Ken Johnson

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November 20, 2012
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JOHNSON: Prepare for a ramming

Remember when our president promised he would only tax the rich? And that was just to reduce the deficit?

Well, guess what. We're ALL "rich."

In the parlance of the Navy, when you're about to have an unpleasant jolt that might not turn out too well, like someone's boat is going to sink, the cry is "prepare for a ram." It works both ways, of course, whether you are doing the ramming or you're being rammed.

As the discouraging political posturing continues in Washington, businesses are starting to look at part of our 21 soon-to-be new taxes. Including ones coming with the (Un-)Affordable Care Act, quaintly known as Obamacare.

Everyone who pays any federal taxes - FICA, income or capital gains - is going to pay more, including the working poor. Directly or indirectly. No one is going to be exempt. And the costs are going to steadily grow.

The regulations are still being written, and they are on the march toward over 100,000 pages. They are already about a year behind schedule, too, so uncertainty still holds a lot of business plans on "Wait." Are the bureaucrats likely to keep things simple?

Remember, this is the bill Nancy Pelosi famously said, as the Democrat majority in both House and Senate rammed the 2,400-page bill through Congress, we'll try to read it AFTER we pass it.

Ah, the consequences. Some are already in motion, others won't hit until 2014 shows up, others year by year. The good things promised are pretty well after 2014.

Here's one scenario you might ponder.

On Jan. 1, 2014, an employer with 50 or more full-time employees has to provide approved health insurance or pay a fine of $2,000 (or in some cases $3,000) per employee. In real life this "penalty" is cheap compared to the cost of providing health insurance.

Do ya think small employers might be more likely to drop their insurance plans?

Right now only 10% of the small businesses seem likely to do this, but when it happens you can bet a lot more will jump into that boat.

Take a couple of examples:

Say Joe, married with a couple of kids, makes $90,000 a year. Health insurance for Joe costs $8,000 a year. So this small business says: "Joe, starting in 2014 we are dropping coverage. Here's an $8,000 a year raise. You can buy insurance at the exchange."

At 2012 tax rates, standard deduction, Joe's federal income taxes go up $1,220. Social Security and FICA at 7.65% take another $612. In Colorado the state tax is another $370. Total hit is about $2,200. And Joe still has to pay for new insurance.

Different Joe, similar family, making $50,000 with $6,000 for insurance. Total hit about $1,640. And yes, Joe still has to buy insurance, which won't be deductible.

Does it feel like one size fits all?

And that's just about the insurance cost. What about federal tax rates in general? Our $90,000 Joe has a 2012 federal tax bill of $8,565. If the bozos in Washington let his "Bush" tax rates go away, his taxes go up about $3,100 for 2013. OUCH! The second Joe gets hit, too. Every Joe gets hit.

These are dollars that the Joes would have spent on food, clothing, cars, vacations and even golf. They would help grow the economy.

Worse, all this assumes 2014 rates will stay as low as 2012 rates, which reeks like diapers full of wishful thinking.

It's another "law" in action: the Law of Unintended Consequences. These solutions happen because of rational responses to the provisions of the health care law.

We hope the current Washington sparring will end with an answer that works for us. If the Bush tax cuts go away and we "tax the rich," the middle class in particular gets hit. In fact, everyone who gets a paycheck will take a big hit. So will the country.

I'm saving the worst for last. Those 21 new taxes are already somewhere in process. With the "Fiscal Cliff," the health care tax increases, and just ordinary tinkering, can anyone predict what the tab will actually be?

Just for safety's sake, I'm thinkin' we probably ought to prepare to be rammed.

Ken is founder of the Grand Junction Free Press and former publisher of The Daily Sentinel. He spends his time between the Grand Valley and California.


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The Post Independent Updated Nov 20, 2012 02:37PM Published Nov 20, 2012 02:35PM Copyright 2012 The Post Independent. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.