Public's response saved lives in rampage

Citizens' coolheadedness and individual preparation for coping with gunfire in public settings may have curtailed the casualty count from Tuesday's shooting at a Portland, Ore., shopping mall, law officers suggested on the day after the tragedy.

Two people died and one was critically wounded before the shooter, 22-year-old Jacob Tyler Roberts of Portland, killed himself a few minutes after running into the food court at the Clackamas Town Center mall. Officials say Mr. Roberts, wearing camouflage and a white hockey mask, had methodically fired "multiple" rounds from an assault-style rifle at random shoppers.

Most of the 10,000 Christmas shoppers at the mall appeared nearly as ready and able as police to deal with a gunman appearing suddenly in their midst, Clackamas County Sheriff Craig Roberts said on Wednesday.

"Many people have asked me why there were so few victims during this incident," said Sheriff Roberts. He listed the fact that Mr. Roberts's AR-15 semiautomatic rifle intermittently jammed and noted a well-practiced mall lockdown procedure. But he also credited "10,000 people in the mall who at one time kept a level head, got themselves out of the mall, helped others get out, secured themselves in stores.… It was really about a whole group of people coming together to make a difference."

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Law officers said during a Wednesday press conference that they did not know whether any member of the public carrying a concealed weapon had counterattacked Roberts. But they said they are certain that Roberts died by his own hand after fleeing down a stairwell from the mall's upper level.

The death rate from mass shootings has ticked up slightly in recent years, even as deaths in single-victim incidents have decreased, according to a recent analysis of FBI crime data by the Huffington Post. The worst recent mass shooting came in July in Aurora, Colo., where a gunman killed 12 people and injured 58 during a midnight screening of a new "Batman" movie.

Gun-control advocates seized on the mall shooting as a possible result of the expiration in 2004 of a national ban on assault weapons.

"Santa Claus could have been shot in the mall," said Penny Okamoto, executive director of Ceasefire Oregon, in an interview with the Portland Tribune. "If you're sick of this, you should call your legislators to tell them to fix the laws so that assault weapons don't end up in the hands of felons."

Many versions of the AR-15 were banned under the assault weapons law, but it's not known if the gun used in the Clackamas mall shooting was one of them.

Police said Roberts had no criminal record and had stolen the AR-15 from "someone he knew."

Does the collected response by shoppers at the Clackamas Town Center indicate that Americans are becoming less daunted by senseless violence and, perhaps, better ready to react? Those who back broad gun rights under the Constitution's Second Amendment suggest a shift may be under way in people's readiness to respond.

In blocking Illinois's ban on concealed weapons, the last such law in the nation, Seventh US Circuit Court of Appeals Judge Richard Posner on Tuesday implied that self-defense readiness in public is not only protected by the US Constitution, but may be good social policy. An awareness "that many law-abiding citizens are walking the streets armed may make criminals timid," he wrote in his ruling.

"As far as a social shift, I think people are getting more intelligent and appropriate in their reactions to shooters," says Dave Kopel, research director at the Independence Institute, a libertarian-leaning think tank in Golden, Colo. "Police training has changed in significant ways since the Columbine [High School] shooting [in 1999], where they no longer wait for the SWAT team to arrive but go in immediately with … the army they have. There's also an awareness [among police and the public] that if you're trying to stop a gangster from robbing a liquor store, you may have a [heck] of a fight on your hands, but that these publicity-seeking guys with mental illness, they basically crumble at first opposition."

The upshot, says Mr. Kopel: "Lying down and cowering doesn't seem to work very well, so law enforcement has gotten smarter and civilians have gotten smarter."

In Clackamas County, Sheriff Roberts said local law-enforcement personnel had trained earlier this year for a shooting scenario at Clackamas Town Center, an exercise that involved both police and retailers. On Tuesday, arriving police, in keeping with evolving police tactics nationwide, formed small teams and quickly entered the mall to pursue the shooter. Police could not say Wednesday whether any officers saw the shooter before he killed himself.

Dennis Curtis, the mall's general manager, noted that police officers told him that they were amazed "how many stores were secured and people were locked in place" upon entering the mall to look for the shooter.

