Wednesday, April 7, 2010

Sweet tax break for big guys ripped off little guys

Watching federal health insurance reform unfold is like watching melting snow reveal the layered detritus of a long winter. It's full of surprises.

One of the first revelations since Congress approved the Patient Protection and Affordable Care Act last month was that major corporations had been receiving a 28 percent federal subsidy for prescription drug programs for retirees.

The subsidy made sense in that companies that got it were more likely to continue private programs even after Congress and the Bush administration added prescription drug coverage to Medicare.

What didn't make sense was that not only did the big companies get a subsidy, which was not counted as income, but they also got to deduct the subsidy from their income for tax purposes. They got a sweet, sweet tax break.

Any business or individual that pays for prescription drug coverage would have jumped at such a deal. Imagine: The government gives you a few $100 bills then allows them to be listed as a business expense, which reduces your taxes.

This setup was grossly unfair and contrary to the way the government handles subsidies otherwise. It was a deal that went only to big corporations with medical programs for retirees.

The tax breaks were paid for with the hard-earned money of self-employed individuals or workers in small businesses, many who paid for their own insurance—or went without.

If this were basketball, this week's unknown underdog Butler University would have been forced to give famous three-time NCAA champ Duke University a few 3-point bonuses before the game even began.

That would have skewed the game.

Rotten deals like the health subsidy tax breaks skewed the game for small businesses and individuals trying to compete with big companies.

No company of any size ought to be able to penalize competitors by lifting their wallets, harvesting the cash and using it against them.

This didn't stop critics of the new health insurance bill from decrying the loss of the tax breaks even though the new law doesn't end the subsidies themselves.

Headlines screamed about huge health-care charge-offs as a result of health reform, even though U.S. Commerce Secretary Gary Locke said the one-time charge-offs included the entire loss of future tax deductions over future decades covered by companies' health-care plans for retirees. It was much screaming about nothing.

The new health insurance reform act closes the loophole and returns fairness where there was none.

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