The Job tax

[Skull Pilot]

Pelosi’s Health-Care Payroll Tax Is a Tax on Labor - WSJ.com

Even many Democrats are revolting against Speaker Nancy Pelosi’s 5.4% income surtax to finance ObamaCare, but another tax in her House bill isn’t getting enough attention. To wit, the up to 10-percentage point payroll tax increase on workers and businesses that don’t provide health insurance. This should put to rest the illusion that no one making more than $250,000 in income will pay higher taxes.

To understand why, consider how the Pelosi jobs tax works. Under the House bill, firms with employee payroll of above $250,000 without a company health plan would pay a tax starting at 2% of wages per employee. That rate would quickly rise to 8% on firms with total payroll of $400,000 or more. A tax credit would help very small businesses adjust to the new costs, but even a firm with a handful of workers is likely to be subject to this payroll levy. As we went to press, Blue Dogs were taking credit for pushing those payroll amounts up to $500,000 and $750,0000, but those are still small employers.

So who bears the burden of this tax? The economic research is close to unanimous that a payroll tax is a tax on labor and is thus shouldered mostly if not entirely by workers. Employers merely collect the tax and then pass along its costs in lower wages or benefits. This is the view of the Democratic-controlled Congressional Budget Office, which advised on July 13: “If employers who did not offer health insurance were required to pay a fee, employee’s wages and other forms of compensation would generally decline by the amount of that fee from what they otherwise would have been.

To put this in actual dollars, a worker earning, say, $70,000 a year could lose some $5,600 in take home pay to cover the costs of ObamaCare. And, by the way, this is in addition to the 2.5% tax that the individual worker would have to pay on gross income, if he doesn’t buy the high-priced health insurance that the government will mandate. In sum, that’s a near 10-percentage point tax on wages and salaries on top of the 15% that already hits workers to finance Medicare and Social Security.

Even Democrats are aware that his tax would come out of the wallets of the very workers they pretend to be helping, so they inserted a provision on page 147 of the bill prohibiting firms from cutting salaries to pay the tax. Thus they figure they can decree that wages cannot fall even as costs rise. Of course, all this means is that businesses would lay off some workers, or hire fewer new ones, or pay lower starting salaries or other benefits to the workers they do hire.

Cornell economists Richard Burkhauser and Kosali Simon predicted in a 2007 National Bureau of Economic Research study that a payroll tax increase of about this magnitude plus the recent minimum wage increase will translate into hundreds of thousands of lost jobs for those with low wages. Pay or play schemes, says Mr. Burkauser, “wind up hurting the very low-wage workers they are supposed to help.” The CBO agrees, arguing that play or pay policies “could reduce the hiring of low-wage workers, whose wages could not fall by the full cost of health insurance or a substantial play-or-pay fee if they were close to the minimum wage.”

To make matters worse, many workers and firms would have to pay the Pelosi tax even if the employer already provides health insurance. That’s because the House bill requires firms to pay at least 72.5% of health-insurance premiums for individual workers and 65% for families in order to avoid the tax. A Kaiser Family Foundation survey in 2008 found that about three in five small businesses fail to meet the Pelosi test and will have to pay the tax. In these instances, the businesses will have every incentive simply to drop their coverage.

A new study by Sageworks, Inc., a financial consulting firm, runs the numbers on the income statements of actual companies. It looks at three types of firms with at least $5 million in sales: a retailer, a construction company and a small manufacturer. The companies each have total payroll of between $750,000 and $1 million a year. Assuming the firms absorb the cost of the payroll tax, their net profits fall by one-third on average. That is on top of the 45% income tax and surtax that many small business owners would pay as part of the House tax scheme, so the total reduction in some small business profits would climb to nearly 80%. These lower after-tax profits would mean fewer jobs.

To put it another way, the workers who will gain health insurance from ObamaCare will pay the steepest price for it in either a shrinking pay check, or no job at all.

so much for not raising taxes on those making less than 250K a year.

This tax is very troubling. my wife and i own a small business and employ 10 people. Our payroll is over 250k a year.

Now we do provide health insurance. right now we ask our employees who need insurance to get a private policy and we pay the premiums. This saves us a ton of dough compared to the alternative of group health plans.

