asset—will be rendered worthless. There will be massive unemployment, and a high possibility of civil strife. Imported goods will essentially be unobtainable, and I’m not just talking about BMWs and Land Rovers, but everyday things we never even think about, like fresh fruit from Chile in the winter, or clothes from Singapore and Taiwan at any time.

The least damaging course of action would be a massive reduction in government spending. A more damaging course would be a massive increase in taxation. The most damaging course would be to do nothing but nibble at the edges of spending and taxation until we default, either formally, or de facto through hyperinflation. So far, we are set on the third course.

We are set on a path to completely destroy the currency and economic life of the Republic, and we will inevitably do so without massive tax increases, massive spending cuts, or some mixture of the two.

Meanwhile, in Washington, DC, the Fiscal Cliff negotiations—by which I mean "farce"—continue. Personally, I’m a charter member of the Let It Burn club. The Democrats have set up a narrative in which, no matter what happens, Republicans will get the blame. And yet, 18 months ago, what we’re now calling the Fiscal Cliff was unilaterally hailed as a wise, bipartisan, and far-seeing compromise that would set the country on the road to financial rectitude. And quite frankly, the president is giving every indication that he wants to go over the Fiscal Cliff, and that he can weather the political and economic fallout from it.

OK. Then let’s test that theory.

This is not a risk-free strategy. As Ace of Spades points out:

The Walk Away/Let It Burn option is growing on people. One cautionary note, though: This will provoke a serious constitutional crisis and may undo the Republic. So a soft Let it Burn could turn into a genuine collapse of the Republic.

Obama is a tyrant. If Republicans do not lift the debt ceiling, it is perfectly obvious what he will do, as he’s argued for it before: Like Putin, he will begin unilaterally asserting power he doesn’t have.

And what will be the recourse? Court, I suppose. Impeachment, sure, but Democrats will block conviction. So whether or not the President can suddenly assert sweeping power over the purse — sweeping aside the last real check on his power granted to the House of Representatives — will depend on the vote of Justice Go Along to Get Along Roberts.

President Obama has already asked for it. It’s that one exception I mentioned before: He is asking for unilateral power to raise the debt ceiling and no president should ever have that power.

Our constitution is clear that the money bills must originate in the house. Equally clear is the principle of Congressional supremacy, in that Congress may pass laws even over a presidential veto.  The debt ceiling is clearly a Congressional, not a presidential prerogative.

Congress, of course, has already amended the Constitution’s strictures in practice. For instance, the Senate takes House bills, say, for building a dam, and strips the original language, then loads it up with budgetary items. The House accepts them in conference. Additionally, we have operated without a federal budget—though one is required annually by law—since 2009. This is a…constitutional novelty.

But giving unilateral budgetary power to the president goes far beyond novelty. In my view, granting this power to any president will mark the end of the Republic, just as surely as the creation of the First Triumvirate marked the death knell of the Roman Republic.

The American people elected President Obama. It is only right that they should reap the full measure of the consequences of that decision. Ace is right. Going over the Fiscal Cliff may undo the Republic. But if that is true, then I’m entirely unconvinced that the Republic should be saved.

~
Dale Franks
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Since when do Americans reward incompetence?

Jonah Goldberg provides a little history lesson that helps one understand why it is that politicians are now credited with the country’s economic progress or lack thereof:

The idea that presidents “run” the economy is both ludicrous and fairly novel. Before the New Deal (which in my opinion prolonged the Great Depression), the notion that presidents should or could grow the economy was outlandish. But, as the historian H. W. Brands has argued, it was JFK who really cemented the idea that the president is the project manager for a team of technicians who create economic prosperity. “Most of the problems . . . that we now face, are technical problems, are administrative problems,” he explained, and should be kept as far away from partisan politics as possible.

It may have been JFK who “cemented” the idea, but it was FDR who first sold it and the myth that grew up around him that claimed he had saved us from the Great Depression. Subsequent study of the era has yielded pretty solid evidence that, in fact, his policies failed and it was a world war that dragged us out of the Depression.

That said, it really doesn’t matter – the perception and belief has been established that the President does indeed have an effect on the economy – right or wrong. That’s just the reality of the matter. Additionally, politicians haven’t been shy about cultivating that perception. It is another means of padding the resume (if the results during their term have been good) or attacking the incumbent (if the results haven’t been very good).

The truth is politicians do have an effect – usually when they chose to intervene, the economy does worse and when they get out of the way, it does better. For the most part, they have yet to realize that, however.

But that’s not really the point I’m interested in making. All of that said, what this race boils down too is a President, who has had poor results, claiming he should be given another 4 years to do better.

The problem with that? He’s already proven he doesn’t know what he’s talking about:

President Obama, a hybrid reincarnation of Kennedy and Roosevelt according to his fans, came into office with similar misconceptions. Controlling the White House, the House, and the Senate, his team of propeller-heads insisted that if we passed exactly the stimulus they wanted, the unemployment rate would top out at 8 percent and would be well below that by now.

They waved around charts and graphs “proving” they were right, like self-declared messiahs insisting they are to be followed because the prophecies they wrote themselves say so.They got their stimulus. They were wrong.

