In parts one through four of our series on the Affordable Care Act, we have examined a few of the benefits that are seen as the most desirable provisions of the law, things like no pre-existing condition, no-cost birth control, and the ability for children to remain on their parents’ plans. There are other benefits, like cash subsidies to assist in the purchase of the ACA health care plans that will be examined later in the series. For part five, we will skip ahead and discuss the law as it relates to small business and corporate America.

Who Must Comply with Obamacare?

Under the ACA law, any business with more than 50 full-time employees must offer health insurance to its employees. This health insurance plan must be compliant, meaning the benefits of the plan must meet or exceed the minimum benefit thresholds in the ACA law. If a company does not offer a plan or has a plan that does not meet the minimum standards, then the employer will be assessed a tax fine of $2,000 per employee. This provision is not quite as straightforward, however, because technically the company is only supposed to pay the fine for employees who are eligible to receive subsidized health care costs.

Since everyone is mandated to have coverage, that means the fine would apply to all employees, not just the ones receiving government subsidies. In addition, the first 30 employees are exempted from the fine. For example, a company of 51 workers would pay a $2,000 fine on 21 workers (51-30=21) or $42,000. A good guide for explaining different scenarios can be found at the National Federation of Independent Business website.

If you have fewer than 50 employees, you are not required to provide health insurance. However, if you have up to 25 employees, the government will provide a tax credit if you have employees earning at least $50,000 per year and offer health insurance. In 2013, the tax credit amount is 35% of your annual cost for health insurance premiums and goes up to 50% after 2014.

However, that is only if your average employee salary is $20,000 or less. If the average salary is higher than $20,000, then the tax credit will be reduced by a factor determined by how much the average salary is above $20,000. In addition, if the company has more than 10 employees, regardless of salary average, the tax credit will be reduced. Lastly, there are no tax credits allowed for employees considered “highly compensated.”

For the ACA law, highly compensated is considered anyone making over $80,000 a year. If you noticed how the first sentence in this paragraph contradicts with the numbers in the third sentence, that is not a typo. It is contradictory, but that is what is written in the ACA law. You can find this information at the healthcare.gov and on page 319 of the ACA law.

Implications

The number one implication of the small business and employer provision is the flooding of potential ACA recipients into the system, resulting from employers dropping coverage. Most proponents of the ACA law have dismissed this idea as conservative scaremongering at best and corporate greed at worst. That, however, is because they are not the ones writing the checks. This is a simple math equation. The increase in required ACA benefits increases the costs of the health insurance premiums, because more items are covered.

At current levels, the Kaiser Family Foundation puts the average cost of employee health insurance at $15,073. Only $4,129 of that is paid by the employee, meaning close to 11,000 of the costs is paid by the employer. The ACA coverage mandates will increase those premiums, but even at current levels, paying a $2,000 per person fine is better than $11,000. This is simple math, and as you move into companies that have 5,000 or more employees, you are now talking about saving hundreds of millions of annual costs. Make no mistake, many companies will take this option.

For the companies that bite the bullet and provide health insurance, their costs will increase. This will be because of higher premiums charged by the insurance companies for having to cover more health care benefits and for costs related to keeping up with the regulations that come with the law. There is no definitive way to determine the costs accurately ahead of time, but the Congressional Budget Office projects the costs of ACA to be double what they originally projected.

To be fair, the CBO estimates were for the first 10 years. New projections that go out 11 years have the cost down 0.64%. Why the CBO would go out just one year on their projections is a little strange, especially given the paltry reduction in costs it would show. More telling is that the projection is based on additional revenue provisions that would pay for the law. This is always the problem with the CBO; it only answers questions based on the paper and assumptions put in front of them.

If any of those figures are wrong, if something is left out (like payments to doctors left out by Democrats when the bill was originally submitted), or the revenue gathered is less then projected, then the whole analysis is thrown off. Garbage in, garbage out is the old saying. The primary common sense question to this is simple: When has any government program ever cost less than promised? The answer is never.

The other implication is that the country may see an increase in temporary agency usage. Companies on the cusp of going past 50 employees and either wish to expand or have no choice to can avoid that employee threshold by going through temp agencies. This will alleviate some added costs to them, but only marginally as the temp agencies will also be charging a higher fee per employee supplied.

