If like me you receive the Heritage Foundation's daily e-mail alert (which could be titled "How Barack Obama is destroying America today"), this morning you would have learned the latest bit of outrage over health-care reform, which is that "companies used to be able to deduct part of their costs for providing drug benefits to their retirees, but Obamacare cancels that deduction." Turns out that a bunch of big corporations like AT&T, Caterpillar, and 3M made virtually simultaneous announcements (Could it have been coordinated? Nah.) that they were putting charges on their balance sheets because they'll be losing this deduction.
First of all, it's a little odd that they're doing it this quarter, since the change in the tax law doesn't kick in until 2013. But the more important thing to note is this: The loophole the reform is eliminating is no ordinary tax deduction. It's a sweetheart deal so absurd that no honest person could defend it.
Turns out that as part of the prescription-drug bill the Republicans passed in 2003, companies that gave drug benefits to their retirees were given subsidies by the taxpayers to do so, to the tune of around $1,300 per retiree. You might argue that AT&T doesn't need this taxpayer subsidy, but that's not the good part. The good part is that the law allows them to deduct the amount of the subsidy from their taxes, as though they were actually paying their own money for those benefits and not that of the taxpayers. So they get a subsidy, and then they get an absurd tax break on top of it. Essentially, they're deducting money you gave them from their taxes.
It's the latter part that the new health-care reform eliminates. They'll still be getting the subsidy; they just won't have the ridiculous tax deduction anymore.
Conservatives now decrying the loss of this loophole are probably hoping that people won't really grasp the particulars and that the overriding message will be not "Health-care reform eliminates sweetheart tax loophole for large corporations already suckling on the federal teat" but rather "Health-care reform ruins economy by cutting into corporate profits." And it just might be -- as long as they can keep anyone from understanding what the issue is actually about.
-- Paul Waldman
