Obama tax cuts a “bait and switch”
posted at 2:55 pm on May 20, 2010 by Ed Morrissey
The AP decided today to fact-check one of the Obama administration’s favorite claims — that they have passed so many tax cuts that Tea Partiers should be rallying to thank him. The White House unveiled a small business tax credit this week, as part of the ObamaCare bill, that they claimed would stimulate job creation. However, as the AP discovers, it may actually hinder both job creation and salary growth:
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.
CBS actually took the lead on reporting the skewed incentives in the tax credit, prior to the final vote on the bill. Their report mainly focused on the disincentives to provide health insurance, given the cost of such policies and the much lower cost of the penalties involved. The AP picks up what CBS missed, which is that even the tax credits create strange incentives and disincentives for business owners.
In order to qualify for the full tax credit, business owners have to keep their staff to 10 or fewer workers and the average salary at the poverty line. What will business owners do under that set of incentives? They certainly won’t take the risk of expansion past the 10-worker level, not unless they’re certain to get a return greater than both the extra costs of the workers and the lost opportunity cost of the tax credit. The same is true for offering higher wages. Instead of only having to scale the market burden for labor costs, the Obama administration has a tax penalty that now must be overcome before an owner pays something above poverty-level wages.
Actually, it’s worse than that. The tax credit disappears unless the business has 10 or fewer workers and pays less than $25K per worker in average salary. In an economy that’s having trouble creating jobs and getting real wage growth, why did the Obama administration and the Democrats in Congress set the incentives against both?
Blowback
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its almost as if the Central Planners really have no idea of the impact of their policy choices.
rob verdi on May 20, 2010 at 2:57 PM
Or that they are fundamentally dishonest.
DrMagnolias on May 20, 2010 at 2:58 PM
Captain Renault just emailed to say that he’s not even a little bit shocked.
misterpeasea on May 20, 2010 at 2:59 PM
Depress wages? Discourage hiring? You know what the means. Success!
lorien1973 on May 20, 2010 at 3:00 PM
Obama has lost both CBS and the AP?
Not good. Spurned lovers are the worst enemies.
percysunshine on May 20, 2010 at 3:00 PM
All of these supposedly puzzling questions are easily answered once you recognize that Obama lies about everything and wants our economy destroyed. Obama does not want anyone to have a good paying job except government employees. That is why he is implementing anti-growth and anti-success programs.
GaltBlvnAtty on May 20, 2010 at 3:01 PM
You think they haven’t war gamed this thoroughly for maximum effect of wealth redistribution?
Fletch54 on May 20, 2010 at 3:01 PM
Higher tax burden for hiring workers, two year plus subsidies for not working. It is almost like this high unemployment is on purpose.
WashJeff on May 20, 2010 at 3:02 PM
Obama and the current Congress have no understanding of economic principles. So much for Ivy League educations.
MeAlice on May 20, 2010 at 3:02 PM
Every scripted word off the teleprompter is a lie. Every bill that is passed is all lies. Glimpses of truth only come when the great orator adlibs.
jukin on May 20, 2010 at 3:04 PM
Why does Obama hate small business?
JusDreamin on May 20, 2010 at 3:04 PM
Social Justice means making more people poor.
Daggett on May 20, 2010 at 3:05 PM
It’ll be tons of hilarity when Obooby comes out and admits he’s too incompetent to ‘Run’ the economy.
Of Course, by that time the country will be in such bad shape, that’ll be the Only thing we’ll be able to laugh at.
Chip on May 20, 2010 at 3:06 PM
That thing about health insurance covering your kids up till they reach 26 is another bait-and-switch, in many of the same ways.
Alana on May 20, 2010 at 3:07 PM
They knew what this outcome was. They got to talk about the great tax cut it would provide for small business, but then they made it so that almost no small business will qualify for the tax break….just like they knew that it would not save any money. They just created a sound bite that the low lifes in Congress could hide behind while they voted for it.
tnarch on May 20, 2010 at 3:08 PM
I hope they also check to see if the business owner is making huge profits, because giving a tax break to a rich small business owner whose employees are in poverty is disgusting.
PrezHussein on May 20, 2010 at 3:09 PM
comrades! comrades! from each according to their abiltiy, to each according to their needs!
DrW on May 20, 2010 at 3:11 PM
A good compromise, a good piece of legislation, is like a good sentence; or a good piece of music. Everybody can recognize it. They say, ‘Huh. It works. It makes sense.’
