GOP.gov Policy News: ObamaCare and Small Employers
Less than three months before the congressional midterm elections in November, House Republicans are still actively trying to remind the American public that the health care reform bill forced through the House and Senate by the Democrats only a few months ago is short on benefits and long on detriment. Focusing on aspects of the new law which affect small business owners–the engine of our economy–the House GOP issued a nice little reminder before the weekend.
Small employers are the engines that drive the economy. One of the biggest myths is that ObamaCare does not impact small employers. Unfortunately, ObamaCare adds layers of regulations and raises taxes on small employers.
EXCESSIVE REGULATIONS—A 1099 NIGHTMARE
ObamaCare requires every small employer to issue a “1099-MISC” IRS Form to every vendor with which it has more than $600 in transactions in a year. Employers will have to track down the taxpayer identification number (TIN) of each vendor and may be responsible for withholding payments from the vendor if requested by the Internal Revenue Service.
- “[T]he new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”
- “[S]mall businesses may have to acquire new software or pay for additional accounting services, incurring additional costs.”
- “In our view, it is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort.”
- “[S]mall businesses that lack the capacity to track customer purchases may lose customers, leaving the economy with more large national vendors and less local competition.”
“The—for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.” President Obama, September 20, 2009, discussing the health insurance mandate
$5 billion Medicine Cabinet Tax Increase on HSAs and FSAs: Approximately, 2.9 million people have HSAs in the small employer health insurance market, and according to industry sources, 20 million Americans have a Flexible Spending Account. Under ObamaCare, they will pay taxes on over the counter (OTC) nonprescribed household health care items when paid from their HSA or FSA.
$1.4 billion HSA Tax Increase: Approximately, 2.9 million people have HSAs in the small employer health insurance market. ObamaCare increases the tax on nonqualified medical expenses from 10 percent to 20 percent.
$13 billion Tax Increase on FSAs: ObamaCare caps the annual contribution to Flexible Spending Accounts (FSAs) at $2,500 per year. According to industry sources, 20 million Americans use FSAs to pay for routine medical care.
$15.2 billion Tax Increase on Medical Expenses: Under current law, individuals may deduct the cost of their medical expenses, including health insurance, if their expenses exceed 7.5 percent of adjusted gross income (AGI). ObamaCare increases the threshold to 10 percent, which increases taxes on Americans with high out-of-pocket expenses.
$210.1 billion Tax Increase on “Unearned Income” and New Tax on High Wage Earners: ObamaCare includes a new 3.8 percent tax on “unearned income,” which includes investment income such as home sales and rental property. In addition, ObamaCare adds a new 0 .9 percent tax on high-wage earners.
$17 billion Uninsured Tax Increase: ObamaCare requires everyone to buy ObamaCare-qualified insurance or pay a tax. The 2009 Kaiser Family Foundation survey shows that only 46 percent of businesses with fewer than 10 workers offer health benefits to their employees. In addition, three-fourths of firms with 10 to 24 employees and almost 90 percent of firms with 25 to 49 employees provide health insurance. In many cases, the business owner or its employees will buy an individual policy for themselves and their family. If they don’t buy a government-approved health insurance plan, they will have to pay an uninsured tax.
$52 billion “Pay or Play” Tax Increase: Employers with 50 or fewer employees will not be subject to ObamaCare’s health insurance mandate. However, if the company grows and decides to hire its 51st employee, the company must “pay or play.” In other words, it must provide ObamaCare health insurance or pay a $2,000 per employee tax if it doesn’t provide coverage. In addition, if an employee uses the ObamaCare tax credit to buy insurance in the exchange, employers still have to pay a penalty.
$20 billion Tax Increase on Medical Device Manufacturers: ObamaCare includes a 2.3 percent tax on medical device manufacturers, which totals $20 billion over 10 years. President Obama’s chief actuary at the Centers for Medicare & Medicaid Services concludes this tax increase will be passed along to consumers in the form of higher costs. Furthermore, 84.6 percent of medical device manufacturers employ fewer than 20 employees, according to the latest Census data.
$27 billion Tax Increase on Pharmaceutical Manufacturers: ObamaCare includes a $27 billion tax on pharmaceutical companies. President Obama’s chief actuary at the Centers for Medicare & Medicaid Services concludes this tax increase will be passed along in the form of higher prices.
$60.1 billion Tax Increase on Health Insurance Companies: ObamaCare includes a $60.1 billion tax on health insurance companies. President Obama’s chief actuary at the Centers for Medicare & Medicaid Services (CMS) believes this tax increase will be passed along to health insurance purchasers in the form of higher health insurance prices.
$2.7 billion Tax Increase on Indoor Tanning Services: According to tanning industry sources, more than 50 percent of indoor tanning salons are owned by women and most are small employers.
President Obama pledged to the public that under his health care plan, people would be able to keep the health insurance they have. However, Obama administration officials estimate that as many as 80 percent of small employers will be forced to drop their current health insurance plans.
With national unemployment hovering around 10 percent, lawmakers ought to reduce the tax burden on all Americans and create an environment that encourages all business to expand and hire new employees. Unfortunately, the ObamaCare health care tax increases coupled with the expiring 2001 and 2003 tax breaks will amount to the largest tax hike in United States history, and it hits all Americans in less than six months.
Is it any wonder that the unemployment rate has increased to nearly ten percent and, despite what the mainstream press would like to tell us, is actually getting worse? Uncertainty kills job growth and, right now, what exactly do small business owners have to be certain about? All they can know for sure is that the current administration and Democratic Party leadership demonizes victory, renders profit taboo, and is plodding along in its War on Success and Prosperity.