Lastly, small businesses will not get near the benefit from the tax credit. As discussed above, employers cannot have more than a $20,000 in average salary to receive the full tax credit. If you have higher salaries, the tax credit percentage goes down. Any company that can only afford to pay an average salary of $20,000 or less, in all likelihood, cannot afford to pay for health insurance regardless. Look at the numbers: With an average employer cost of $11,000, an employer could get a $5,500 tax credit, and they pay the other half.

However, $5,500 dollars is a quarter of a $20,000 salaried employee’s pay. A business that small cannot afford to pay that. They cannot afford to risk going under just to satisfy some politician’s belief that paying for health insurance is the right thing to do–no matter the cost. Also, this tax credit does nothing for large employers because they are not eligible. If you have 51 or more employees, you cannot get a tax credit at all. Because of this, there is no incentive.

The primary problem is political and social philosophy intruding on policy and business. Things like health care, time off, vacations, etc., used to be called fringe benefits. They were there to create greater employee loyalty and a way to compete for better employees. They were, in short, extra benefits. Today, they are seen as items that are owed to employees.

The President and the Democrats have determined that health insurance is a right, and if the government cannot get a bill through for single payer, then employers are responsible for paying for that right. Whether this is true (health insurance as a right) is an argument for a different day. The point here is when you approach policy that way, then you end up with bills that have consequences far beyond what is written or intended. Businesses exist to provide a product or service, and make a profit. That is all. They are not smaller surrogates for government to be enlisted in the care and feeding of the population.

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New York, U.S.A. – In the new issue of Philanthropy Management, a panel of experts from the philanthropic sector agreed that charitable giving is often hampered by misdirected government tax policies.

Sam MacDonald, charity taxation expert for Farrer & Co., a London-based law firm, told Philanthropy Management, “There’s a point where the logic of taxing charities falls down. Taxing the assets of a legitimate charity takes money from a public good and recycles it to deliver what is purportedly another public good. It can be difficult to see what benefit has been achieved.”

Government taxation of charities tends to reduce the philanthropic sector’s ability to address social needs that are often not covered by government, according to Richard Schwartz, Philanthropy Management‘s editor. “This calls into question the ability of tax authorities to assess the consequences of their policies,” he commented.

The panel considered the position shared by Stanford University’s Robert Reich that charitable giving is a form of consumption and should be taxed as such. Schwartz and other panelists questioned this thinking, noting that it equates consumption with activities that can contribute to, and strengthen, society.

Members of the panel observed that the US and UK have consistently enjoyed a high level of giving, according to a Charities’ Aid Foundation study. Perhaps not coincidentally, they also offer the most generous tax relief among developed nations. Germany was mentioned as an example of a country that offers minimal tax relief and has a much lower degree of giving as a percentage of GDP.

Panelist David Altschuler, chairman of the Board of the One to One Children’s Fund, suggested that government services and philanthropy are not mutually exclusive. “Somehow we need to find a way to work more closely together, whether fiscally or in partnership,” he said. Charles Keidan, director of the Pears Foundation, concurred that there is no reason why public-private partnerships shouldn’t exist, but cautioned that nonprofits should not undertake initiatives that are “the proper role of government.”

About Philanthropy Management

Philanthropy Management, an Asset International publication, focuses on the financial, operational and strategic services provided to foundations, endowments and other large-scale grant makers by banks, asset managers and other professional advisors. Edited by Richard Schwartz, it is distributed globally to more than 11,000 senior executives within the largest grant making entities in the Americas, Europe, Asiaand Middle East, including foundations and endowments, family foundations and family offices.

Philanthropy Management aims to provide philanthropic institutions with a broader and more refined range of tools, resources and research to measure their own success and the impact of the advisors they use. Please visit philanthropy-management.com.

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So far in our series about the Affordable Care Act (ACA), we have provided an overview in Part 1 and reviewed the benefits of Pre-existing conditions and continuing coverage for kids under their parent’s plans. This law is a complicated one, with over 2,700 pages. It is the goal of this series to explain the more common provisions in a simple and logical way, so you do not have to read the entire law. In Part three, we will look at the following provisions: no cap on lifetime benefits, and preventative care benefits.