Barack Obama
canopfor on May 20, 2010 at 3:12 PM
I think this was part of the lying to get ObamaCare through without costing more than 1 trillion. So to win political favors they tried to sweeten the deal with these tax “credits” but to keep the cost from ballooning beyond their official benchmark they nerfed the credits so that they would hardly ever apply.
jwolf on May 20, 2010 at 3:13 PM
Because it represents success achieved without government intervention.
jana on May 20, 2010 at 3:14 PM
Why does Obama hate small business?
JusDreamin on May 20, 2010 at 3:04 PM
An excert from The 3rd Coast and the 3rd World…..
“To foist such as massive global wealth rebalancing upon Americans (and hence pressure the rest of the west) Obama must first find a means to rein-in the chaotic dynamism of individual capitalism, ie; small businesses. Entrepreneurs who start up new enterprises, the dominant engine of our economic growth, are by nature an unruly lot. They are not normally disposed towards the centralized controls needed to enact such schemes. To thrust one-size-fits-all mandates upon them is akin to herding cats, because their interests are too varied to be addressed by blanket measures. No, to get a firm grasp of the economy, it requires a less fragmented model. A model where people are coalesced under massive umbrella bodies represented by figureheads who are then more easily managed, either by carrots or by sticks. It easier to juggle 3 baseballs than 10 BB’s, baseballs you can get a firm grip on, and continual monitoring of 10 items simultaneously is too unwieldy. Multi-national corporations and large trade unions fit this bill nicely.”
Does that answer your question? Its all about control!
Archimedes on May 20, 2010 at 3:14 PM
Americans… still believe in an America where anything’s possible – they just don’t think their leaders do.
Barack Obama
Ummmm….like Hopey!!
canopfor on May 20, 2010 at 3:14 PM
comrades! comrades! from each according to their vote, to each according to their level of kickbacks!
percysunshine on May 20, 2010 at 3:15 PM
Hmmm…government picking winners and losers (a bad thing), government hurting groups politicians intended to help (‘good intentions’ vs. reality), hurting the very people the Democrats claimed they were sacrificing their precious political fortunes to help (told you so) and the law is too complex to have any real positive impact (a bad thing and a symptom of Big Governmentitis that infect the body politic).
It’s almost as if that’s exactly what those superviolent, Brooks Brothers, racist, KKK, teabagging, redneck, cousin-banging, bitter-clinging Bible thumping maniacs in the Tea Parties were telling you was going to happen for the last two years while you all had your fingers in your ears singing songs about HOPE-N-CHANGEINESS.
In fact, it’s exactly like that.
Good Lt on May 20, 2010 at 3:15 PM
Even better, let’s just tax all of the rich man’s money. He’ll be poor and his employees won’t have jobs anymore, but think about how much more fair that would be!
jwolf on May 20, 2010 at 3:15 PM
To paraphrase Rand, no corporate monopoly in history has ever survived without some form of government assistance propping it up.
Good Lt on May 20, 2010 at 3:17 PM
This is rhetorical, right?
mwdiver on May 20, 2010 at 3:17 PM
is akin to herding cats,
Archimedes on May 20, 2010 at 3:14 PM
Archimedes:)
===========
‘Cat Herders’
http://www.youtube.com/watch?v=m_MaJDK3VNE
canopfor on May 20, 2010 at 3:18 PM
Rob, I think they know precisely the impact of these policy choices. That to me is a far more frightening notion.
Insomniac on May 20, 2010 at 3:21 PM
Why…..because they’re the working man’s friends. Just ask them. (Only don’t delve too deep looking for specifics.)
Or maybe to tilt the playing field toward a government controlled plan? Just saying its a possibility….
tgharris on May 20, 2010 at 3:21 PM
HA!..gotcha!!
belad on May 20, 2010 at 3:21 PM
And more from The 3rd Coast and the 3rd World..
“…This is why we see this coziness with corporate titans like Intel and Goldman Sachs et al and this administration. Giants such as these and their kind stay close to the administration and are quite literally “in the room” to curry favor and allowances that Mom & Pop operations across the nation can never hope to get. These exceptions are granted to Mega-Corporations and justified under the convenient rubric of “systemic risk” to the national economy. And the preference shown for hot shot outfits over “Joe the Plumber” doesn’t stop there. Notice how the pin-striped mandarins of Mergers & Acquisitions and Collateralized Investment Vehicles, the guys who handle the “paper” for the large corporations got this “systemic risk” label, whereas the more mundane CIT Group who underwrote 70% of all small business loans in America did not.
