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  • Obamacare Day 2: A $1 Billion Tax Bill... for Just One Employer

    “AT&T Inc. will take a $1 billion non-cash charge in the first quarter” the Associated Press reported today. And by “take a non-cash charge” what they really mean is that President Barack Obama’s health spending plan just ate $1 billion out of AT&T’s bottom line. And that’s to pay for just one of the tax hikes wrought by Obamacare.

    AT&T is just one of many companies that subsidize Medicare drug coverage for their retirees. The new health law slaps a tax on those subsidies, effective next year. In addition to costing the communications giant a cool billion, the tax is likely to cost workers and retirees a cherished benefit. AP notes that, because of the legislation, AT&T is now “looking into changing the health care benefits it offers to active and retired workers.”

    So much for the promise about being able to keep the health care you have!

    AT&T is not the first company warning stockholders to expect earnings to plunge due to the new law. Yesterday, as President Obama celebrated his health “triumph” by taking a victory lap in Des Moines, Iowa’s largest manufacturer, Deere & Co, announced it would have to take a first-quarter charge of $150 million. Caterpillar Inc. and AK Steel Holding Corp have announced similar charges as well.

    Many more earnings “shoes” will be dropped next week. Keep checking The Foundry for up-dates about this and other troublesome “Side Effects” of Obamacare.

    Posted in Obamacare [slideshow_deploy]

    15 Responses to Obamacare Day 2: A $1 Billion Tax Bill... for Just One Employer

    1. Sonja in Colorado says:

      This is going to get even WORSE for the American people. Obama care HAS TO BE STOPPED before it completely destroys our country.

    2. Billie says:

      On the basis obama care is unconstitutional, the people have stated loud and clear, they do not want it, don’t pay to help it. Don’t let this thief steal from you through his taxation of misrepresentation.

      This president is bias and discriminating. He doesn’t believe in accountability unless it furthers his agenda. He doesn’t believe in freedom, rights, liberty. He isn’t working for the American people, PERIOD.

    3. roger olson says:

      I wonder what Congress is thinking now? And i don,t see unemployment to go down any time soon and might even go up after this new law really kicks business in the teeth. And to think my Congressman voted for this kind of law and is on the radio saying how he wants a single payer health care system here in the US. Ha i will do everything i can to kick him out of office this year.

    4. Michael says:

      No government has enough power to make its citizens EQUALY rich, but it

      has more than enough power to make us equaly POOR.

      "The trouble is that he who gets something for nothing

      will earn every penny of it, twice over."

      David P. Goldman

    5. Wilbur Sanchez says:

      What’s the complaint?

      1. AT&T is still going to get their corporate welfare.
      2. AT&T is still going to get that corporate welfare taxfree.
      3. The only change is that when they spend their tax-free corporate welfare, they won’t be able to count it as an expense.

      Why is it that people who decry “welfare queens” so love corporate welfare?

    6. Jill, California says:

      I have three questions:

      1. Why weren’t these big companies speaking out in time to stop this train wreck?

      2. Why aren’t these big companies admitting the truth? They’re not going to lose profits. They’re going to pass the costs on to their customers. And we’re all going to be held hostage to their price hikes, because there won’t be any alternatives.

      3. Why aren’t these big companies filing lawsuits, like several attorneys general have? I believe they have standing under the Fifth Amendment … “nor shall private property be taken for public use, without just compensation.”

    7. Connie says:

      They didn’t go far enough. What we really need is universal single payer health care. Look at Canada. Look at Europe. It can be done and it should be done. We spend way too much on health care in this country and we’re not all that healthy.

    8. Jeff Bakke, Oregon says:

      AT&T and other companies' claimed "cost increases" should be clarified so people really understand the issue. In 2003, under the drug plan legislation, these companies received a 28% subsidy for the cost of their payments to retiree drug plans. In addition, they were able to continue to deduct the full amount of the payment to the plan. Following is an example of what this meant: An expense of $100 is paid for retiree drugs as provided for in AT&T's contract with employees. The government then gave the company $28 towards payment of the expense; net cost to the company: $72. But AT&T was still able to deduct the full $100 from their income, even though they only paid $72. In other words, they were able to deduct a $28 charge from their income even though you and I, other taxpayers, paid that $28. This is just plain wrong and the 2010 healthcare legislation simply closed the loophole. Incidentally, they still get the $28 subsidy, which you and I are paying for. When these companies claim they'll have to cut healthcare benefits, lay people off, etc., then blame it on this healthcare legislation, they are being fundamentally dishonest. What they’re really doing is using this healthcare legislation as an excuse to make further cuts to wages and benefits in their ongoing race to the bottom.

      Jeff Bakke

    9. peggyag1 from Pa. ww says:

      peggy ag1 http://www.abloggerwithoutablog.com It is a shame that AT&T retirees will lose drug benefits and have to be placed on the Medicare rolls which will certainly raise the overall costs of Medicare. The amount the government was subsidizing these companies with, was a little over $1,000- which isn't much considering that either Prevacid or Nexium alone would be much more than that per year, when you consider that seniors take several prescriptions. So who is doing the accounting in the Obama administration ?

      In addition, I know they were using the savings from dropping this program to pay for the new Health Care Law. So exactly how much did they really save, when you subtract the cost of the dropped retired employees who are now forced to be on Medicare, from the amount they claimed this administration saved by dropping this program ?

