Is the threatened health care tax destroying jobs?
But no one seems to be talking about the $2,000 per worker [per year] tax on employers, to begin in 2014. Enacted as part of the 2010 Patient Protection and Affordable Care Act, it will be levied on firms with 50 or more employees who do not offer the right kind of health insurance to their workers.
Millions of Americans are looking for work, and the number in poverty, 46.2 million, is the highest since the Census Bureau began compiling poverty data 52 years ago.
This tax might be one reason for the slow employment growth we observe two years after the end of the recession, in June 2009.
Although the tax will not take effect until 2014, businesses are adjusting now. They are not stupid, they plan ahead. . . .
Price WaterhouseCoopers, the accounting firm, has estimated that 828,000 franchise establishments in America account for more than $468 billion of GDP and more than 9 million jobs, based on data from the Census Bureau. . . .
Where the franchisor and the franchisee own and operate multiple locations, these sets of firms are treated as one company for tax and health care purposes. . . .
If a business does not offer health insurance, then, beginning in 2014, it will be subject to a tax if it employs more than 49 workers in all its establishments. For 49 workers, the tax is zero. For 50 workers, the tax is $40,000, since the business does not pay the tax on the first 30 workers. For 75 workers, it is $90,000; and for 150 workers, the tax is $240,000. Each time a business adds another employee, the tax rises. . . .
There is also the uncertainty of the taxes because the Obama administration is talking about changing the taxes to pay for his program. From Politico:
Nearly imperceptible to all but the most trained tax policy eyes, President Barack Obama’s blueprint to boost employment hinges partly on a provision that makes health plans taxable for individuals who make more than $200,000 and couples making more than $250,000.
“If your incomes are above those levels, and you benefit from employer-sponsored health insurance, you’re going to have to pay a modest amount of tax on the value of the health insurance,” explains Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities.
The tax provision was included as a way to defray the nearly $447 billion price tag for Obama’s template to get Americans back to work.
Under the White House’s calculations, the provision means that higher earners would pay about 7 percent more on the value of their health coverage. Put another way, it caps what the wealthy can deduct for the cost of their coverage, lowering the amount to 28 cents.
“This proposal is part of a balanced deficit reduction plan that includes closing corporate tax loopholes and asking the wealthiest Americans to pay their fair share,” a senior White House official said, adding that shifting the deduction from 35 percent to 28 percent makes it “more in line with what middle class families receive today." . . .
UPDATE: It seems that the IRS understands the damage that this will do.
The IRS and Treasury just put out for public feedback a new rule to help businesses contend with a big penalty under health reform that could potentially smack them with tens of thousands of dollars in costs, a fine that could hit already cash-strapped small businesses.
Submarined in the new health-reform law is this big onerous penalty, called a “shared responsibility payment,” that the government can slap against businesses with more than 50 workers if they don’t provide “affordable” health benefits to their full-time employees, which the government gets to define. . . .
Beginning in 2014, the government will slap businesses with a higher $3,000-per-employee penalty if the government finds they provide workers “unaffordable” health insurance.
And who gets to define “unaffordable”? The government.
How is it defined? The government will assess the $3,000 penalty if any worker has to take a tax credit or has to enroll in state health exchanges because his or her boss pays less than 60% of the full value of the coverage, or the premium the employee pays is more than 9.5% of household income.
But now the Treasury Department and the IRS are asking for input from the public on a proposed “safe harbor” that says small businesses wouldn’t have to pay the new fine, so long as they can prove to the government their health insurance is really “affordable.”
So how can companies qualify for this safe harbor? Watch this -- because health reform has raised serious privacy issues about what the government can know about your household income.
The small business has to prove to the IRS that its insurance is affordable by showing the government the wages that it paid to employees, instead of reporting to the government the employee’s household income.
Meaning, the IRS would deem a business’s coverage affordable so long as a worker’s premium costs did not exceed 9.5% of his W-2 wages. . . .