Commerce bashes companies crying foul on healthcare law
Commerce Secretary Gary Locke in a Thursday op-ed in The Wall Street Journal called out companies for being “disingenuous” in arguing that the rescission of a particular healthcare tax deduction would cause their taxes to jump.
“Critics have seized on this accounting adjustment to suggest these costs — as much as $1 billion in one company’s case — are going to place immediate and substantial cost burdens on America’s businesses. This is disingenuous,” Locke wrote.
Boeing on Wednesday announced the accounting change would make it take a $150 million tax hit.
recently announced a $1 billion tax charge because of the accounting
rule change. Caterpillar and John Deere expect tax increases of $100
million and $150 million, respectfully. 3M claimed the accounting
change would boost its tax payments by roughly $87 million.
Locke wrote that the actual cash flow impact of the provisions would begin in 2013 and would only represent a tiny fraction of the accounting charge-offs.
He also pointed to a story in the Journal that said that one company that had calulated a $100 million hit to its first-quarter earnings would actually see closer to a $7 million hit each year. Locke said that was less than 1 percent of the company’s profits.
Under the healthcare law, businesses still receive the tax-free subsidy, but they can no longer deduct it from their taxes as they did in the past. In most cases, companies cannot deduct tax-free subsidies from their taxes.
“This is how virtually every other federal subsidy for businesses and individuals is treated by the IRS,” Locke wrote, adding, “When you look past the hype and the overheated rhetoric, the benefits of the health reforms for America’s businesses large and small far outweigh the impact of this small provision.”
Republicans are pressing the argument that the healthcare law is a jobs-killer that will raise taxes, and reports from the companies have bolstered their public case.
Locke’s op-ed is a sign of Democrats trying to push back.
Locke noted that Credit Suisse’s response to the accounting change was: “Don’t overreact to the hit on earnings”; Morgan Stanley regarded reaction to the change as “noise”; and UBS estimated the change represented less than 1 percent of market capitalization for affected companies.
“I understand that in these difficult economic times the potential for any additional expense is not welcomed by American businesses,” Locke wrote. “But in the long run, the health insurance reform law promises to cut healthcare cost for U.S. businesses, not expand them. That’s good for [businesses]. That’s good for their employees. That’s good for America.”