No Lifetime Limit on Coverage

Most health insurance plans, either private or through employment, have a limit on the amount of coverage for each person. Often, that limit is between one million to two million dollars. This is an average, and can be more or less depending on the health insurance plan. When you reach that limit, you no longer have coverage. If you or your kids have a rare illness like hemophilia, or rare form of cancer, you can reach the limit fast. Once you do, you have to pay for your care out of your own pocket.

Congress set out to end this within the ACA law. Now there will be no limits on coverage. If you have a rare disease or other health care problem that costs five million dollars, then the insurance company must pay it. While there are no official statistics on people that reach and exceed lifetime limits, it takes only a few people with news stories of their plight to make this a popular provision of the law. It is hard to argue against.

Implications

The primary result of this policy is higher premiums. On one hand are the very real costs of paying the additional medical bills of people who would have reached and passed a limit. Not many people do, but that is not the issue. The insurance company must factor in the costs of additional expenses for everyone. That is how they figure out risk and determine appropriate rates: by using actuaries and high level math to determine risks, average costs, etc. When their expenses for payouts go up, their rates must go up as well. It is simple to say, “They should just eat the expense for the good of people over profits,” but without profits there is no company to pay any premiums.

On the patient side, you will no longer have to worry about being wiped out by an illness. If you can afford the premiums for coverage, then you will not have to stress over possible high health care costs.

A more subtle implication is the continuing argument over how much are and should people be responsible for their decisions. As we will discuss in detail in the section on preventative care, no limits are another barrier to people understanding health care costs, and being responsible. Often, insurance plans have riders that allow individuals to purchase a higher limit amount, and people decline to do so.

They see two million dollars, and think “Hey I’ll never have that many doctor visits.” Then, the illness hits and it is too late. Sometimes people are innocent victims of fate, other times they are the victim of their own choices. As laws take more and more responsibility away from individuals in different areas, there is the real effect of people being more irresponsible.

Preventative Care

If you have caught even a slight amount of news about the ACA law, then you have probably heard supporters of the bill tout this benefit. Beginning in section 4,000 of the law, a host of preventative services are now covered under the law at no co-payment.

The number of services covered are too numerous to fully list here, but include things like disease screenings, mental illness screenings, immunizations, and most controversial presently, birth control and sterilization procedures. Many of these services were covered under current plans offered for sale or through employers, but now they must be covered at no co-payment to the insured.

Implications

The primary idea behind covering preventive care in a comprehensive manner is the fact that the best way to keep costs down for serious illnesses is to not get sick. If individuals take better care of themselves, get regular checks-ups, and prevents illness, then over time health care costs will go down, and then premiums will go down. The problem, however, is that you cannot make people go to the doctor. Many insurance plans already cover items of preventative care at no cost, or very low co-pays.

Many offer lower premiums for things like joining a gym, or joining wellness programs. Yet, people still do not take better care of themselves. You cannot make people go to the doctor, get checks-ups, or engage in wellness programs. By making them free, you have just taken any incentive or responsibility out of their hands.

When you divorce people from real costs, they do not worry about costs. When you make something free that they were not planning to do anyway, then all you have done is raise the costs of premiums, because these services must be covered. By making all sorts of preventative services covered, both the practical like immunizations and the esoteric like fully funded wellness centers, you increase costs.

The other implication is that the Obama administration has set up a coming legal war over the issue of birth control. By mandating that religious organizations must cover birth control, they have impended, many feel, on the rights of the religious. Birth control is a personal choice, but the ACA has made it everyone’s business because it requires everyone to pay for it.

The crux of the situation is simple, should you have to pay for your neighbor’s choices? If you are an employer, religious or otherwise, should you have to pay for the choices of your employees? The ACA says yes, and many organizations will be fighting this provision.

The next part of our series will explain provisions requiring equal premiums for women, and mandates dictating how much insurance companies must pay in health care expenses. These are two of the more controversial provisions with wild and inaccurate statements flying in the media. Tune back in to get the real facts on these two provisions of ACA.