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SKorea says NKorea has fired its long-range rocket

SEOUL, South Korea (AP) — North Korea fired a long-range rocket Wednesday in its second launch under its new leader, South Korean officials said, defying warnings from the U.N. and Washington only days before South Korean presidential elections.

South Korean defense officials said the rocket was fired from a west coast launch pad but there was no immediate word if the rocket was successful. North Korea had indicated technical problems with the rocket and extended its launch window. The officials spoke on condition of anonymity, citing office rules.

North Korea's Kim Jong Un took power after his father Kim Jong Il died on Dec. 17 last year, and the launch also comes about a month before President Barack Obama is inaugurated for his second term.

The North says the Unha rocket is meant to put a satellite in orbit. A similar launch in April broke apart shortly after liftoff, and the condemnation that attempt received is likely to be repeated. Washington sees the launch as a cover for a test of technology for missiles that could be used to strike the United States.

Rocket tests are seen as crucial to advancing North Korea's nuclear weapons ambitions. North Korea is thought to have only a handful of rudimentary nuclear bombs. But Pyongyang is not yet believed capable of building warheads small enough to mount on a missile that could threaten the United States.

North Korea has spent decades trying to perfect a multistage, long-range rocket. Experts say that ballistic missiles and rockets in satellite launches share similar bodies, engines and other technology. This is the fifth attempt at a long-range launch since 1998, when Pyongyang sent a rocket hurtling over Japan. Previous launches of three-stage rockets weren't considered successful.

Washington sees North Korea's pursuit of nuclear weapons and ballistic missiles as a threat to world security and to its Asian allies, Japan and South Korea.

North Korea under new leader Kim has pledged to bolster its nuclear arsenal unless Washington scraps what Pyongyang calls a hostile policy.

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LA prosecutors seek to violate Lohan's probation

LOS ANGELES (AP) — Los Angeles prosecutors on Tuesday asked a judge to revoke Lindsay Lohan's probation and schedule a hearing that could lead to the actress' return to jail.

The filing came one day before Lohan is scheduled to be arraigned Wednesday on three misdemeanor charges filed last month related to a June car crash.

Lohan will not need to be present for Wednesday's arraignment on charges she lied to Santa Monica police, was driving recklessly and obstructed an officer from performing duties related to the crash investigation. She remains on probation for a 2011 necklace theft case and could be sentenced to 245 days in jail if a judge determines her conduct was a probation violation.

Her attorney Shawn Holley did not immediately return an email seeking comment.

City attorney's spokesman Frank Mateljan said any probation violation proceedings are likely to be heard after the Santa Monica case. Prosecutors allege Lohan lied about being a passenger in her Porsche when it crashed on Pacific Coast Highway on the way to a film shoot.

The "Liz and Dick" star was released from supervised probation in March after completing several months of court appearances and morgue cleanup duty.

Lohan has yet to be booked on the new charges and a judge on Wednesday will likely set bail and the terms of her release.

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DA investigating Texas' troubled $3B cancer agency

AUSTIN, Texas (AP) — Turmoil surrounding an unprecedented $3 billion cancer-fighting effort in Texas worsened Tuesday when its executive director offered his resignation and the state's chief public corruption prosecutor announced an investigation into the beleaguered agency.

No specific criminal allegations are driving the latest probe into the Cancer Prevention and Research Institute of Texas, said Gregg Cox, director of the Travis County district attorney's public integrity unit. But his influential office opened a case only weeks after the embattled agency disclosed that an $11 million grant to a private company bypassed review.

That award is the latest trouble in a tumultuous year for CPRIT, which controls the nation's second-largest pot of cancer research dollars. Amid the mounting problems, the agency announced Tuesday that Executive Director Bill Gimson had submitted his letter of resignation.

"Unfortunately, I have also been placed in a situation where I feel I can no longer be effective," Gimson wrote in a letter dated Monday.

Gimson said the troubles have resulted in "wasted efforts expended in low value activities" at the agency, instead of a focused fight against cancer. Gimson offered to stay on until January, and the agency's board must still approve his request to step down.

His departure would complete a remarkable house-cleaning at CPRIT in a span of just eight months. It began in May, when Dr. Alfred Gilman resigned as chief science officer in protest over a different grant that the Nobel laureate wanted approved by a panel of scientists. He warned it would be "the bomb that destroys CPRIT."

