The Wall Street Journal once again published an op-ed about policy which offers a disingenuously partisan take to an important issue–employment. In this latest flop-ed, Michael Fleisher offers his opinion as to why there is too little private sector hiring right now and he blames government. In his article, Fleisher conflates benefits with taxes and blames rising costs for his existing health care plan on the government.
Now it’s one thing to say it’s unfair for the government to mandate health insurance, another altogether to blame the government for rising costs. EVERYONE, including Democrats and Republicans alike are well aware that rising health care costs are a major problem. The solution is where the two sides differ. Yet somehow, Fleisher comes off blaming government for the entirety of that component of rising costs.
But you know what, I won’t even focus on these minutiae. What really concerns me about this article is the complete willingness to present half-truths as truth. It’s one thing to be wrong about facts, another altogether to intentionally place facts in a misleading light. Exactly what am I talking about? For purposes of simplicity, I have borrowed this breakdown of the “costs” to employee Fleisher’s hypothetical worker from Business Insider.
Costs To Employee “Sally”:
SALLY’S SALARY: $59,000
LESS:
Sally’s share of health/dental: $2.376
State unemployment insurance: $126
Disability insurance: $149
Medicare: $856
State income taxes: $1,893
Federal income taxes: $6,500
Social Security: $3,661NET TO SALLY: $44,000
Costs To Company:
SALLY’S SALARY: $59,000
PLUS:
Company’s share of health/dental: $9,561
Life and other insurance: $153
Federal unemployment insurance: $56
Disability insurance: $149
Worker’s Comp: $300
State unemployment insurance: $505
Medicare: $856
Social Security: $3,661NET COST TO COMPANY: $74,000
What’s missing from this picture? Well let’s start with Sally. Let’s forget about the fact that disability insurance is applied as a cost to both parties, and businesses are not mandated by government to provide life insurance, nor do many businesses necessarily do that. Let’s also forget about the fact that the Worker’s Comp and State Unemployment Insurance numbers are above what a business would pay in reality, and let’s start with the fact that Mr. Fleisher counts health insurance as a COST to Sally without any benefit. I’m not even making this up.
Mr. Fleisher makes it seem as if health insurance DECREASES Sally’s take home pay without providing a tangible benefit. Moreover, after he calculates the take-home pay to Sally, Mr. Fleisher includes the total amount paid, less costs, but doesn’t put health insurance in as one component of the net take home pay. In actuality, Sally’s bank account gets $44,000 in salary, AND her health gets covered with insurance. That is a tangible benefit worth good money. To apply it is a cost is a deliberately misleading attempt to fudge the math in order to dramatize a point.
And yet more egregiously, for the company’s costs, Mr. Fleisher intentionally leaves out company benefits for hiring workers. Not everyone might know, but when businesses hire, they often benefit from both tax credits and deductions. Credits are amounts that company’s can take off of their tax bill. $1 in a credit is equivalent to $1 in the bank for a business. Deductions are taken before a business applies their tax rate and its impact for a business’ income can be added up by applying their tax rate to the amount of the deduction. So assuming a business has a 35% tax rate, then $1 in a deduction amounts to $0.35 of benefit to the company.
With this new knowledge let’s see which credits and deductions apply to Mr. Fleisher’s business. First off, for health insurance premiums, a businesses can take a CREDIT of up to 35% of the total cost. In Sally’s case, the tax credit for Mr. Fleisher’s business would amount to $3,346.
Next, a business can take a deduction of business expenses, defined as “the costs of carrying on a trade or business.” Such costs include those of employee wages, and other federal and state taxes paid. Corporate tax rates for most brackets tend to fall at about 35% of gross income. So, with a total expense of $74k, that amounts to a $25,000 deduction. The key to taking a deduction is that the company needs to actually have income to take it against. Without the income there is neither a deduction nor credit.
Now with these new facts, let’s recalculate the cost to a profitable company for employing Sally. We’ll take that initial figure of $74,000 from Mr. Fleisher. Then we’ll subtract his credit for providing insurance, and his deduction for his business expense and we get a much more favorable net impact to the business of $45,654 to put $44,000 in his employee’s pocket AND to insure her to boot. Does that really sound like an unreasonable sum? No, I didn’t think so. Mr. Fleisher, if you’re not hiring Sally it is clearly because you don’t have the prospective income necessary to hire, not because the government makes it cost too much (and this helps explain exactly why).
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