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In Part One of Toonari’s Affordable Care Act series, we gave an overview of the law’s structure. In Part Two, we will begin to review the benefits as stated in the law, and their possible implications. The provisions we will review first are two that will be at the forefront of the President’s campaign stump speeches. These are benefits related to children and preexisting conditions.
Children Can Stay On

Before the 2008 recession, this is a benefit that would not have been a big deal for most parents. In the wake of the recession and Millennials moving back home in droves, it has become a more frequent problem. Before the ACA, children could remain on their parent’s health insurance plans until some time between age 21 and 24; it varied from state to state.

Now under the ACA, children can remain on their parents plan until age 26. This is something that many parents like, and sounds good on the campaign trail. For parents with kids with serious, ongoing chronic illnesses this also relieves, in theory, some of the stress of approaching health care costs. This is a catch gap designed to be a bridge between now, and when the preexisting condition benefits kick-in, in 2014.

Implications

The consequences of this change are minute. It is true that some people have a philosophical problem with what could be seen as further coddling of young adults, the reality is the difference between 24 and 26 is small. Keeping kids on the parent’s plans for a couple of extra years does increase the risk of higher and more medical payouts for the insurance companies, but most people at age 26 do not go to the doctor that often. In addition, the parents still have to pay the extra premium they were paying for their kids remaining on their plan for a few more years.

That is added income to the insurance company. Basically this is a wash. The one caveat to this is that one of the benefits mandated by the ACA (more in this later in the series) is the coverage of birth control costs with no co-pay. Young adults are typically more sexually active so there will be an increase in costs to the insurance company for that benefit, which will force an increase in premiums from the insurance company.

Premium increases are a subject we will return to again and again in this series about the ACA law. It is important to remember; health insurance companies do not have the power to tax the public. They pay their claims out of the earnings they make. When their expenses go up, they must charge more. This is not a matter of evil intentions. It is basic business 101. You must charge enough to cover your expenses. If expenses go up, then so must your prices.

Pre-existing Conditions

This is the big one. The issue that pulls the most heart strings, and the one that most people agree upon. Starting in 2014 there will be no preexisting conditions limitations for anyone. Before the law, if you had a preexisting condition and were not on an employee health care plan, you would be denied coverage. The reason for this is simple. If you have diabetes, then you are a guaranteed expense for the insurance company.

Insurance is all about minimizing risk to cover as many people as possible, for as little as possible. That basic tenant of insurance planning is now off the table. Cancer, AIDS, asthma, congenital conditions, previous surgeries; it is unimportant what the condition is, you can now get coverage.

Implications

The possible and real implications for this are huge. On the consumer side, you do not have to worry about being denied coverage. The days of worrying about choosing bankruptcy over health care are now ostensibly over. On the insurance side, the costs will skyrocket. It is easy for many to say, “Life before profits, or money” but that is because they are not the ones writing the check to cover the costs. One of the main selling points politically was that the ACA would reduce costs of health insurance and health care expenses.

This is one component of the law that makes that claim hard to reach. Millions of people who are very sick will now have coverage. This is a good thing. However, this will prove to be a bad thing fiscally. As the law settles in (assuming an Obama victory in November), costs for premiums and actual care will move up under the law. At some point cost containment measures will have to be looked at, which could mean rationing of care.

The other implication is that many Americans will opt not to buy insurance and just pay the penalty, because it is less money then annual premiums for the insurance. If they do get sick, or need an expensive surgery, they can just sign up for the coverage after they find out what they need. The scenario painted by conservatives is the picture of a person signing up for the plan in an ambulance on the patient’s way to a hospital.

The image is extreme, but it is also true. A person can do that. The law has no provisions in it to keep people from waiting till they know they need to sign up, and then dropping coverage once the medical situation is treated.

This will also have an effect of increasing costs, but also limiting the funds necessary to run the plan, as those missing premiums will affect the balance sheets of the insurance companies and cause higher premiums.

In our next installment, we will review the health care cost limitations, and preventative care provisions.