They were dead wrong.

So the question then, given their “know-it-all” claim and their assertions that their plan would work if we’d only give them the money, why should we trust them to do better the second time around, given the fact that we’re actually worse off now than when we were in the actual recession?

As Goldberg points out, their claim is the downturn was “so much worse than anyone realized” isn’t a good excuse given the assurance with which they made their previous claim.

Why didn’t they realize it? That’s a fair question.

A more important question though is why in the world would you give another chance to someone who didn’t drive the vehicle of the economy out of the ditch as promised, but instead put it into a telephone pole?

It makes absolutely no sense.

And Obama’s plan for his coming 4 years? As best as I can discern, pretty much maintain course and tax the rich. That’s it. We’re banging along the economic bottom, unemployment is trending worse, and Obama wants to raise taxes on a single group that would pay for a total of 11 hours of government spending.

Brilliant.

You’re asked to buy into that nonsense as solid economic policy – i.e. giving him more time.

Really?

Are you actually going to do that?

If so, and if you give this incompetent president and his clueless advisers another 4 years, you deserve everything that comes with that choice – to include a hearty “I told you so” from me if I’m still around in 2016.

~McQ

Twitter: McQandO

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To My Friends In Maryland

Q: Why doesn’t Delaware fall into the ocean?
A: Because Maryland sucks.
Q: Why doesn’t California fall into the ocean?
A: Because Maryland really sucks.

Dear Marylanders:

I see that your financial picture is looking rather dicey again. Sorry to hear that. Who could have guessed that high taxes, profligate spending and a general hostility to business would lead to such things? No worries, though. I’m sure political leaders will continue to work hard at righting the ship and get Maryland sailing along smoothly again (how is that plan to repeal the laws of economics coming anyway?).

On a related note, I understand that the Maryland legislature, in collaboration with Gov. O’Malley, has passed a new tax on all six-figure income earners in Maryland. Well, bully for you! That’ll teach those nasty capitalists to stop being so productive. And Gaia knows that they really need to pay their fair share (I mean, how is it that the top 20% of earners only pays about 68% of the income taxes? How’s that “fair”?). So, here’s hoping that works out for you (fingers crossed!).

Of course, I seem to recall that the last time you all did something like this (with that “Millionaires Tax” thingy), we here in Virginia experienced a bit of an influx of former Marylanders. Not too many that we couldn’t handle it, mind you, and probably fewer than some thought. But it does raise an issue, especially since the latest tax scheme stands to affect a much larger portion of Maryland’s population. While we’re always happy to welcome you all into the Commonwealth, we’d really appreciate it if you’d leave things here the way you found them.

You see, all too often when Virginia takes in refugees of high tax and high regulation states, they tend to bring a lot of those policies with them. They seem to really like our neighborhoods, schools and business environment, but for some reason they get all worked up about the fact that our government doesn’t spend as much money as they’re used to (in fact, we’ve actually had a budget surplus the past couple of years, and look to do so again this year!). They also tend to push for more state intrusion into our lives. Thing is, we really don’t like that. (In fact, it’s a fairly common complaint in the South.)

You see, before they came, we were doing just fine. Sure, some of us moved to places like New York and California so that we could enjoy that wonderful embrace of the Nanny State, but for the most part it’s been the other way around: people moving from high-tax/high-regulation states to places like Northern Virginia. We completely understand why you would want to leave a place whose policies increase your costs of living, impair your livelihoods, and generally intrude on your lives in unwanted ways. That’s why we try not to do that sort of thing here (albeit, with some annoying exceptions). Problem is, when you all move in, you start enacting all the same policies that made the place you left so bad. We’d all really appreciate it if you wouldn’t do that.

So, like I said, I really hope that whole tax-the-hell-outta-the-rich thing works for you. If it doesn’t, and your looking for change of scenery, you’ll always be welcomed with open arms on this side of the Potomac. Come on over, make yourselves comfortable and set a spell. Just don’t go touching anything.

Yours Truly,

Michael J. Wade

Observations: The QandO Podcast for 12 Dec 10

In this podcast, Bruce, Michael, and Dale discuss the Obama Tax Compromise, and its repercussions this week.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.

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Observations: The QandO Podcast for 05 Dec 10

In this podcast, Bruce, Michael, and Dale discuss the Budget Comission, and Washington’s refusal to even consider making any of the hard choices it represents.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.

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Charting health care’s demise and government’s growth

Rep. Kevin Brady (R-TX) had his staff do a study of the ObamaCare bill after its passage to assess exactly what Democrats had blindly passed into law. He also asked his staff to put a chart together to represent the health care system under that law.

The result is mind-boggling and troubling. And if you figured the Secretary of Health and Human Services was the new defacto health care czar, backed by the IRS, you’re correct.

Below is a thumbnail of the chart to give you a flavor of its complexity. Brady admits only represents a third of what is in the bill after which it got too crowded. Said Brady, "it’s actually worse than this."

obama_chart

You can see a full size representation of the chart here.  As you peruse it read the legend carefully.  You’ll notice 3 areas color coded – “new government”, “expanded government” and “private”.  It also charts “new relationships”, such as regulations, requirements and mandates, reporting requirements, oversight and money flow.

