Published on: November 22, 2004Interesting piece in the Washington Post last week about the Bush administration’s proposed tax code overhaul. In addition to considering changes that “would drastically cut, if not eliminate, taxes on savings and investment,” there was another scenario that caught MNB’s eye:
“The changes are meant to be revenue-neutral. To pay for them, the administration is considering eliminating the deduction of state and local taxes on federal income tax returns and scrapping the business tax deduction for employer-provided health insurance…”
The White House stresses that no final decisions have been made on what changes need to be made to the tax code, just that President Bush is committed to a fairer and simpler system that will encourage economic growth.
- KC's View:
- If the administration and the Congress agree to eliminate the business tax deduction for employer-provided health insurance, we have to believe that there will be a lot of employers out there that will stop offering it. After all, getting a tax break is one of the reasons these companies offer health insurance.
There will be retailing companies that are managed by financial types that will see only the financial benefits of eliminating health care insurance coverage of employees,. These companies will not realize the impact that such a move will have on employee morale, on the quality of employee that they hire, and on the ability of the stores to provide products and services to customers. These are the companies that see employees as costs, not as assets…and they will look only to cut costs.
We believe that this is a prescription for labor chaos in retailing, setting the stage for angrier confrontations between chains trying to cut their costs and organized labor trying to remain relevant. In such a confrontation, labor will lose…chains will lose…and customers will lose.
We’re not saying that a tax code overhaul isn’t a good idea. We are saying that this particular change, if enacted, could have enormous impact on Main Street USA.