Wednesday, May 28, 2014

IRS: Employers Face $36500 Per Worker Tax for 'Obamacare Dumping'

The Internal Revenue Service ruled it will impose a tax penalty on employers of up to $36,500 per worker for dumping employees into the Obamacare exchanges.

The New York Times, which broke the story, reports:
When employers provide coverage, their contributions, averaging more than $5,000 a year per employee, are not counted as taxable income to workers. But the Internal Revenue Service said employers could not meet their obligations under the health care law by simply reimbursing employees for some or all of their premium costs.
The IRS ruling is an effort by the Obama administration to stop employers with 50 or more workers from doing what critics of the health law said they would do: pay a penalty for not providing insurance and dump workers into the unpopular Obamacare program.
With the Nov. 4 midterm elections looming, the Obama administration could not allow massive waves of employer cancellations before Democrats face an already angry electorate. So the IRS ruled it would slap any employer with a $100 tax penalty per day per worker that used tax-exempt health insurance monies to cut workers a lump check and dump them on the Obamacare exchanges.
(via Breitbart)

RW note: This is going to mean layoffs at the margin. By imposing such a penalty, it will force firms to provide expensive coverage---or fire employees. Low productivity employees will be fired.


  1. they'll just borrow all the productive members of's easy as can be...see..

    Junk Borrowers Are Increasingly “Adjusting Earnings” to More Easily Sell Debt

    Last week, I wrote a post highlighting increased leverage in private equity deals and the fact that the Federal Reserve was warning of such practices in the piece: Leverage in PE Deals Soars Despite Fed Warnings. In it, I highlighted how 40% of PE deals in 2014 have used leverage ratio above 6x EBITDA, despite Federal Reserve and the Office of the Comptroller of the Currency guidance last year to not breach that ratio.

    I noted how ridiculous it is for the institution most responsible for all of the current market insanity to try to come out and talk down leverage ratios. The primary reason all of this craziness is occurring is because the Federal Reserve has intentionally lowered interest rates to such an extent that investors feel they have no choice but to chase the riskiest assets just to catch a few additional basis points. Now we see that junk borrowers are increasingly using tactics such as "add-backs" in order to make earnings look better. This allows low quality borrowers to borrow, while at the same time providing an excuse for investors to buy garbage.

    Think I'm exaggerating the problem? According to Bloomberg, 66% of junk-rated bonds sold this year scored by Moody’s Investors Service included at least one adjustment to earnings the credit rater considered “aggressive." In 2011, the number was just 40%.

    Everybody wins right? Wrong. Society will pay a very heavy price for this ultimately.

    More from Bloomberg:

    stop worrying...everything's great!

  2. Isn't it comforting to know that the most ruthless and unrestrained agency of the Federal Government is now in charge of implementing the Federal takeover of healthcare and is issuing unilateral "rulings" based on political whims of the current regime. Just another glimpse of our totalitarian future. How long will it be before someone like Obama decides to stay in office for life, for the good of the country of course.

    Without our Dear Leader how can we survive in this dog eat dog world? We the people need a strong leader to protect us from the anarchy and injustice of a free society. Now sit down, shut up and do what your told and everything will be all right. For the ruling class that is.

  3. Gee, what happened to socializing the costs of health care to make the U.S. more competitive with the rest of the world?