There was quite a stir last Friday when AT&T revealed it would take a $1 billion charge in the first quarter as a result of the passage of Health Care Reform. Apparently, $1 billion was only worth a four sentence SEC filing:

“On March 23, 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act (HR 3590). Included among the major provisions of the law is a change in the tax treatment of the Medicare Part D subsidy. AT&T Inc. (“AT&T”) intends to take a non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change. As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.”

AT&T was not alone. Earlier in the week several other brand name companies announced that they too would take a hit, though much smaller than AT&Ts. The impression was left that Health Care Reform was going to sap Corporate America of all its hard earned profits.

But wait, I think I saw the word subsidy in there somewhere. Yes, I did. This $1 billion charge relates to the tax treatment on a subsidy they have been getting from the federal government since the passage of Medicare part D in 2003. When a company offers its retirees prescription coverage, Medicare part D pays for 28% of the cost leaving the company to pay for 72%. But that’s not the kicker. Companies have been allowed to deduct 100% of the cost of the coverage from their taxable income even though the government pays for 28% of it! This is the very definition of a tax loophole and the bill that passed closes it.

In fact, Medicare is single-payer socialized medicine. (The horror! The enemy of all freedom loving people everywhere!) This subsidy, and the tax loophole can be called redistribution of wealth. And as everyone knows, or at least the people whose weekends constitute dressing up like Ben Franklin and stocking up on ammo know, you don’t create wealth by redistributin’ it. The joy of closing the loophole is that we’re going to be doing a little less redistributing. But since it is Corporate America that is on the receiving end of the redistribution, the Wall Street Journal calls the move a “wholesale destruction of wealth and capital.” Maybe redistribution of wealth does create wealth after all.

In an interesting postscript, the veiled threat that AT&T would “be evaluating prospective changes to the active and retiree health care benefits offered by the company” got the attention of Henry Waxman. He wants to have a hearing on April 21st and allow AT&T’s CEO and other CEOs to explain themselves. Of course, Waxman’s interest is evidence, according to the National Review, that we live in a “thugocracy.” Those poor CEOs having to explain their own SEC filings!