In his radio address on July 25th, President Obama highlighted a few key points to show he “cares” about small business. They were the same points that the small-business community has been making about their health-care predicament to lawmakers for years.
Citing a new White House study, the president noted that: “Because they lack the bargaining power that large businesses have and face higher administrative costs per person, small businesses pay up to 18 percent more for the very same health insurance plans – costs that eat into their profits and get passed on to their employees. As a result, small businesses are much less likely to offer health insurance. Those that do tend to have less generous plans.”
This is absolutely true. Which is why the cost of health insurance is the No. 1 concern of the small business community. A White House study wasn’t really needed to show this, but, hey, thank goodness the president and Democrats in Congress are offering help to small business when it comes to health care. Right?
Not even close. Sympathy for small business seems disingenuous when one looks at the actual details of current health-care reform legislation. Under the original House plan, businesses with more than $250,000 in payroll expenditures would have been required to purchase health insurance for their employees or face a punitive payroll tax of up to eight percent.
The $250,000 payroll threshold was low, and Blue Dog pressure raised it to $500,000. But it will still absolutely affect small companies – the exact constituency that President Obama claims to want to help. A company employing just 20 people with average salaries of $25,000 would be penalized by the House plan’s payroll tax if they dare say that, much as they wish they could, they simply cannot afford health insurance for their employees. The number of employees is likely to be even smaller if payroll taxes are included as part of “aggregate payroll.”
Doesn’t it warm your heart to see small business looked after this way?
Here’s the final irony on this point: The White House study that the President cited in his radio address showed that only 49 percent of businesses with three to nine workers and 78 percent of companies with 10 to 24 workers offered health insurance to their employees in 2008. In contrast, 99 percent of companies with more than 200 workers offered health insurance.
Which means that the health-care mandate and payroll tax will not only affect small employers, it is designed to target them. The punitive tax is not a threat to big companies; they already offer coverage.
And then there’s the health-care “surcharge” – another tax, this one on income, that will hurt small businesses in the name of taxing the wealthy. Since income for most small businesses is taxed as income flowing through their individual owners, the tax will, in fact, target and hurt small firms.
House Democrats claim the surcharge will only affect four percent of small businesses. They have a pie chart to prove it. Yet they admit that they’ve arrived at that tiny percentage by using the broadest possible definition of small-business owners. They’ve defined, as a small-business owner, every single person in the U.S. who claims as little as $1 on their income tax returns as coming from “business income.” Someone who sells a once-worn cocktail dress on eBay for $50 would be a “small-business owner” under this definition.
Sorry to be picky, but wouldn’t a better measure have been the small firms that actually employ people?
Meanwhile, the National Federation of Independent Business – an organization that represents actual small-business owners who have actual employees and conducts scientific research on their problems, priorities, and economic health – says that as many as 1.6 million small-business jobs could be lost if an employer mandate becomes law. They’ve also estimated that the number of small firms hit by the surcharge would be about one-third of the nation’s total.
It is smart politics to show you understand an important constituency. But this is a case where the White House and Congressional Democrats need to put their policy where their rhetoric is. Right now, they only offer misleading lip service – not policy solutions – for small business. If the employer health-insurance mandate and surcharge are implemented, this lip service will end up being the insult that precedes the injury.
Jean Card has been a professional writer in Washington, D.C. for more than a dozen years. Today, she is freelance writing and consulting, full-time. Jean is a native of Vermont and a graduate of Middlebury College. She lives and writes in Alexandria, VA with her husband two rather poorly-behaved cats.