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Governor Tom Corbett recently discussed his 2012-13 budget proposal during a visit to AccuSpec Electronics, where he cited the Erie employer as an example of the kind of innovation and resiliency state government must support in order to bring real job growth to the region.

“I hope all of you will ask your legislators to pass the budget I proposed earlier this month,” Corbett said. “It is built the way you build your own household budgets: you spend no more than you have. Given that the state spends your money, I think you can agree the philosophy appeals to most working Pennsylvanians.”

The $27.14 billion proposal maintains Corbett’s commitment to balance the state budget. It closes a projected revenue shortfall of more than $700 million and reduces spending by more than $20 million.

Importantly, it meets the state’s pension obligations and does not raise taxes for residents or businesses. The governor’s proposed budget focuses on five key areas: economic opportunities, education, human services, public safety and streamlining government.

“By keeping taxes low and holding down government spending, this leaves more money in the part of the economy that creates the best jobs – the free market,” Corbett said.

Governor Corbett’s proposed budget accomplishes the following:

• Reduces spending from last year, reducing the state government workforce by an additional 2 percent, eliminates 33 wasteful appropriations, reduces 181 additional line items and reduces the state vehicle fleet by 1,200 vehicles.
• Creates job opportunity by holding the line on taxes, supporting Pennsylvania’s small and large businesses and focusing state efforts on workforce development and job matching.
• Increases funding to basic education, continues the same level of funding from last year for universities dedicated to job placement, and creates new programs that give students incentives for training for occupations that are in high need of employees.
• Levels funding for the Department of Corrections for the first time in a decade, increases the funding for PA Board of Probation and Parole to support transition from incarceration to community, provides funding for volunteer fire companies and provides funding for 115 state police troopers.
• Transforms the public welfare system by providing incentives to those who are able to transition from the welfare line to the workforce, providing real relief to our poor and safeguarding taxpayer dollars through the elimination of waste, fraud and abuse.
• Provides more than $387 million in funding for Penn State, Temple and the University of Pittsburgh, which translates to between a 1.6 to 2.1 percent decrease in the operational budgets; and a total of $330.2 million for the state-owned universities, a 3.8 percent reduction in the operating budget.

“I’m happy to be here to talk about jobs, the economy and how we can work together to build both,” Corbett said.

AccuSpec was established in 1989 providing contract electronic manufacturing services for various electronic component distributors and OEMs. In 2009, the company expanded into a 60,000 square-foot facility and has invested about $8 million in new machinery and equipment during the past five years. AccuSpec is the largest electronic contract manufacturer in northwest PA.

For more information about the proposed budget, visit www.governor.pa.gov.

Image Courtesy of  https://www.facebook.com/Gov.TomCorbett

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Tonight President Obama gave his third State of the Union speech and he had allowed drips and drabs of the speech to leak in advance, clueing the media in on the theme of the speech; economic fairness. At the speech’s opening, however, President Obama used a very different, yet very clever rhetorical device.

He opened with a reminder of the work necessary to track down and kill Osama bin Laden last year. By doing so, he not only reminded America that he managed this fiend on his watch, but also used the operation to illuminate the thrust of his speech. Everyone knows that in a military operation, soldiers must work together for the mission to succeed. If they don’t, the mission will fail, and someone is likely to be killed. As a debate tool, it was brilliant tactic.

He followed up with cleverly avoiding any mention of the phrases “fair share” and ”fair shot,” contrary to what he has in his campaign speeches for the last two months. This time he used the word “everyone” as a substitute. The concept of everyone doing this or that for a common cause is something people can agree with superficially, but that’s where the speech ultimately falls flat. The State of the Union (SOTU) was all surface, no substance. High rhetorical skill, but low on reality.

SOTU speeches by nature are always low on details. No matter who’s in office, the speeches are always too long and boring for most people. Yet, President Obama has shown a habit of making grand promises and pronouncements on one matter or another, only to let them never materialize, and blame the Republicans, though most often he cannot even get his own party to agree with him.

