As most people know, the law was frontloaded with a basketful of goodies with all the pain coming after Obama’s was supposed reelection. Benefits such as having your child tethered to your insurance until they turn 27 years old are already in effect. Other changes, such as lifting lifetime caps and eliminating the ability to cancel insurance for sick people, no doubt have beneficial effects. But they contribute greatly to the skyrocketing cost of insurance.
One of the major concerns allegedly addressed by the law was the affordability of insurance for small employers, and how these companies could extend coverage to all their employees. The answer that the Democrats came up with was to provide a tax credit. Like the CLASS provisions, which were to confront the issue of long-term care, the costs and benefits of the credit were wildly misjudged. In fact, it appears that the projections were done by the same people who estimated how far away the iceberg was from the Titanic. Mercifully, the CLASS Act was repealed before the outrageous costs were thrust on taxpayers’ backs, but the Small Employer Health Insurance Tax Credit has an entirely different story.
The number of claims for the Credit has been low despite IRS efforts to inform the 4.4 million taxpayers who could potentially qualify. According to the IRS, through May 2011 only about 228,000 taxpayers had claimed the Credit, for a total of just over $278 million. The Congressional Budget Office estimated that the Credit would provide benefits of $37 billion over 10 years, and that taxpayers would claim up to $2 billion in Credits for the 2010 tax year. The IRS plans to conduct focus groups to determine why the claim rate was so low.
The IRS doesn’t have to waste their time or our money with focus groups. The answer is simple: the darn thing is way too complicated. A friend of mine teaches classes on the annual changes in tax law to CPAs all over the country. Whenever he talks about the Tax Credit, he gets the same results: the CPAs just sit there, utterly mystified by the material and rolling their eyes as if they were listening to Al Gore explain the Alternative Minimum Tax. As my friend said, “Why would an employer pay a CPA $3,000 to calculate the tax credit to get a benefit of just $1,300?” What this means, of course, is that these employees likely won’t be covered by their employers, and they’ll eventually be enrolled into a government plan at our expense.
This doesn’t even include the additional record-keeping expenses borne by the employer. Because there are three ways in which you can calculate the number of hours that each employee works, you have to calculate the credit all three ways too! This means that you have to keep more extensive payroll records, which is why it is no wonder that less than 10% of the projected participants are being covered by the credit. The government will argue that it’s early in the program and that more firms will use the credit as they begin to understand it. But based on the reaction of the preparers, it could in fact be less. Frankly I’m surprised how large the number is who have jumped in so far.
Here is another stupefying part of this that shows why the Feds should not write bills like this because they always write things in black and white when life is in gray tones. To stop people from cheating by getting a credit they disallowed any family members from participating in the program. Unfortunately, the bill writers apparently have never been in a small business like a Chinese or Mexican or Greek restaurant. Lots of small businesses are run by family and extended family and the brilliant attorneys who wrote this have purposely excluded them. That means thousands of small businesses will never qualify for the credit.
Next January, the oppressive costs of Obamacare start to kick in. Every W-2 will have to include the amount of money paid out in health care benefits, a requirement that will entail extensive administrative costs. The reason for this mandate is still somewhat of a mystery, but we can guess that a bunch of new federal bureaucrats will be using this information to further invade our lives and tell us what to do. Then in 2013, right after the “reelection of Obama,” the new taxes take effect – just as all the panels and commissions start to decide and control every aspect of our health care.
Many observers claim that what Republicans hate about Obamacare is the individual mandate. That could not be further from the truth. Mandates are the one thing they found they could sue about under the Constitution to dismantle the thing. In fact, Republicans as well as independents and rational Democrats hate hundreds of things about this new law.
Obamacare is built on falsehoods and misconceptions, and it’s only a matter of time until this utter disgust is shared by every sane American.
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