Gilman was followed by Chief Commercialization Officer Jerry Cobbs, whose resignation in November came after an internal audit showed Cobbs included an $11 million proposal in a funding slate without a required outside review of the project's merits. The lucrative grant was given to Dallas-based Peloton Therapeutics, a biomedical startup.

Gimson chalked up Peloton's award to an honest mistake and has said that, to his knowledge, no one associated with CPRIT stood to benefit financially from the company receiving the taxpayer funds. That hasn't satisfied some members of the agency's governing board, who called last week for more assurances that no one personally profited.

Cox said he has been following the agency's problems and his office received a number of concerned phone calls. His department in Austin is charged with prosecuting crimes related to government officials; his most famous cases include winning a conviction against former U.S. House Majority Leader Tom DeLay in 2010 on money laundering charges.

"We have to gather the facts and figure what, if any, crime occurred so that (the investigation) can be focused more," Cox said.

Gimson's resignation letter was dated the same day the Texas attorney general's office also announced its investigation of the agency. Cox said his department would work cooperatively with state investigators, but he made clear the probes would be separate.

Peloton's award marks the second time this year that a lucrative taxpayer-funded grant authorized by CPRIT instigated backlash and raised questions about oversight. The first involved the $20 million grant to M.D. Anderson Cancer Center in Houston that Gilman described as a thin proposal that should have first been scrutinized by an outside panel of scientific peer-reviewers, even though none was required under the agency's rules.

Dozens of the nation's top scientists agreed. They resigned en masse from the agency's peer-review panels along with Gilman. Some accused the agency of "hucksterism" and charting a politically-driven path that was putting commercial product-development above science.

The latest shake-up at CPRIT caught Gilman's successor off-guard. Dr. Margaret Kripke, who was introduced to reporters Tuesday, acknowledged that she wasn't even sure who she would be answering to now that Gimson was stepping down. She said that although she wasn't with the agency when her predecessor announced his resignation, she was aware of the concerns and allegations.

"I don't think people would resign frivolously, so there must be some substance to those concerns," Kripke said.

Kripke also acknowledged the challenge of restocking the peer-review panels after the agency's credibility was so publicly smeared by some of the country's top scientists. She said she took the job because she felt the agency's mission and potential was too important to lose.

Only the National Institutes of Health doles out more cancer research dollars than CPRIT, which has awarded more than $700 million so far.

Gov. Rick Perry told reporters in Houston on Tuesday that he wasn't previously aware of the resignation but said Gimson's decision to step down was his own.

Joining the mounting criticism of CPRIT is the woman credited with brainstorming the idea for the agency in the first place. Cathy Bonner, who served under former Texas Gov. Ann Richards, teamed with cancer survivor Lance Armstrong in selling Texas voters in 2007 on a constitutional amendment to create an unprecedented state-run effort to finance a war on disease.

Now Bonner says politics have sullied an agency that she said was built to fund research, not subsidize private companies.

"There appears to be a cover-up going on," Bonner said.

Peloton has declined comment about its award and has referred questions to CPRIT. The agency has said the company wasn't aware that its application was never scrutinized by an outside panel, as required under agency rules.

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3 dead, including gunman, in Oregon mall shooting

PORTLAND, Ore. (AP) — Police says three people are dead, including the gunman, after a shooting at a shopping mall in the Portland, Ore., area.

Clackamas County sheriff's Lt. James Rhodes says the gunman fatally shot two people, and another person was wounded, in the Tuesday afternoon shooting at the Clackamas Town Center.

Rhodes says the gunman is also dead but he would not say how he died.

Hundreds of holiday shoppers and store employees evacuated the mall after the shots rang out around 3:30 p.m. Many others hid in stores, and Rhodes says deputies are going through the mall to get them out.

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Australian DJs apologize for royal hoax call

SYDNEY (AP) — They say they expected a hang-up and a few laughs. Instead, the Australian DJs behind a hoax phone call to the London hospital where the pregnant Duchess of Cambridge was being treated were deeply apologetic Monday as they described how their joke ended up going too far.

