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AT&T links $1 billion charge to new health-care law

By Frank Ahrens
Telecom giant AT&T said Friday that it would be forced to record a $1 billion non-cash charge on its first-quarter earnings to account for increased costs associated with the health-care legislation signed into law this week by President Obama.

The company also said it may have to cut health-care benefits to employees and retirees.

You've already seen some of this: Caterpillar, John Deere and Valero said they would have to take balance-sheet charges because the bill will increase the cost of health-care benefits to its employees. Also today, 3M said it would take a charge of up to $90 million. AT&T's charge is the biggest so far.

Read more at the Economy Watch blog »

By Frank Ahrens  |  March 26, 2010; 6:08 PM ET
Categories:  44 The Obama Presidency , Health Care  
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Comments

let me guess these company are doing what because of what let me guess they are getting money for last quater a tax write off they didnt get last year for a bill that went into effect a week ago
do any of the people that had insurance and used it get any money back a telcom giant poeple lost there life and you want money back sounds like reimberssment to the policy holder

Posted by: smithandrossi | March 31, 2010 10:58 PM | Report abuse

Oh poor AT&T. They use to pay 100% of their employee benefits and over the years have found ways to force employees to pay more and more. So their profit goes from $1000B to $500B - woe is me. This is a company that also does not pay its fair share of taxes so I don't have any sympathy for them.

Posted by: rlj1 | March 29, 2010 11:25 AM | Report abuse

How dare Obama cut corporations PROFITS from, let say, 100Billions to 90Billions!

Posted by: coqui44 | March 28, 2010 1:15 AM | Report abuse

This is very enlightening.

So... we have been giving out probably hundreds of billions of dollars in tax deductions for a tax free subsidy?

Republicans, who wanted to cut back on spending, have a problem with this loophole closing?

No one sees the problem with loopholes like this for corporations and then the Citizens United Supreme Court decision which allows corporations to spend whatever they want whenever they want however they want to influence elections... that this is pretty much tax payer money they are getting that they can spend to influence elections?

This is really twisted.

Balancing the budget or making things deficit neutral involves some tough decisions. Now I see why the Republicans voted against the deficit panel. If they were the ones that engineered this piece of corporate welfare, I don't see how they'd really be interested in making rational decisions on deficit reduction.

My question is... why the tax deduction? Wouldn't it have been better to just increase the subsidy without the tax deduction for RECEIVING the subsidy (as if it were an expense)? At least then, 100% of the tax payer money would have been going to the benefit... not a good portion getting skimmed off the top by the company issuing the benefit.

Posted by: porkbellies37 | March 28, 2010 12:33 AM | Report abuse

Keep in mind that the principle at work is that the government money will still go to individuals for drug benefits. Before health care reform takes effect, the money goes to the corporations, mostly tax free, who pass it on to insurance companies who pass it on to pharmaceutical companies. After health care reform takes effect, the money goes directly to individual or to the pharmaceutical company on behalf of the individual. So the dollars still get spent and the benefits are still received. In theory.

Posted by: Blieden | March 27, 2010 4:48 PM | Report abuse

And so it begins. To each according to his need from each according to his ability. Defined Marxism right here in the USA. Builder7, the way you set up your tax argument is flawed, the company still pays the .72 to get the .28, they just don;t pay tax on any portion of the dollar. But the real argument is that government is taking more and more out of people's and corporations income to subsidize the growing entitlement class. Bush was widely criticized for the drug coverage for seniors and Obamacare is only shifting more of the cost to the companies (for the drug benefits and also for the rest of the healthcare benefits).

I know that you liberals are thinking with your hearts when you proclaim healthcare as a right (which it isn't) and your intentions are noble. But you HAVE to come to the realization that those evil companies that make a profit (gasp), are the source of income for all of it's employees. That income is what allows people the freedom to do and buy what THEY want and need. The more you allow government to decide for you what you want and need, the more you lose your freedom.

Another thing you need to realize is that the companies don't exist for the benefit of the employees. Rich people don't earn money for the benefit of the needy. When financial stress is placed on the companies and the rich people, they will sacrifice employees before they let the company go down in flames. Rich people will stop spending and investing which hurts the labor class and the service industries. They are not going to go broke for the benefit of others. Rich people and companies are the fuel for the economy, if you continue to vilify them and restrict their ability to produce income, they will suffer the least and their employees and laborers will all be let go.

Posted by: TruthCzar1 | March 27, 2010 9:46 AM | Report abuse

Way to go Mr President and Congress - just what the US economy needs... a reduction in "disposable income" by corporations and thus a reduction in the dollars that otherwise MAY have been available for job creation. Nice going!

"The company also said it may have to cut health-care benefits to employees and retirees." Hey, Mr. President, did you not say it was a lie purported by others that our existing insurance would not change? Who is lying now?!

Posted by: sagedutch | March 27, 2010 2:10 AM | Report abuse

US corporations pay 36 % income tax. The impact is estimated as follows:

Say the company spends $1 in medicines under the program. Under the old law, They paid $0.72, they got $0.28. They wrote off $0.36. So for every $1 they spent, they had $0.28+0.36=$0.64 covered by the government, and $0.36 covered by their own cash. Since this was due to a mandated program passed by the Republicans under Bush, it's evident the government felt it was a fair deal for all.

Under the new scheme, they will be taxed on the $.28 at 36 %, which means they'll have to pay an extra $.10 US dollars. They paid $0.36 before, now they pay $0.46. This represents a reduction in their net after income tax income of 10 % for every dollar spent providing this mandated coverage. Remember, this coverage was mandated by the government, not something they offered to provide on their own.

Posted by: clownshoos | March 26, 2010 6:57 PM | Report abuse

Why were corporations being subsidized by the government with tax breaks in the first place? It seems today that all the 'socialism' goes to big business. Not only do they get the fluff, but they get the cake too. How are they going to tell their employees to have their cake and eat it too. No wonder there was so much opposition to the health care legislation in this country - it is going to cost business leaders their 3rd homes. How can business or any Republican out there talk about 'socialism' when all they have done is turn our free enterprise state into a corporate welfare state with wage slaves. Now the wage slaves have lost their houses, investments, pensions, jobs or wages, and health care plans - but who subsidized them. It is time to stop corporate socialism in this country and let them stand on their own two feet. The last thing our taxpayer dollars should go for is to subsidize the bottom line, unless it is defense in war!

Posted by: builder7 | March 26, 2010 6:42 PM | Report abuse

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