      I am also troubled by the 40% tax on medical devices, I watched a company owner who produced surgical tools claim his 9 million dollar profit would be reduced by 7 1/2 million. There is a tax on tanning beds which I understand, but one on surgical instruments implies that Obama administration wants to discourage surgeries, which is the mantra found in their blue-print for Health Care- the Dartmouth Atlas. Also, funds have been cut for the training of specialists when we need surgeons according to the head of the A.M.A..Anyone see a pattern here, of taxing not only for revenue, but also to discourage using targeted health care resources ?

    10. Arvin, GA says:

      Once again, the Heritage foundation won't disappoint to conceal the real facts from its readers.

      First of all, these subsidies was part of "Socialized" Medicare part D which gave companies such as AT&T 28% tax break on prescription bought by its retirees. Translation: you the taxpayers were paying for their medicine = corporate welfare in action.

      Second, this reform bill closes this loophole which must, philosophically, have your sanction as a conservative–no more hand outs to anyone.

      Finally, the $1 billion spoken here is an expense that AT&T must find throughout their contractual obligation of retiree drug plan. AT&T has around 300k pensioners with their dependents. Over the next few decades, they have to find ways to cover their 28% prescription which was being subsidized prior to this bill. This amount to $10-$20 million quarterly decrease in earning. AT&T just had a $3 BILLION revenue so such misery amount won't make a dent in their overall performance. Perhaps a dim in the first few years but not over the long haul.

    11. Dean,, Southport, NC says:

      Where were these companies BEFORE this bill was passed? They would have had more influence that anyone. Now it will cost consumers and their employees. It isn't every day we go out and buy a new Caterpillar or John Deere, so when they begin loosing sales it WILL impact them AND their employees.

      My hope is that the employees of AT&T, John Deere, Caterpillar, etc standup and becounted. Put presser on their employers. It would be alot more beneficial for these companies to spend a million doallers to defeat the Dems this coming November than to loose theirs businesses and employees.

    12. MT from CC says:

      This is wrong on so many levels. Quoting Ezra Klein:

      What's going on here isn't a new mandate or a hefty tax, but the elimination of a subsidy that advantaged firms who provide drug benefits to retirees.

      What happened was this: When George W. Bush and the Republican Congress passed Medicare Part D in 2003, they were presented with a problem: The fact that the government was now offering prescription drug coverage might encourage these companies to dump the prescription drug coverage they were already offering employees. So Congress gave them a kickback: Companies that provide retiree drug benefits get a subsidy of about $1,300 per retiree per year in order to keep companies from ending their retiree drug plans at once and dumping everyone into Medicare. This subsidy is not just tax free but also tax deductible. Let me make sure that's clear: Not only did companies get a subsidy, but they could also deduct that subsidy from their taxes. Sweet deal.

      This looked a bit nuts in retrospect, so Democrats ended the subsidy's deductibility. Again, let's be clear: They didn't end the subsidy. And they didn't make it taxable. They just said that it couldn't be used as a tax deduction. And ultimately, this doesn't raise that much money: About $4.5 billion over 10 years (the sums look large on the corporate side because they're writing down the deduction's expected future value, not just its annual value). [SIDEBAR: For its vaunted $1.1 Billion write-off, the loss of this deduction will actually cost AT&T $40 Million annually, They are adding up 30 years, increasing it at teh rate of health care cost inflation (very high) and writing it all off in one quarter as a one time charge.]

      But oh, the hue and the cry. This is "a small measure of the destruction that will be churned out by the rewrite of health, tax, labor and welfare laws that is ObamaCare, and only the vanguard of much worse to come," fretted the Wall Street Journal's editorial page. Your own article misses the point completely, And there is only one explanation: Politics. It's shameful and dishonest, and you ought to stop.

    13. MT from CC says:

      PS – To Sonja from Colorado (and people other here like you): Obama has to be stopped? Why, and by who? With all due respect, he won the last election, and not by a close margin either — and heath care reform was a centerpiece of his (and McCain's campaign for that matter) . The next time the GOP wins an election (or steals one like Bush did in 2000), I'd like to see them govern like the party with the lower vote total deservs to be respected and treated like it really won. Fat chance. As Dubya himself said: "Elections have consequences." and "This election gave me some political capital, and I plan to spend it"

      Why is it that conservatives hate democracy? Why is that they only love the American system of government except when the other party wins elections? This sour grapes attitude is pretty distressing for those of us who respect the outcomes election, not to mention the tens of millions who voted for Obama precisely so that he would pass health care legislation. I don't recall Bush going with polls and public opinion — no, he had so-called "principles," even if 70% of the public disagreed with him. That's how the GOP always governs.

      This Act passed fair and square. Get over it. And get over yourselves — you are not so special that when you lose an election, you get to continue acting like you won, and saying that anything the winners do is somehow an afront to freedom and liberty. It's really very un-American of you and your compadres on this.

    14. Alpheus says:

      @Connie: I *have* looked at Canada. I *have* looked at England, and to a lesser extent, the rest of Europe. It isn't working for them. And, in that *we* haven't had "Free Market" health care for decades, state control over health care hasn't worked for us, either.

      Having government take everything over isn't going to work for us, *regardless of the industry*.

    15. Alpheus says:

      @Everyone who is pointing out the corporate welfare AT&T has received:

      Yes, we need to stop *all* forms of welfare: that hasn't been working out for us, either!

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