I absolutely love this idea: The Bad Boss Tax

[possiblylogical]

87. My argument is that there is really no reason to use this method as a solution to the problem..

... and good reasons not to.

Regardless of what you think, devising laws to get around adverse incentives is very difficult. This is part of the reason why that Affordable Care Act is so long. Private provision of health care has so many perverse incentives that, in order to make health care more universal and still maintain markets, you need a complicated set of rules. The major problem with your suggestion is that you are introducing a set of rules that create adverse incentives when there are other policies that don't introduce these incentives.

Raising the minimum wage would have the same types of benefits without the adverse incentives. If you don't want to increase the minimum wage, a "low wage" tax would accomplish roughly the same thing as the policy you suggest without creating the incentives to discriminate.

There also are other smaller issues with what you suggest. There is the costs of implementing the policy. You would need to develop mechanisms to determine how much assistance each employee receives. Then, you would have to develop a mechanism for charging the companies for these costs. Finally, you would have the costs of dealing with all the adverse incentive that the tax creates. Alternatively, increasing the minimum wage and applying a low wage tax can be done fairly easily.

You policy would also disproportionately affect locations that have higher rates of poverty. Over time, businesses in less well-off locations go out of business and new companies would be more reluctant to replace them. This would cause business to move to locations that are more affluent. This problem would not exist if you increase minimum wage or introduced a "low wage" tax.

Finally, raising the cost of employment will lead to more unemployment and discouraged workers. This is also true of a minimum wage increase and a low wage tax; however, when changing the minimum wage the outcome is more certain. Policy makers are more likely to consider the effect of wage increase on unemployed and will be less likely to make bad decisions.