The shotgun marriage of Big Government/Big Labor & Big Business, with Obama holding the 12 gauge, is ripped right from the pages of Ayn Rand’s Atlas Shrugged. Once having achieved control over your employment, your access to medical care and your energy usage, and the elimination all other available options, the public will find themselves beholden to them for their subsistence or locked out of the monopolized system. With no other alternatives the average “Joe”, out of concern for his family and self preservation will have to go along as he watches the fruits of his labor vanish into the leftist utopian ether of helping unseen people in a faraway place who we never actually witness reap the benefits. It will be in the name of global “fairness” that the nation will be plundered. For the sake of a false cause that any “caring” person cannot argue with Obama’s cronies will siphon off vast quantities of tax-payer money. The leftist philanthropic authoritarians of Hyde Park and its surrounding environs have perfected this particular form of graft since the times of Upton Sinclair’s “Back of the Yards”. It’s called The Chicago Way.”
If you ever have to ask “why” this administration does anything, the answer is power and control.
Archimedes on May 20, 2010 at 3:23 PM
Feel good, all you hope and changers? The splendid new world of social engineering. You asked for it, you got it.
rrpjr on May 20, 2010 at 3:24 PM
Since the entire Obama administration and Obama himself epitomize ‘bait and switch’–we shouldn’t be surprised at any and all variations.
jeanie on May 20, 2010 at 3:25 PM
‘Cat Herders’
http://www.youtube.com/watch?v=m_MaJDK3VNE
canopfor on May 20, 2010 at 3:18 PM
Too funny! That was great!
Archimedes on May 20, 2010 at 3:27 PM
Malevolence, not incompetence.
rbj on May 20, 2010 at 3:29 PM
It’s almost like they say “Let’s see how stupid of a bill we can pass”, then they up the ante with each bill.
right2bright on May 20, 2010 at 3:30 PM
Hate for Obama is not a strong enough word.
BuckeyeSam on May 20, 2010 at 3:31 PM
Obama is a master baiter and switcher
faraway on May 20, 2010 at 3:35 PM
And another tasty little bit from The 3rd Coast…..
“Obama’s district on Chicago’s near south side Englewood, where his former constituents reside, is a hell hole of abject poverty and violence to rival any of the 3rd world and has been left to rot as he found it. Meanwhile he and his fellow travelers wallow in appropriated wealth derived from their altruistic efforts to engender “social justice” for these hapless souls. As with all prior proponents of centrally planned utopias, the jet-set humanitarians never seem to join their fellow citizens in the bleak reality they hath wrought. In every instance where misbegotten collectivism has been unleashed, the plight of the underprivileged is never sustainably improved. They are merely there amongst the resultant ruins of an evaporated tax base to welcome the formerly comfortable middle class into their now mutual desolation.”
Archimedes on May 20, 2010 at 3:36 PM
People making under $25,000 a year are more likely to vote Democrat. You really didn’t think there was any other reason, did you?
tballard on May 20, 2010 at 3:36 PM
they want both—they want to have BOTH unemployment and businesses not making money….how fortuitous for a group of leftists that need to feel the working end of a 9-iron.
ted c on May 20, 2010 at 3:36 PM
Obama Doesn’t Care comes through again.
J_Crater on May 20, 2010 at 3:36 PM
Tax credits are not tax breaks. They are hand outs.
Count to 10 on May 20, 2010 at 3:37 PM
In other news, bears have been spotted having bowel movements near trees.
CurtZHP on May 20, 2010 at 3:37 PM
cut business hiring and productivity–check
cap salaries at $25K—check
open the borders—check
demagogue “real Americans”—check
cry “racism” at laws that simply mirror federal law—check
keep the masses distracted, uneducated and confused—check
blame everything on george bush—check
The System…..is working…
ted c on May 20, 2010 at 3:39 PM
Dear Mr. Hoffman, that’s what you get for believing the govmint really wanted to help your small business. Sap!
Kissmygrits on May 20, 2010 at 3:42 PM
No sh*t, Sherlock.
Some people have the vocabulary to sum up things in a way you can understand them. This quote came from the Czech Republic. Someone over there has it figured out. We have a lot of work to do.
The danger to America is not Barack Obama but a citizenry capable of entrusting a man like him with the Presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president.
The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America . Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince.
The Republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools such as those who made him their president.
LarryG on May 20, 2010 at 3:45 PM
And we have yet to see the worst things Obama will do to our country.
It’s going to get real ugly folks.
fogw on May 20, 2010 at 3:45 PM
LarryG on May 20, 2010 at 3:45 PM
Who said this?