The phone call — in which they impersonated Queen Elizabeth II and Prince Charles — went through, and their station broadcast and even trumpeted the confidential information received. Whatever pride there had been over the hoax was obliterated by worldwide public outrage after Friday's death of Jacintha Saldanha, the first nurse they talked to.

"There's not a minute that goes by that we don't think about her family and what they must be going through," 2DayFM radio host Mel Greig told Australia's "A Current Affair," her voice shaking. "And the thought that we may have played a part in that is gut-wrenching."

Police have not disclosed the cause of Saldanha's death, but many have assumed it was related to the stress from the call. An autopsy is being held Tuesday.

Prime Minister David Cameron said at a luncheon Monday that "the suicide of this nurse, who worked incredibly hard and obviously was incredibly dedicated ... is an absolute tragedy."

His office later said Cameron's comment was not an official acknowledgment that the death was a suicide.

Greig and co-host Michael Christian spoke publicly about the prank for the first time in the televised interview. Another interview on rival show "Today Tonight" also aired Monday.

The hoax has sparked broad outrage, with the hosts receiving death threats and demands they be fired.

The radio station's owner said Greig and Christian were receiving psychological counseling to deal with the tragedy. A British lawmaker said he wished that much was being done for Saldanha's grieving family.

"They are devastated by what has happened," said Labour legislator Keith Vaz, who has visited Saldanha's husband and two children at their home in Bristol, southwest England.

"They want the facts to be established so that they can effectively grieve," Vaz said. "What is needed, clearly, is an inquiry by the hospital into how this tragic case happened."

Both DJs apologized for the hoax and cried when asked about the moment they learned that the Saldanha was dead. But neither described having reservations before the hoax tape was broadcast; they said higher-ups at the station had made the decision to air it.

"We didn't have that discussion," Greig said.

Southern Cross Austereo, the parent company of 2DayFM, released a statement Monday saying that Greig and Christian's show had been terminated and there would be a company-wide suspension of prank calls. The DJs themselves remain suspended.

Saldanha, 46, had transferred their call last week to a fellow nurse caring for the duchess, who was being treated for acute morning sickness at King Edward VII Hospital in London. That nurse said the former Kate Middleton "hasn't had any retching with me and she's been sleeping on and off."

Three days later, Saldanha was found dead at the hospital's nurses' accommodation.

The DJs said when the idea for the call came up in a team meeting, no one expected that they would actually be put through to the duchess' ward.

"We just assumed we'd get cut off at every single point and that'd be it," Christian said.

"The joke 100 percent was on us," he said. "The idea was never, 'Let's call up and get through to Kate,' or 'Let's speak to a nurse.' The joke was our accents are horrible, they don't sound anything like who they're intended to be."

Southern Cross Austereo CEO Rhys Holleran has called Saldanha's death a tragedy but defended the prank as a standard part of radio culture. He has also insisted the station had not broken any laws. He told Fairfax Radio on Monday that his station had tried at least five times to contact the London hospital to discuss the prank before it aired, but never succeeded.

When asked why the company made the attempts, Holleran replied "because we did want to speak with them about it." When pressed as to whether this meant the station had reservations about the pre-recorded prank, Holleran said only, "I think that that's a process that we follow and we have checks and balances on all those things."

The King Edward VII Hospital denied that its management had been contacted by the radio station.

"Following the hoax call, the radio station did not speak to anyone in the hospital's senior management or anyone at the company that handles our media inquiries," the hospital said in a statement.

It also announced a memorial fund to help support the nurse's family, with the hospital making the first donation.

Saldanha's children and husband, Ben Barboza, on Monday visited the hospital, which said it was offering assistance to the family.

Barboza expressed his sadness on his Facebook page with a short note "Obituary Jacintha."

"I am devastated with the tragic loss of my beloved wife Jacintha in tragic circumstances," he wrote. He said she will be laid to rest in Shirva, India.

Meanwhile, there were indications that the Duchess of Cambridge still struggled with acute morning sickness over the weekend when her husband, Prince William, cancelled a Sunday night engagement.

Palace officials said no final decision had been made on whether Kate would attend Wednesday's British premiere of "The Hobbit," where she and William are to be the guests of honor.

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Associated Press writers Jill Lawless, Gregory Katz and Danica Kirka in London contributed to this report.