But there is no way we can afford to pay 60% for family insurance. we currently pay 100% for individual. thankfully most of our employees are covered under a spouse's insurance.

So if we get hit with a 2% or greater surtax, the first thing I'll have to do is end our retirement benefit and use the money for matching funds to pay the tax.

Then we'll probably cut payroll.

yeah government health care is sure good for business.

 

[sparky]

I'm a one man show who is finding it almost impossible to make that leap to hire

Big Bro, who apprently thinks we (small biz) are a bottomless well isn't doing us any favors....


America's Affordable Health Choices Act of 2009 (H.R. 3200).

The Top 10 Reasons “America’s Affordable Health Choices Act of 2009” is the Wrong Approach for Small Business


1. An Employer Mandate
The bill includes an employer mandate that will require employers to offer healthcare to full-time and part-time employees. Research shows an employer mandate could cost 1.6 million jobs, with more than 1 million of those jobs lost in the small business sector. The approach fails to increase affordability and, instead, devastates the economy – with the greatest impact being levied on the low-income community who will pay through depressed wages and lost jobs.

2. Payroll Tax Penalty
Payroll taxes are an especially onerous tax, because they tax labor rather than profits. No matter how profitable or unprofitable a business might be, they are forced to pay this tax. The legislation requires that all employers with a payroll of $250,000 or more pay a payroll tax of up to 8 percent if they do not provide qualified health insurance to their employees. The taxes punish wage and job growth since the tax rate increases as payroll increases. If an employer chooses to add a worker or increase wages, the rate of tax on that employer may continue to go up. Even the smallest wage increases could trigger an additional tax, since the wage rates at which the tax is applied are not subject to inflation. Simply put, this is a tax on job growth.

3. Pay-or-Play, Pay-and-Pay and Offer-and-Pay
The legislation establishes a confusing multi-part test that hits employers who do and do not offer health insurance.
A non-offering employer will pay the payroll tax of either 2, 4, 6 or 8 percent.

Offering employers must:

Offer qualified individual and family coverage
Make premium contribution requirements of at least
72.5% for individuals and
65% for family plans
Offer a qualified plan as defined by a government-appointed board
* If the employer offers, but the employee declines and obtains coverage in the exchange, then the employer must pay the payroll tax penalty of up to 8 percent.
* If an employer offers coverage other than the qualified plan, they can be assessed a penalty of up $100 per day/per employee.
Consequences: In addition to the financial penalties, new taxes and onerous government involvement in the healthcare of you and your employees, these approaches lead to potentially higher costs and many small business employees not being able to keep the plan they have today.

4. A Mandated Minimum Plan with a Big Price Tag
Today, among firms of 1 to 199 workers, 86 percent who offer coverage offer only one plan. This leaves their employees with two options: take it or leave it. Small employers and their employees want the ability to choose from a variety of affordable plans. However, H.R. 3200 gives a political board the power to define “coverage” and will determine whether an employer plan is acceptable. The bill does nothing to ensure that the new plans will be less costly than what small employers are paying today and even requires small employers to cover certain services that they are exempt from under current federal law.

5. An Exchange that Limits Access to All Small Businesses
Small employers have long sought a simpler and more efficient way to shop for insurance. Although we believe that an exchange approach can provide a streamlined and simplified way to gain access to affordable coverage, H.R. 3200 fails to provide guaranteed access to the exchange for employers with 21 or more employees. Providing increased access and more choices for some, but not all small business is not reform that small business can support.

6. An All Powerful Insurance Czar
The “Health Choices Commissioner” will have unbridled authority to institute rules and regulations that greatly affect small employers, including the ability to define who is and is not a full-time and part-time employee. Thresholds set forth by an unelected commissioner would be subject to continual changes, leaving small business owners in constant fear of ever-changing compliance requirements.

7. The Government-Run Public Option
As advocates for competition and choice, we are deeply concerned that a public option would further compromise the viability of private insurance and would restrict choice to a single plan: the government-run plan. Instead, a reformed, private insurance marketplace can provide businesses and employees with more affordable coverage and a sustainable choice of plans.