In order for anyone to agree with the basic thrust of his speech last night, you have to buy into the idea that America is an unfair place; that the rich were born that way, that they stay that way at your expense, and that the only way for your government to help you is to tax them. You have to buy into the concept that to lift up the people at the bottom, you first have to pull the ones at the top down. It is equal to saying the only way a football team can win is by deliberately trying to injure the members of the opposite team. Under the President’s notion of ‘a fair share,’ you take from one entity, and give what you took to someone else. This means, the companies that leave the country due to high corporate tax rates, excessive regulations, or to avoid unions, these are the ones you tax, and give the money to companies who say nothing about those three issues, companies who are in the President’s pet industries; like Sylandra.

When explained this way, most Americans will not buy into it. Here is a question to those who do: If only the rich are born rich, and stay rich, how did the Queen of Nice, Oprah Winfrey, go from dirt poor to a billionaire? How did Michael Dell go from broke college student to a multi-billionaire? How did Jorge Perez who arrived here with no money, and unable to speak the language, end up a billionaire? Questions like these destroy the phony idea that you don’t have a fair opportunity in this country. If America were the country that the President tries to portray, we would not know who any of those three people are. Everyone in America has a fair opportunity to succeed, but you’ll never have the same results. Not everyone will work as hard, open a business, save money, or invest. Any one of us could have given up the keg and frat house parties in college to build computers in our dorm room. We did not, so we don’t have what Mr. Dell has accomplished.

So the question is, if you do become affluent and rich, should you pay more in taxes? The answer is yes, and the rich already do. When Mitt Romney pays 15% on 23 million dollars that is higher than 30% of $100,000; the amount Warren Buffet’s often-mentioned secretary, presumably makes. Of course, the types of income are different. One is a salary and the other from long-term investments, hence, the percentage difference. But, what is the President’s focus, the bottom line dollar amount of three million paid by Romney, or the percentage?

Tonight the President proposed that at minimum, the capital gains rate should be 30%, but only for those above a 250,000 in earnings. He really doesn’t think that everyone should get a fair shake. No, if you are successful he wants to shake you down, using a vague morality play as a shield. Question: If everyone should “sacrifice” for the good of the country, then what about the 56 percent of people that do not pay any taxes at all? Where’s their skin in the game? Where’s the call to have them pay their fair share?

The problem in this country is not that the rich do not pay enough. The top five percent in wage earners pay 60 percent of the tax bill.  Instead, the problem is that the government under President Obama wishes to continue spending more money and have the rich pay for it. In the SOTU speech alone, the President called for the creation of five new government entities. That’s five new departments on top of the over two million that we have now.

The problem is not that the rich pay 15% on investments made from money that has already been taxed at 34 or 39 percent, it’s the pure math that if you confiscated 100 percent of the income from the rich, it still would not pay for the Obamacare law, let alone Medicare, Social Security, or Medicaid.

In the history of this country, when you raise rates, tax revenues go down. It happens because people stop investing, or invests in tax-free muni bonds. They stop expanding their business. They simply do what all humans do, which is find ways to avoid paying more for something, no different from anyone going to one gas station over another, because one has lower priced gas.

The SOTU speech is the first salvo in a class war that may tear the United States apart, and one that may lead to its collapse, IF the President wins that war. In the end, considering that the poor never created a job, and the middle-class is employed and maintained by rich people, hurting them, by taking money out of their pocket, only hurts the people the President purports to be fighting to help.

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Laurence J. Kotlikoff, an economics professor Boston University, has proposed a compromise tax plan that seeks to placate both Republicans and Democrats. Under his proposed ‘Purple Tax Plan,’ the federal income tax for individuals and corporations would be scrapped and replaced with a 17.5% federal sales tax.

According to the Purple Tax Plan website, the tax would be levied on the consumption of all final goods. However, there would be provisions to allow those in economic distress to defer paying tax on housing-related transactions. Furthermore, each household would receive a monthly payment called the ‘demogrant’ that would be based on the size of the household.

In a piece written for Investment News, Kotlikoff claimed that the size of the demogrant would “ensure the poor pay no net sales tax, while the rich pay a lot.” In addition to scrapping personal and corporate income taxes, the Purple Tax Plan would also replace the federal estate and gift taxes with a flat 15% tax on inheritances above $1 million.