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The Wii U uses less than half the power of the Xbox 360 and the PS3

Nintendo’s (NTDOY) Wii prided itself for being a super energy-efficient console that ran nearly silent and sipped very little electricity. And although Microsoft’s (MSFT) Xbox 360 was originally a loud monster with a penchant for Red-Ring-of-Death-ing itself, the amount of power it consumed was never as much as Sony’s (SNE) launch PlayStation 3, which used more power than a refrigerator. Eurogamer took it upon itself to pit the Wii U against the Xbox 360 S and new super slim PS3 and concluded that Nintendo’s new console “draws so little power in comparison to its rivals that its tiny casing still feels cool to the touch during intense gaming.” Most impressive is that the Wii U maintains its low-wattage while fitting in a chassis that’s smaller than both the Xbox 360 and PS3.

According to Eurogamer’s tests, the Wii U draws only 32 watts of power during gameplay of games that are as graphically intensive as the 360 and PS3, with both consoles using 118% and 139$ % more power, respectively.

To achieve such “green” levels, Nintendo clocks the Wii U’s CPU to 1.24GHz and “uses far fewer transistors than the competition.” While there are still some mysteries as to how the hardware remains cool, Eurogamer also discovered that the AMD-built GPU increases performance by “40 per cent per square millimetre of silicon – another big leap in efficiency.”

Most disappointing in Eurogamer’s analysis is that they weren’t able to get the Wii U’s wattage to spike more than 33 watts, suggesting that the console can’t be over-clocked in the future to pump out more polygons.

If you’re still on the fence on which console you should buy or play games on, the Wii U looks to be the one that’ll keep your electric bill nice and low.

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'Skyfall' launches back to top spot with $10.8M

LOS ANGELES (AP) — The James Bond blockbuster "Skyfall" has risen back to the No. 1 spot at the weekend box office, taking in $10.8 million.

That brought its domestic total to $261.4 million and its worldwide haul to a franchise record of $918 million.

The top 20 movies at U.S. and Canadian theaters Friday through Sunday, followed by distribution studio, gross, number of theater locations, average receipts per location, total gross and number of weeks in release, as compiled Monday by Hollywood.com are:

1. "Skyfall," Sony, $10,780,201, 3,401 locations, $3,170 average, $261,400,281, five weeks.

2. "Rise of the Guardians," Paramount, $10,400,618, 3,639 locations, $2,858 average, $61,774,192, three weeks.

3. "The Twilight Saga: Breaking Dawn — Part 2," Summit, $9,156,265, 3,646 locations, $2,511 average, $268,691,029, four weeks.

4. "Lincoln," $8,916,813, 2,014 locations, $4,427 average, $97,137,447, five weeks.

5. "Life of Pi," Fox, $8,330,764, 2,946 locations, $2,828 average, $60,948,293, three weeks.

6. "Playing For Keeps," FilmDistrict, $5,750,288, 2,837 locations, $2,027 average, $5,750,288, one week.

7. "Wreck-It Ralph," Disney, $4,859,368, 2,746 locations, $1,770 average, $164,402,934, six weeks.

8. "Red Dawn," FilmDistrict, $4,236,105, 2,754 locations, $1,538 average, $37,240,920, three weeks.

9. "Flight," Paramount, $3,130,305, 2,431 locations, $1,288 average, $86,202,541, six weeks.

10. "Killing Them Softly," Weinstein Co., $2,806,901, 2,424 locations, $1,158 average, $11,830,638, two weeks.

11. "Silver Linings Playbook," Weinstein Co., $2,171,665, 371 locations, $5,854 average, $13,964,405, four weeks.

12. "Anna Karenina," Focus, $1,544,859, 422 locations, $3,661 average, $6,603,042, four weeks.

13. "The Collection," LD Entertainment, $1,487,655, 1,403 locations, $1,060 average, $5,455,328, two weeks.

14. "Argo," Warner Bros., $1,482,346, 944 locations, $1,570 average, $103,160,015, nine weeks.

15. "End of Watch," Open Road Films, $751,623, 1,259 locations, $597 average, $39,989,766, 12 weeks.