Evident to anyone with the IQ of a mushroom is the incredible complexity of what our masters in Congress cobbled together in haste and passed before anyone could actually read the thing through and study the probable consequences.  The chart includes:

  • $569 billion in higher taxes;

  • $529 billion in cuts to Medicare;

  • Swelling of the ranks of Medicaid by 16 million;

  • 17 major insurance mandates; and

  • The creation of two new bureaucracies with powers to impose future rationing: the Patient-Centered Outcomes Research Institute and the Independent Payments Advisory Board.

As might be expected, ObamaCare fulfills almost all the promises of the critics – top driven, bureaucratic, complex, expensive and set up to ration health care.

The chart gives visual evidence of the type monstrosity that has been foisted upon the American public by Democrats.  Says Kevin Hassett:

This clearly is a candidate for most disorganized organizational chart ever. It shows that the health system is complex, yes, but also ornate. The new law creates 68 grant programs, 47 bureaucratic entities, 29 demonstration or pilot programs, six regulatory systems, six compliance standards and two entitlements.

Yes friends, the DMV teaming up with the Post Office, have now “organized” your health care and promise it will be “better and less expensive”.

And don’t forget – your new health care czar has the power to make judgments about health care that, by law, cannot be challenged either through an administrative process or the courts.  So you are stuck with whatever the Sec HHS decides.  That means:

A sprawling, complex bureaucracy has been set up that will have almost absolute power to dictate terms for participating in the health-care system. That’s what the law does to government. What it does to you is worse.

Based on the administration’s own numbers, as many as 117 million people might have to change their health plans by 2013 as their employer-provided coverage loses its grandfathered status and becomes subject to the new Obamacare mandates.

Those mandates also might make your health care more expensive. The Congressional Budget Office predicts that premiums for a small number of families who buy their insurance privately will rise by as much as $2,100.

Finally, and as noted above, there is to be a huge expansion in Medicaid “paid for” by cutting care to the elderly:

To pay for this expansion, the bill takes $529 billion from Medicare, with roughly 39 percent of the cut coming from the Medicare Advantage program. This represents a large transfer of resources, sacrificing the care of the elderly in order to increase the Medicaid rolls.

Another revenue source are the “Cadillac plans” – for those who have them and pay for them, the gig’s up:

Front and center among the new taxes is the 40 percent excise tax on those lucky people with so-called Cadillac health plans. The higher insurance costs that are driven by the government mandates will push many more ordinary plans into Cadillac territory.

As we’ve discussed, the bill relies on a constant revenue stream from these insurance plans from now on, assuming everyone will pay the 40% increased cost to keep their plans.  That’s not likely at all, and cutting these plans will effect millions – many of whom bought in lock, stock and barrel, to the promise “if you like your doctor and you like your plan, you can keep both”.

Look at this chart and tell me how you do that.

Yesterday a federal judge in VA ruled that the state of Virginia had “standing” to sue the federal government over the law.  That, of course, means nothing more than the lawsuit moves forward, but it is an important first step in repealing this monstrosity or at least the more intrusive and odious parts of it.  Obviously it doesn’t ensure success in that endeavor and the White House typically believes it is on the side of angels and the Constitution when it comes to running our lives.

We’ll see.  But clearly Nancy Pelosi was right when she said “we have to pass the bill to see what’s in the bill”.  Now that we have this chart, we know what’s in the bill – the largest power grab by the federal government since the income tax.

“Change” you can believe in, huh?

~McQ

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House Dems: No time for budget but plenty of time for campaign finance reform

The House of Representatives has a constitutional obligation to pass a yearly budget, through which it then appropriates money (taxes) for the business of government. Supposedly no budget, no spending.

But Congress has, over the years, hit upon a legislative convenience called a “continuing resolution” where it simply picks a figure from the sky, passes it and continues funding government sans budget. The only possible hope for stopping such a practice is a president who insists on a budget and promises to veto continuing resolutions.

That, of course, isn’t going to happen with this White House. No budget is going to be passed by Congress either – at least not until after November. And there’s a reason they’re engaging in this classic bit of nonfeasance. If they pass the budget they must before the November election, they’ll have to explain the trillion dollar deficit that is anticipated in the plan to their constituents. Can’t have that, can we?

On the other hand, they have plenty of time to try to pass campaign finance reform again. In fact, the House plans on taking it up on Thursday. When it comes to curtailing freedom the Democrats have an uncanny ability to rush things through – and especially if the legislation is likely to help them come November.

Congress – again ignoring the people’s business for the party’s business.

Last but not least, Democrats, knowing they have to either find a new revenue source in lieu of cutting spending have decided they’re not bound by President Obama’s tax vow.

I know, I know – you’re shocked, right?

~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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Observations: The QandO Podcast for 18 Apr 10

In this podcast, Bruce, Michael and Dale discuss the state of the economy, Tea Parties, and the Democtrats’ approach to politics. The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.

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