Excessive Outrage on Retiree Subsidy Accounting

More

So as blogged yesterday, the new health care plan changed the tax treatment of a subsidy for retiree prescription drug benefits, which caused those companies who had received the subsidy to announce a charge against their deferred tax assets.  Conservatives gleefully pointed out that this was probably going to change peoples' drug benefits.  Liberals leaped into the fray, arguing that all the law had done was 'closed a loophole", and accusing the companies of "double dipping".


All this moralizing seems to me to be extremely overwrought.  (To be fair, I haven't actually seen any of the conservative moralizing; only liberal blogs claiming it exists.  Which is not to say that it doesn't, only that I don't read the frothier bits of the conservative blogosphere or media world where such moralizing might have been done).  The government gave a subsidy; it can take it away.  I don't have much of an opinion either way, except, as I said yesterday, if by increasing the cost of retiree prescription drug benefits (which is what "closing the loophole" does), we encourage companies to cancel their benefits and dump retirees into the public system, at higher cost to the taxpayer.

But liberals have now taken to making it sound as if the companies were engaged in some dodgy practice.  Here's the thing:  health care benefits are tax deductible.  Deducting the cost of the benefits is standard practice.  And subsidies usually aren't taxable, because there's no point, really.  This wasn't a loophole.  It was the natural result of the current tax code.  And there's no evidence so far that the "loophole" was unintentional; legislators may have decided this was the optimal bribe to get companies to keep their seniors on the drug program rolls.  It would hardly be the first time that tax subsidies were thrown in as a sweetener.

Now we've changed it, we have made retiree health benefits more costly for the companies.  That means that some of them will probably drop their benefits.  Fine, if you think that's good policy, but let's not pretend this is some righteous campaign against dastardly companies.  We were paying them to take expensive seniors off our hands.  Now we want to reduce the payments.  

Am I outraged that they've been feasting at the public purse excessively?  Only to the extent that I want Medicare Part D eliminated.  Paying the companies was cheaper than putting beneficiaries on Part D, and gave the retirees more generous benefits.  What am I supposed to be outraged about, again?
Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity


Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity

Video

Is Technology Making Us Better Storytellers?

The minds behind House of Cards and The Moth weigh in.

Video

A Short Film That Skewers Hollywood

A studio executive concocts an animated blockbuster. Who cares about the story?

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Video

What Is a Sandwich?

We're overthinking sandwiches, so you don't have to.

Video

Let's Talk About Not Smoking

Why does smoking maintain its allure? James Hamblin seeks the wisdom of a cool person.

Writers

Up
Down

More in Business

Just In