8. The Surtax: A Tax on Job Creation
The surtax imposes an additional tax on some businesses reducing after tax profits at a time when small businesses are struggling to find capital. Because 75 percent of small businesses are structured as pass through entities, they pay their business taxes at the individual level. More than one-third of small businesses employing 20 to 250 employees would face the tax. The businesses most likely to face this tax employ 33.5 million American workers – more than one-quarter of the American workforce.

9. Jeopardizes Options That Small Employers Have Today
As written, the legislation appears to limit the use of health savings accounts, jeopardizing a health insurance option that small business owners have and use today. In addition to the bill limiting the sale of individual plans in the future – a key component of an HSA, a Congressional Committee adopted an amendment prohibiting individuals from using HSA funds to purchase over-the-counter health products. This further limits the utility of this health insurance option, making it harder for people to keep what they have.

10. An Employer Tax Credit with Limited Value
While some small businesses can be helped by tax credits, the structure of the credit is critical to its successes. Small businesses (with 25 or fewer employees) would be eligible for a subsidy of up to 50 percent of the cost of health insurance for employees. Businesses that have an average annual salary per worker of $20,000 or less get the full subsidy, with the credit phasing out at $40,000. U.S. census data from 2007, notes that the average wage of full-time employees at businesses with fewer than 10 employees is over $30,000, meaning that in many cases the value of the credit is already cut in half. This could also mean that a small business owner must make trade-offs when compensating workers. Increasing wages would have to be measured against the amount of the lost credit, which could lead to workers – especially lower-wage workers – seeing stagnant wages for a longer period of time.

 

[Skull Pilot]

I'm a one man show who is finding it almost impossible to make that leap to hire

Big Bro, who apprently thinks we (small biz) are a bottomless well isn't doing us any favors....


America's Affordable Health Choices Act of 2009 (H.R. 3200).

The Top 10 Reasons “America’s Affordable Health Choices Act of 2009” is the Wrong Approach for Small Business


1. An Employer Mandate
The bill includes an employer mandate that will require employers to offer healthcare to full-time and part-time employees. Research shows an employer mandate could cost 1.6 million jobs, with more than 1 million of those jobs lost in the small business sector. The approach fails to increase affordability and, instead, devastates the economy – with the greatest impact being levied on the low-income community who will pay through depressed wages and lost jobs.

well ALL my part time people will be let go and I'll hire only full time people because there is no way I can afford to pay insurance for part time people.

2. Payroll Tax Penalty
Payroll taxes are an especially onerous tax, because they tax labor rather than profits. No matter how profitable or unprofitable a business might be, they are forced to pay this tax. The legislation requires that all employers with a payroll of $250,000 or more pay a payroll tax of up to 8 percent if they do not provide qualified health insurance to their employees. The taxes punish wage and job growth since the tax rate increases as payroll increases. If an employer chooses to add a worker or increase wages, the rate of tax on that employer may continue to go up. Even the smallest wage increases could trigger an additional tax, since the wage rates at which the tax is applied are not subject to inflation. Simply put, this is a tax on job growth.

the only way to handle this is to cut payroll to under 250K

i might be able to do this by taking myself and my wife off payroll. I'll just increase the monthly rent the business pays me.

3. Pay-or-Play, Pay-and-Pay and Offer-and-Pay
The legislation establishes a confusing multi-part test that hits employers who do and do not offer health insurance.
A non-offering employer will pay the payroll tax of either 2, 4, 6 or 8 percent.

Offering employers must:

Offer qualified individual and family coverage
Make premium contribution requirements of at least
72.5% for individuals and
65% for family plans
Offer a qualified plan as defined by a government-appointed board
* If the employer offers, but the employee declines and obtains coverage in the exchange, then the employer must pay the payroll tax penalty of up to 8 percent.
* If an employer offers coverage other than the qualified plan, they can be assessed a penalty of up $100 per day/per employee.
Consequences: In addition to the financial penalties, new taxes and onerous government involvement in the healthcare of you and your employees, these approaches lead to potentially higher costs and many small business employees not being able to keep the plan they have today.

it's the 'qualified" part that scares me. basically choice is taken away.

