Friday, March 26, 2010

Obamacare: Bad for Businesses

Tax on Jobs Will Increase Unemployment. The health care takeover creates a new tax on jobs by forcing employers who do not provide “acceptable” coverage to pay a “fair share” tax of $2,000 per full-time employee—nearly triple the $750 tax initially proposed.[i]  The Congressional Budget Office has confirmed that this tax on jobs masquerading in the form of a “pay-or-play” mandate “could reduce the hiring of low-wage workers,” and could also lead to wage stagnation as wage compensation is diverted to comply with new federal taxes and mandates.[ii]

Taxing Part-Time Workers. The health care takeover extends the “fair share” tax on jobs to include part-time as well as full-time workers. These new and higher penalties will create further disincentives for strapped businesses to hire workers.

Other New Taxes on Business. The health care takeover raises the Medicare payroll tax by a total of $210.2 billion—leveling new taxes on many American small businesses that serve as the engine of new job creation.[iii] Worse yet, this tax is not indexed for inflation, meaning it will hit more and more businesses over time. Imposing another new tax on businesses in an already struggling economy will be a recipe for prolonged stagnation.

Higher Taxes, Higher Premiums. The health care takeover imposes $107 billion in higher taxes on drug and device manufacturers and insurers.[iv] The Congressional Budget Office found that these taxes “would be largely passed through to consumers in the form of higher premiums for private coverage.”[v] Moreover, because larger businesses that self-insure their workers are exempt from the $60 billion in tax increases imposed on health insurers, small businesses will face a disproportionate share of this tax burden—at a time when many are already struggling to fund coverage for their workers.

Expanded Federal Retiree Mandates. The health care takeover eliminates the tax deductibility of subsidies provided to employers who offer prescription drug coverage to their retired workers. This $4.5 billion tax increase will likely result in employers dropping their retiree health coverage—undermining President Obama’s frequent promise that those who like their current coverage will be able to keep it under the Democrats’ version of reform.[vi]

New Restrictions on Employer Coverage. The health care takeover imposes various new restrictions on Health Savings Accounts (HSAs), Medical Savings Accounts, Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs). At least eight million individuals hold insurance policies eligible for HSAs, and millions more participate in FSAs.[vii] The bill’s new restrictions and tax increases will limit employers’ ability to offer benefit plans that best meet their workers’ needs and bring down costs for their employees and firms.

 

[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] Congressional Budget Office, “Effects of Changes to the Health Insurance System on Labor Markets,” July 13, 2009, http://www.cbo.gov/ftpdocs/104xx/doc10435/07-13-HealthCareAndLaborMarkets.pdf

[iii] Joint Committee on Taxation analysis of substitute amendment to H.R. 4872 in concert with H.R. 3590, March 20, 2010, http://jct.gov/publications.html?func=startdown&id=3672.

[iv] Ibid.

[v] Congressional Budget Office, Letter to the Honorable Evan Bayh, November 30, 2009, http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf.

[vi] JCT analysis of H.R. 3590 and H.R. 4872.

[vii] America’s Health Insurance Plans, Census of HSA/High-Deductible Health Plan holders, May 2009, http://www.ahipresearch.org/pdfs/2009hsacensus.pdf.