The plan would also make changes to the FICA employment tax by exempting the first $40,000 of earnings from the employee portion. Currently, there is a ceiling on FICA payments, but the Purple Tax Plan would abolish it. In his Investment News piece, Kotlikoff said that his plan would represent a truly progressive approach to taxation.

He claimed that it would represent a dramatic tax increase for the rich because it would be levied on their consumption. He also stated that the plan would encourage people to save rather than spend, and in the absence of corporate taxes, foreign investment in US companies would increase.

“A zero corporate tax will make the U.S. an investment haven, giving it a shot at experiencing what Ireland enjoyed after it dramatically cut its company rate: a major influx of investment and faster growth in jobs and wages,” he wrote. The Purple Tax Plan would also remove the need to file tax returns, potentially making life easier for ordinary people.

Kotlikoff also sees the imposition of a flat tax rate as a break on spending, since it would make it much harder to conceal future tax increases. Kotlikoff’s plan is certainly ambitious, but it remains to be seen whether or not it will gain much traction on either the Left or the Right.

One also has to wonder whether a  Congress that can’t even pass routine pieces of legislation without resorting to partisan stonewalling would be able to agree on such a sweeping overhaul of the tax system.

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Senator Bernie Sanders (I-VT) is not known for biting his tongue about his feelings. And the disastrous debt ceiling debate is no different. Sanders released a statement on Wednesday with biting sarcasm about the so-called “Gang of Six” and their compromise.

Sanders congratulated the GOP members of the Gang of Six on their “very significant victory in negotiating a deficit-reduction plan which achieves their long-term goal of dismantling every major social program relevant to working families.”

The Gang of Six is the moniker given to six Republican senators that are working with Democrats to create a compromise in order to raise the debt ceiling. Among the cuts, the gang of six will cut social security and Medicare.

“While I am sure that they did not get everything that they wanted, I think it’s fair to say they won about 80 percent to 90 percent of what they fought for,” Sanders said. “Despite President Obama’s campaign promise not to cut Social Security benefits, the Gang of Six plan, which he apparently embraced, calls for massive cuts in that vitally important program.”

According to Sanders, the negotiations involve a new formula for calculating cost-of-living adjustments for social security recipients. The new plan would cut a typical 75-year-old’s yearly benefits in 10 years by $560. The proposal also cuts Medicare by $298 billion over 10 years and makes massive cuts to Medicaid.

“At a time when the wealthiest people in this country are becoming wealthier and are paying the lowest effective tax rates in modern history, when corporations are making billions of dollars and making nothing in taxes at all,” Sanders said in his statement, “at least half of a deficit reduction package should come from ending tax breaks and tax loopholes for the wealthy and large corporations.  With military spending having nearly tripled since 1997, we must take a hard look at cutting unnecessary and outdated military programs.”

In his statement, Sanders warned specifically of the danger higher taxes on the middle class could pose, saying, “there is reason to expect that some of the areas that the House and Senate will be looking at include the home mortgage deduction for middle-class families, taxes on health care benefits, and increased taxes on retirement programs such as 401(k)s and IRAs.”

Appearing Wednesday afternoon on MSNBC’s “The Dylan Ratigan Show,” Sanders reiterated his criticism of the plan’s revenue raising provisions saying, “in terms of revenue, it is very very vague as to where this revenue is going to come from.

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Sen. Orrin Hatch (R-Utah) believes that the poor, not the rich, should pay more to help reduce the nation’s debt. Just another example of a Saturday Night Live skit that has come to life. “I hear how they’re so caring for the poor and so forth,” Hatch said in remarks on the Senate floor Wednesday, in reference to Democrats.

“The poor need jobs! And they also need to share some of the responsibility.” Hatch made these comments during debate on a motion that would allow the Senate to begin debating a non-binding resolution that says millionaires and billionaires should play a more meaningful role in reducing the nation’s debt. The motion passed 74 to 22 despite Hatch’s argument. Only one Democrat, Sen. Ben Nelson (D-Neb.) voted against the debate while Sen.