16. "Hitchcock," Fox Searchlight, $712,544, 181 locations, $3,937 average, $1,661,670, three weeks.

17. "Talaash," Reliance Big Pictures, $449,195, 161 locations, $2,790 average, $2,397,909, two weeks.

18. "Taken 2," Fox, $387,227, 430 locations, $901 average, $137,700,304, 10 weeks.

19. "Pitch Perfect," Universal, $305,765, 387 locations, $790 average, $63,517,408, 11 weeks.

20. "The Sessions," Fox, $218,973, 197 locations, $1,112 average, $4,948,342, eight weeks.

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Online:

http://www.hollywood.com

___

Universal and Focus are owned by NBC Universal, a unit of Comcast Corp.; Sony, Columbia, Sony Screen Gems and Sony Pictures Classics are units of Sony Corp.; Paramount is owned by Viacom Inc.; Disney, Pixar and Marvel are owned by The Walt Disney Co.; Miramax is owned by Filmyard Holdings LLC; 20th Century Fox and Fox Searchlight are owned by News Corp.; Warner Bros. and New Line are units of Time Warner Inc.; MGM is owned by a group of former creditors including Highland Capital, Anchorage Advisors and Carl Icahn; Lionsgate is owned by Lions Gate Entertainment Corp.; IFC is owned by AMC Networks Inc.; Rogue is owned by Relativity Media LLC.

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Surprise: New insurance fee in health overhaul law

WASHINGTON (AP) — Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama's health care overhaul.

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.

Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.

"Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. It starts at $63 and then declines.

Most of the money will go into a fund administered by the Health and Human Services Department. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with medical problems. Under the law, insurers will be forbidden from turning away the sick as of Jan. 1, 2014.

The program "is intended to help millions of Americans purchase affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured and thereby lower medical expenses and premiums for all," the Obama administration says in the regulation. An accompanying media fact sheet issued Nov. 30 referred to "contributions" without detailing the total cost and scope of the program.

Of the total pot, $5 billion will go directly to the U.S. Treasury, apparently to offset the cost of shoring up employer-sponsored coverage for early retirees.

The $25 billion fee is part of a bigger package of taxes and fees to finance Obama's expansion of coverage to the uninsured. It all comes to about $700 billion over 10 years, and includes higher Medicare taxes effective this Jan. 1 on individuals making more than $200,000 per year or couples making more than $250,000. People above those threshold amounts also face an additional 3.8 percent tax on their investment income.

But the insurance fee had been overlooked as employers focused on other costs in the law, including fines for medium and large firms that don't provide coverage.

"This kind of came out of the blue and was a surprisingly large amount," said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee, a group that represents large employers on benefits issues.

Word started getting out in the spring, said Young, but hard cost estimates surfaced only recently with the new regulation. It set the per capita rate at $5.25 per month, which works out to $63 a year.

America's Health Insurance Plans, the major industry trade group for health insurers, says the fund is an important program that will help stabilize the market and mitigate cost increases for consumers as the changes in Obama's law take effect.

But employers already offering coverage to their workers don't see why they have to pony up for the stabilization fund, which mainly helps the individual insurance market. The redistribution puts the biggest companies on the hook for tens of millions of dollars.

"It just adds on to everything else that is expected to increase health care costs," said economist Paul Fronstin of the nonprofit Employee Benefit Research Institute.

The fee will be assessed on all "major medical" insurance plans, including those provided by employers and those purchased individually by consumers. Large employers will owe the fee directly. That's because major companies usually pay upfront for most of the health care costs of their employees. It may not be apparent to workers, but the insurance company they deal with is basically an agent administering the plan for their employer.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. That means the per-head assessment would be smaller each year, around $40 in 2015 instead of $63.

It will phase out completely in 2017 — unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits — decides to extend it.

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Obama tax plan no small deal to small business owners

WASHINGTON (AP) — President Barack Obama's plan to increase taxes on top earners would have only a small impact on the nation's economy, according to congressional budget experts. But don't tell that to small business owners facing a tax hike.

Obama's proposal would hit about 940,000 people who report business income on their individual or household returns, says the Joint Committee on Taxation, the official scorekeeper for Congress. That's only 3.5 percent of the people who report business income, but those business owners are projected to earn 53 percent of the $1.3 trillion in business income that will be reported on individual returns next year.

