One Year Later: STILL Bad for Businesses
Today the Administration embarks on a week-long “messaging” campaign in an attempt to sell its unpopular health care law – and today’s events focus on small businesses. But as an analysis of the bill shows, it’s not the messaging that’s the problem – it’s the message. Here are just some of the ways in which the law will harm the engines of American job creation:
Higher Premiums: A recent article highlighted the skyrocketing premium increases faced by small businesses, profiling small firms receiving premium increases of 20, 40, even 60 percent or more. Candidate Obama promised repeatedly that premiums would go DOWN by an average of $2,500 per family – but the Medicare actuary testified the promise that the health care law would lower costs was “false, more so than true,” meaning struggling firms will continue to face skyrocketing premium increases.
Ineffective Tax Credits: While the Administration attempts to sell the prospect of tax credits for some small businesses, the bureaucratic hoops firms must go through to obtain federal subsidies mean most small businesses aren’t eligible – not least because many firms will reduce their eligibility for subsidies by hiring new workers or giving their current workers a raise. Worse yet, the tax credits are temporary in nature – while the new mandates and requirements imposed by the law are permanent.
Losing Current Coverage: Thanks to the law, as many as 80% of small businesses will be forced to give up their current coverage within the next two years. The Administration’s own estimates revealed that its onerous regulations will force most businesses to give up their current plans, thus subjecting them to costly new mandates that will increase premiums.
Destructive Taxes: Among its more than half-trillion dollars in new taxes, the measure raises the payroll tax by a total of $210.2 billion—a tax that will hit small business owners particularly hard, because many file taxes at the individual level. Worse yet, this tax is not indexed for inflation, meaning it will hit more and more small businesses over time. Moreover, a recent study found that small businesses will pay a disproportionate share of a new tax on insurers whose impact could total $5,000 per household over a decade.
Employers Penalized for Growing: The law forces employers who do not provide “acceptable” coverage to pay a “fair share” penalty of $2,000 per full-time employee. The penalty is applied to firms with more than 50 employees – meaning small businesses will face a penalty of up to $42,000 for hiring their 51st worker – a perverse incentive that discourages burgeoning firms from growing.
Burdensome Regulations: Since the law’s enactment in March, the Administration has released 6,578 pages of regulations implementing the 2,700 page law – only the beginning of an onslaught of mandates imposed by Washington. While larger firms will be more readily able to absorb the compliance costs – and potential lawsuits – arising from these new regulations, small businesses will find it difficult to keep pace with Washington’s mountain of new mandates.
Mountains of New Paperwork Imposed by the IRS: The health care law creates what the National Federation of Independent Business called a “tremendous new paperwork compliance burden” on 40 million businesses, requiring them to file a form 1099 with the Internal Revenue Service for any goods purchases exceeding $600 per year. The National Taxpayer Advocate concluded that this 1099 mandate “could have distortionary effects on taxpayer behavior,” as “small businesses that lack the capacity to track customer purchases.…may lose customers.”
A Smaller Labor Force: The Congressional Budget Office has concluded that the law will reduce the American labor supply by 800,000 workers, finding that the law “will encourage some people to work fewer hours or to withdraw from the labor market,” and that “on net, [the law] will reduce the amount of labor used in the economy.”