Jeff Sessions (R-Ala), who had called the resolution “pathetic”, voted to move ahead with the debate. But, the attention fell on Hatch on Wednesday when he suggested that the wealthy in the nation are already doing too much. Even though, if you remember, the nation’s effective tax rates are at modern lows since the Bush administration slashed rates in 2001 and 2003. In his view, it seems, the middle class and poor should be picking up the slack.

“The top 1 percent of the so-called wealthy pay 38 percent of all income tax. The top 10 percent are paying 70 percent of all income tax,” Hatch said. “The top 50 percent pay somewhere near 98 percent of all income taxes. 51 percent don’t pay anything,” Hatch said, suggesting the payroll taxes that the poor and middle classes pay towards Social Security yields them an especially generous benefit. “Democrats say they [the 51 percent] pay payroll taxes.

Well, everybody does that because that’s Social Security. They pay about one-third of what they’re going to take out over the years in social security,” Hatch railed. “Obamacare — a family of four earning over $80,000 a year — gets subsidies. Think about that. That’s what we call the poor?”

Hatch hedged that the poorest of the poor shouldn’t have to pay taxes. But he was clear that people who qualify for subsidies because they can’t afford things like health care should dig deeper. “Now, we don’t want the really poor people who are in poverty to have to pay income taxes,” he said.

“But 51% of all households. And that’s going up, by the way, because of our friend down in the White House and his allies.” Dude, you cannot get blood from a turnip. There is nowhere else for me to dig. The wealthy have savings and retirement accounts. I don’t.

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The latest outrage comes from General Electric.  Joining companies like Bank of America and Verizon, G.E. did not pay any taxes for 2010, the second year in a row.  The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.  But, they did not pay a single cent.  Instead, they claimed a tax benefit of $3.2 billion.

In a statement, General Electric said that it “pays what it owes under the law and is scrupulous about its compliance with tax obligations in all jurisdictions.” The company claims that its zero-dollar tax bill is largely a result of losses at its financial arm, GE Capital, due to the Wall Street meltdown.

Low taxes are not new for the huge corporation.  They have been reducing their tax burden for years by employing former officials from the U.S. Treasury, the I.R.S. and virtually all the tax-writing committees in Congress.  They also lobby aggressively for tax breaks.

The top corporate tax rate in the United States is 35 percent, and Republicans often remind us that the rate is one of the highest in the world.  However, the U.S. tax code is also full of loopholes such as tax credits and subsidies so that most corporations pay for far less.

G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals.  And even this might be overstated.  These figures include taxes that will be paid only if G.E. brings its overseas profits back to the US.

“Two things are disconcerting. One is, there’s disproportionate amount of profits being reported offshore. And then, even for the profits that are reported onshore, they’re paying less than 35 percent,” said Martin Sullivan, a contributing editor for Tax Analysts.

Tax loopholes, along with changes in tax laws, have decreased the corporate share of the nation’s tax receipts—from 30 percent of all federal revenue in the mid 1950’s to 6.6 percent in 2009.  But, many companies still complain that the tax rate is still too high.  They claim they are not able to compete with foreign rivals.  Although, many in the federal government have been pushing for a balanced budget and spending cuts, they are also talking about lowering tax rates.  President Obama has said he is considering changing the corporate tax system, by lowering the top rate and ending some of the tax loopholes.  In the end, he feels the changes would generate the same amount of revenue.

Another concerning issue is that G.E.’s CEO– Jeffrey Immelt—has been advising the president and serves as the chairman of Obama’s Council on Jobs and Competitiveness.  White House spokesman Jay Carney said that the president is “bothered” by the idea that a U.S. company could pay no taxes, but he wouldn’t talk about GE specifically. Carney was also quick to say that Immelt’s council advises the president on job growth and not on tax policy.

“It is part of the problem of the corporate tax structure that companies hire, you know, armies of tax lawyers to understand how it works and to take advantage of the various loopholes that exist, that are legal in order to reduce their tax burden,” Carney said.

While G.E. has been paying no taxes and still making profits, they have also been laying off workers and closing American factories.  Under Immelt’s leadership, the corporation has laid off 21,000 workers and closed 20 factories.  More than half of GE’s workforce is now outside the United States.

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