First, Do No Harm to Small Business?
“First, do no harm.” Evidently those words don’t apply to Congress and health care reform, at least not as it pertains to small business.
Under the legislation introduced in the House of Representatives as America’s Affordable Health Choices Act, “Businesses that do not offer health coverage to their workers would pay an 8 percent payroll tax to help subsidize coverage … “
What will this mean for small business in this country? Coming up with an estimate isn’t easy because the Census Bureau and the Internal Revenue Service haven’t released the most current data they have on American businesses, but here is my best guess.
If enacted, the law will eat into small-business profits severely. It won’t affect most small businesses, just the ones with bigger payrolls. That’s because employers with payrolls of less than $250,000 are exempt under the proposed law, and only about one-quarter of small businesses in the United States are employer firms. Moreover, 75.3 percent of the businesses with at least one employee employ only one to nine people, and these firms have average payrolls of only $102,025. Because firms with less than $250,000 in payroll are exempt from providing coverage, the tax penalty will be concentrated on only about 5 percent of businesses. (It won’t affect businesses with 200 or more employees because 99 percent of them provide health insurance for their employees.)
But those affected — the 5 percent of U.S. businesses that employ 10 to 199 employees, who, in 2006, provided jobs for 37.9 million Americans — are going to get walloped. To give you a sense of the impact on these businesses, take a look at some of my back-of-the-envelope calculations..
