WASHINGTON -- President Obama's signature on his health care bill was barely dry before businesses began announcing that its costs would reduce their earnings and could lead to cuts in prescription-drug benefits.
After crunching the health care plan's tax consequences, a surprising number of companies announced they would be taking charges on future earnings because of tax law changes in the bill.
First came heavy-construction equipment manufacturer Caterpillar that said the tax hikes would result in a $100 million drag on their first quarter because the bill Obama signed will cut the tax deduction businesses are given to provide their retirees with health care benefits.
One by one, other companies followed suit, announcing charges they will be forced to take because the higher tax levies will cut back earnings at a time when the economy remains very weak and many businesses are still struggling to keep their head above water.
AT&T said it would take a $1 billion first quarter charge, too, along with farm machinery manufacturer John Deere Co., Valero Energy, AK Steel Corporation and 3M who said they would take smaller charges.
Prudential Financial Inc. announced that it would take a $100 million charge against earnings in response to the $1 trillion health care bill's tax consequences on employers.
U.S. aircraft giant Boeing said it, too, planned to record a $150 million charge in the first three months, as estimates of the bill's true costs began rolling in from corporate tax crunchers. Towers Watson, a worker-benefits consulting firm, forecasts that government-imposed health care costs may cut up to $14 billion from U.S. corporate profits.
Critics of the health care law have long maintained that it would lead to higher taxes on businesses that would drive up their health care costs that would in turn result in higher worker premiums, fewer employer-provided health care benefits or both.
AT&T said it planned to assess their own company health care costs and possibly reduce employee benefits.
Driving the latest employer cost charges are the sweeping health care law's increases in business taxes. Companies providing prescription drug benefits for millions of retirees have been getting generous subsidies that cover 28 percent of their costs and thus were allowed to deduct all of their benefit expenditures, including the subsidy, from their taxable income.