That, Republicans in Congress argue, makes those business owners an important engine for economic growth and job creation.

They recite it as gospel: Paying higher taxes will reduce the amount of profits business owners would otherwise re-invest in their companies, making them less likely to expand and hire more workers. Many economists agree that tax increases in general limit economic growth. But there are big disagreements about magnitude — how much relatively small changes in the top two income tax rates would affect the economy and job creation.

The Congressional Budget Office estimated last month that Obama's plan to increase taxes only on top earners would reduce economic growth by 0.1 percent of Gross Domestic Product next year, or about $16 billion. That translates into about 200,000 fewer jobs.

By comparison, letting all the tax cuts enacted in 2001 and 2003 expire would reduce economic growth by 1.4 percent of GDP, resulting in about 1.8 million fewer jobs, the CBO said.

"It's a very tiny portion of the cliff impact and it very much raises revenues and it does so in a fair way," Rep. Sander Levin of Michigan, senior Democrat on the tax-writing House Ways and Means Committee, said of Obama's proposal. "It will not stifle economic growth in any significant way."

Most of the expiring tax cuts were first enacted under former President George W. Bush and extended by Obama in 2010. This time around, Obama says he is determined to let the tax cuts expire on income above $200,000 for individuals and $250,000 for married couples. He wants to extend the Bush tax cuts for people making less.

House Speaker John Boehner and other Republicans have said they are open to more tax revenue through reducing or eliminating tax breaks. But Boehner opposes Obama's proposal to increase tax rates on high earners.

"Raising taxes on small businesses instead of taking a balanced approach that also cuts spending is wrong," Boehner, said recently. "It's only going to make it harder for our economy to grow. And if our economy doesn't grow, Americans don't get new jobs and the debt problem that we have will continue to threaten our children's future."

Republicans often relate the tax increases to small businesses because 94 percent of America's businesses are structured so that profits go directly to partners or shareholders who report the income on their individual tax returns. It's a way for business owners to avoid paying taxes twice on the same income — once at the corporate level and again when profits are distributed as dividends.

Under Obama's plan, the 33 percent tax rate would rise to 36 percent on taxable income above $231,000 for a married couple filing jointly. The top tax rate would increase from 35 percent to 39.6 percent on taxable income above $397,000.

Obama's plan also would phase out the personal exemption and gradually reduce itemized deductions for individuals making more than $200,000 and married couples making more than $250,000. The top capital gains tax rate would rise from 15 percent to 20 percent. Qualified dividends, which are now taxed at a top rate of 15 percent, would be taxed as ordinary income for top earners, or at a top rate of 39.6 percent.

That, some business owners complain, would leave them with less money to hire new workers or keep the ones they have.

"We're trying to encourage people to go out and hire and take risks," said Brian Reardon, executive director of the S Corporation Association. "If you are reducing the marginal value, you are reducing the incentives for folks to take that risk."

An S corporations is a common business structure in which profits flow directly to shareholders who report the income on their individual tax returns.

Business owners note that they often pay taxes on profits they don't necessarily receive. For example, if you borrow money to start or expand your business, you can use some of your profits to repay the loan, but only the interest portion of the loan payment is tax deductible.

When business owners use profits to buy new equipment or make other upgrades, it often takes several years to write off the cost of those upgrades, depending on depreciation rules.

Dan McGregor, chairman of McGregor Metalworking Companies in Springfield, Ohio, said he and the other six shareholders in the business are looking at a tax increase of $250,000 to $300,000 next year under Obama's plan.

Under Obama's plan to increase the top two income tax rates, a taxpayer would have to have an income of around $4 million — depending on how it's structured — to face a tax increase of $250,000.

McGregor's company, which has 365 employees at five locations, does about $80 million a year in sales, McGregor said. Each year, a portion of the profits are distributed to shareholders, along with money to pay taxes. The rest, he said, is invested back into the company.

If taxes go up, distributions to shareholders must go up to pay the higher taxes, leaving less money to reinvest in the business, McGregor said.

"I feel a $40,000 reduction is the loss of one job, so if it's a $200,000 tax increase, that's five jobs," McGregor said.

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