Vaclev?
Got a link?
Archimedes on May 20, 2010 at 3:51 PM
“Stimulate job creation?”
Take out the first ‘t’ you see in that sentence. It’s right after the capital ‘S’.
Now re-read the sentence.
That’s the Obama plan.
hit and run on May 20, 2010 at 3:54 PM
His entire agenda is “bait and switch”.
Buy Danish on May 20, 2010 at 3:56 PM
On fox news there is a video of 500 SEIU thugs descending on a BoA lawyers house! Their mad because they are losing the homes that they could never afford anyways… apparently they just want to be given the houses… I say we’re less than 2 years from another civil war in the US…
CCRWM on May 20, 2010 at 3:58 PM
“Commerce Clause!”
Del Dolemonte on May 20, 2010 at 4:07 PM
When the sh*t hits the fan do these dumb bas**rds in our government actually think that they will remain alive? Not a chance they will all be exterminated like rats.
Reality Checker on May 20, 2010 at 4:19 PM
CAUTION! POLICE STATE AHEAD!
The money line, “we don’t a reason..’
Un-F***ing-real!
Archimedes on May 20, 2010 at 4:22 PM
Oops! forgot link,
http://www.youtube.com/watch?v=Vo91XS5pVj8
Archimedes on May 20, 2010 at 4:22 PM
ANARCHY IN 5, 4, 3, 2,
Cybergeezer on May 20, 2010 at 4:28 PM
Does that mean Michelle hasn’t been keeping him happy?
Steve Z on May 20, 2010 at 4:34 PM
Been saying it for a while myself.
The American people are fickle, narcissistic, and self-indulgent, liberals & conservatives, the whole lot of them.
It’s too hard to stand up for what is right or to put yourself out there as a leader.
It’s much easier to rant & rave from the comfort of your own little bubble.
*Populace turning channel to American Idol*
Badger40 on May 20, 2010 at 4:39 PM
Larry, this is uncommonly good! I ripped it off for my blog’s aphorism for of the day — attributed, of course.
The War Planner on May 20, 2010 at 4:45 PM
When she catches him [master] baiting, she takes a switch to him.
The War Planner on May 20, 2010 at 4:47 PM
When will people finally come to understand, “tax credits” and “tax deductions” are NOT THE SAME as “Tax Cuts” ???
sheeeesh
franksalterego on May 20, 2010 at 4:59 PM
I guess the question we need to ask is: If Obama’s goal was to destroy the American economy as thoroughly as possible, what would he be doing different?
Socratease on May 20, 2010 at 5:01 PM
Unless we were to attribute complete and total incompetence to the entire government (which we can only pray is not the case), the only conclusion that can be drawn from the Obama/Dem agenda being literally forced upon us over our objections, is the creation of 300+ million slaves to the government.
Its either total stupidity or total evil, there is no other legitimate explanation.
I am trending towards a belief in total evil.
Fatal on May 20, 2010 at 5:29 PM
I ran the numbers for a client who has two employees with average wages of about $34,000. He provides health insurance to these two and will getting a whopping credit of $806. True he is not paying anything he wasn’t already paying, but he certainly has no intention of hiring any one new because of the credit
Ann on May 20, 2010 at 5:50 PM
Because they never intended the legislation to solve problems. It was only intended to wreak havoc and make things worse so people would clamor for government intervention.
Troy Rasmussen on May 20, 2010 at 5:54 PM
In order to redistribute wealth, the people have to be kept poor.
Is that it?
Dhuka on May 20, 2010 at 5:54 PM
Now you know why Ojesus wants to control the flow of information.
hillbillyjim on May 20, 2010 at 10:38 PM
Because it isn’t their intention to improve things in America, Ed. Weren’t you paying attention to Obama when he said he didn’t care if revenues drop, as long as it results in more fairness?
Do you think he wants to create any private sector jobs?
Do you think he wants a strong US economy?
Once you understand that Obama’s ultimate goal is global governance, and that the path to that goal is the controlled management of an America in decline, bound helplessly to be sucked dry like a character in Alien, everything starts to make sense.
Try it and you’ll see.
disa on May 20, 2010 at 10:54 PM
just say’n DMFD!
dmann on May 20, 2010 at 10:59 PM
i really don’t
devadevadasa on May 20, 2010 at 11:42 PM
We have to wipe that Shit eating grin off of President Obama’s face by defeating everything he or his administration dreams up.
MSGTAS on May 21, 2010 at 10:30 AM