At Work

Businesses say feds wrong to assume wages will rise as benefits shrink

I have written about this topic several times in the past. [Search Cadillac tax] My perspective was based on nearly a half century of managing employee benefits and compensation for a large company. More importantly, it is simple common sense. Why would employers replace avoiding a new tax with higher wages and the ancillary higher costs associated with base pay (payroll taxes for example)?

They won’t‼️. This is yet another example of the flawed logic on which Obamacare is based. 

Company spending on wages has tracked spending on benefits over the past several years.

Companies aren’t paying workers more as they cut spending on health benefits, a trend that threatens to undermine the key estimate of the funding for Obamacare, federal data show.

The Congressional Budget Office estimates a controversial excise tax that employers will have to pay on generous health benefits starting in 2018 will raise about $87 billion in revenue over 10 years.

About 75% of the revenue from this “Cadillac tax” is supposed to come from taxes on the higher wages workers are supposed to get as companies slash their benefits to avoid paying the tax. The other 25% or so is expected to come from the tax itself.

Companies will have to pay 40% of the value of benefits over a certain threshold.

“How CBO is scoring this is completely flawed,” says Brian Marcotte, CEO of the National Business Group on Health, which represents employers. “It really reflects a lack of understanding how companies make wage decisions.”

Source: Businesses say feds wrong to assume wages will rise as benefits shrink


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