4. A Mandated Minimum Plan with a Big Price Tag
Today, among firms of 1 to 199 workers, 86 percent who offer coverage offer only one plan. This leaves their employees with two options: take it or leave it. Small employers and their employees want the ability to choose from a variety of affordable plans. However, H.R. 3200 gives a political board the power to define “coverage” and will determine whether an employer plan is acceptable. The bill does nothing to ensure that the new plans will be less costly than what small employers are paying today and even requires small employers to cover certain services that they are exempt from under current federal law.

sigh. we are screwed

5. An Exchange that Limits Access to All Small Businesses
Small employers have long sought a simpler and more efficient way to shop for insurance. Although we believe that an exchange approach can provide a streamlined and simplified way to gain access to affordable coverage, H.R. 3200 fails to provide guaranteed access to the exchange for employers with 21 or more employees. Providing increased access and more choices for some, but not all small business is not reform that small business can support.

again the small guy gets the shaft. i only have 10 employees so I most likely will have to pay more.

6. An All Powerful Insurance Czar
The “Health Choices Commissioner” will have unbridled authority to institute rules and regulations that greatly affect small employers, including the ability to define who is and is not a full-time and part-time employee. Thresholds set forth by an unelected commissioner would be subject to continual changes, leaving small business owners in constant fear of ever-changing compliance requirements.

You can't comply easily when regulations change on a whim so the government will make it extremely difficult to comply thereby increasing revenue through penalties.

7. The Government-Run Public Option
As advocates for competition and choice, we are deeply concerned that a public option would further compromise the viability of private insurance and would restrict choice to a single plan: the government-run plan. Instead, a reformed, private insurance marketplace can provide businesses and employees with more affordable coverage and a sustainable choice of plans.

A private company cannot compete with the governments ability to tax the public for operating funds. I've been saying thins all along but no one listens

8. The Surtax: A Tax on Job Creation
The surtax imposes an additional tax on some businesses reducing after tax profits at a time when small businesses are struggling to find capital. Because 75 percent of small businesses are structured as pass through entities, they pay their business taxes at the individual level. More than one-third of small businesses employing 20 to 250 employees would face the tax. The businesses most likely to face this tax employ 33.5 million American workers – more than one-quarter of the American workforce.

And a large portion of those employees will be looking for a new job as small businesses get whacked with this tax and have to cut payroll.

9. Jeopardizes Options That Small Employers Have Today
As written, the legislation appears to limit the use of health savings accounts, jeopardizing a health insurance option that small business owners have and use today. In addition to the bill limiting the sale of individual plans in the future – a key component of an HSA, a Congressional Committee adopted an amendment prohibiting individuals from using HSA funds to purchase over-the-counter health products. This further limits the utility of this health insurance option, making it harder for people to keep what they have

.

HSA will be a thing of the past even though they are a great option for many people.

10. An Employer Tax Credit with Limited Value
While some small businesses can be helped by tax credits, the structure of the credit is critical to its successes. Small businesses (with 25 or fewer employees) would be eligible for a subsidy of up to 50 percent of the cost of health insurance for employees. Businesses that have an average annual salary per worker of $20,000 or less get the full subsidy, with the credit phasing out at $40,000. U.S. census data from 2007, notes that the average wage of full-time employees at businesses with fewer than 10 employees is over $30,000, meaning that in many cases the value of the credit is already cut in half. This could also mean that a small business owner must make trade-offs when compensating workers. Increasing wages would have to be measured against the amount of the lost credit, which could lead to workers – especially lower-wage workers – seeing stagnant wages for a longer period of time.

Thanks for ruining my day bro.

 

[sparky]

Thanks for ruining my day bro.

sorry Skull Pilot, but i think people should know how full of sh*t the NFIB really is

it took me quite a while

but the HC issue is the nail in the coffin

 

[alan1]

You didn't highlight this part of the article,

Even Democrats are aware that his tax would come out of the wallets of the very workers they pretend to be helping, so they inserted a provision on page 147 of the bill prohibiting firms from cutting salaries to pay the tax. Thus they figure they can decree that wages cannot fall even as costs rise. Of course, all this means is that businesses would lay off some workers, or hire fewer new ones, or pay lower starting salaries or other benefits to the workers they do hire.

This part forgot to mention something else. The increase to employers could also result in lower or non-existent raises for the employees.

 

[sparky]

it's going to come from the bottom line MM, and employees are first on deck to take that axe......