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AP: Tax Cut Only For Smallest Businesses

Some actual analysis from, of all places, the Associated Press:

Zach Hoffman owner of Wiley Office Furniture in Springfield, Ill., Wednesday, May 19, 2010.

FACT CHECK: Tax cut math doesn’t add up for some

By Ricardo Alonso-Zaldivar, Associated Press Writer Thu May 20, 2010

WASHINGTON – Zach Hoffman was confident his small business would qualify for a new tax cut in President Barack Obama’s health care overhaul law.

But when he ran the numbers, Hoffman discovered that his office furniture company wouldn’t get any assistance with the $79,200 it pays annually in premiums for its 24 employees. "It leaves you with this feeling of a bait-and-switch," he said.

When the administration unveiled the small business tax credit earlier this week, officials touted its "broad eligibility" for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage. Hoffman’s workers earn an average of $35,000 a year, which makes it all the more difficult to understand why his company didn’t qualify.

Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.

It’s an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help — people with health problems, families with young adult children and small businesses. Because of the law’s complexity, not everyone in a broadly similar situation will benefit.

It’s not “because of the law’s complexity.” You can be sure. It is because this tax credit, like all of Mr. Obama’s policy initiatives, is ultimately just another form of income redistribution for the ‘poor.’

Ask yourself what kind of business has fewer than ten employees who average less than $25,000 a year in wages? How many such businesses could there actually be in the US?

Consider small businesses: "The idea here is to target the credits to a relatively low number of firms, those who are low-wage and really quite small," said economist Linda Blumberg of the Urban Institute public policy center.

On paper, the credit seems to be available to companies with fewer than 25 workers and average wages of $50,000. But in practice, a complicated formula that combines the two numbers works against companies that have more than 10 workers and $25,000 in average wages, Blumberg said.

"You can get zero even if you are not hitting the max on both pieces," Blumberg said

The Treasury Department, which administers the new credit, did not dispute the calculations.

The federal minimum wage is $7.25 an hour. That amounts $290 a week, for a 40 hour week. That is $15,080 a year.

For Mr. Obama to pretend that this would help any but the smallest of small businesses was always ‘hoax and claims’ – not ‘hope and change.’

Small business owners are a pivotal constituency in the fall congressional elections, and Democrats are battling to win them over

Again, what a joke. This ‘tax credit’ is aimed at the only kind of small businesses Democrats like.

‘Head shops’ and bead stores.

This article was posted by Steve on Thursday, May 20th, 2010. Comments are currently closed.

4 Responses to “AP: Tax Cut Only For Smallest Businesses”

  1. Right of the People says:

    And ice cream and hot dog stands, Steve. Don’t forget those. Great places to go when you have the munchies after a few tokes.

  2. David says:

    I was looking over these rules (to see if our home business qualifies, Nope) and found it interesting that tax-exempt organizations can qualify as well. I was trying to work through the rules posted on the IRS website. It seems like you could create a tax exempt organization that people could pay a fee to be a member and then be employed by that organization for say 121 days a year (at any salary, say $1). The organization would receive tax credits as long as it kept the number of “employees” under 25 for covering employee health care up to 25% of the premiums. This remainder would be the membership fee for the organization. Accounting for perhaps 5% overhead, this would be a quick way to get coverage for each member for about 80% the normal cost by going through a third party tax exempt organization and having Uncle Sam pick up the other 20%. Now I am not a tax specialist or a criminal, but if I can figure out an easy way like this to game the system, what hope is there of this ever working out well?

  3. canary says:

    Michelle’s children slave plantation garden. Maybe the kids will get to start keeping some of peas. Even Mexicans expect better pay. Well, most of them were Mexican children now that you think about it.

  4. proreason says:

    “This ‘tax credit’ is aimed at the only kind of small businesses Democrats like…‘Head shops’ and bead stores.”

    or businesses with tax returns prepared by Acorn-or-whatever-they-are-calling-themselves-today

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