Thursday, April 2, 2015

Obamacare: The New Outrageous Full-Time Employment Taxes

"It’s been underestimated in two ways. First of all, a lot of estimates put the number of workers that are really affected by it around 10-15 percent. I’d say it’s more like 25 percent. The reason is this anti-competitive aspect to it that employ­ers are discouraged from becoming large. That hurts even employees who work for a small company, because their employer is no longer willing to compete so hard for employ­ees. So that would be one way it’s underestimated.

"Then the tax treatment: Because salaries are a deductible expense and penalties aren’t, employers really have to cut salaries by over $3,000 in order to have that $2,000 to pay the penalty. Also, it’s not a $2,000 penalty. It’s indexed to health costs, and health costs have already gone up, so that’s going to creep up on us as well...

"If you think of the penalty in terms of the number of hours that somebody has to work to create the value to justify the penalty, that number varies. Some workers need to work a lot of hours to create a little bit of value, and other workers create a lot of value in a short amount of time. So, that’s another major difference.

"I look at the amount of the penalty, making these adjust­ments for taxes that I mentioned. Then I ask the question, worker by worker, “How many hours do you have to work to create that kind of value?”

"So, a minimum-wage worker, for example, would have to work a day every week of the year in order to create the value that would pay for that penalty that his employer is going to owe for him. One day a week for the government, on top of all the other days of the week we normally work for the government, is a lot."

-Casey Mulligan, Professor of Economics, University of Chicago


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