Bad Economy to Get Worse With Obamacare

by: warner todd huston | published: 07 17, 2009

This week and last we’ve seen some firmer ideas from House Democrats on how they expect to pay for Obamacare and from those ideas it is becoming increasingly, painfully obvious that small businesses will be hit hard with tax increases and this during one of the worst economic downturns in decades. Right when we need economic growth from small business, the backbone of the country, Democrats are making to punish them thereby pushing any economic recovery far off into the future… if at all.

Not all Democrats want to tread this suicidal path, granted. We’ve discussed the efforts of the 40 self-professed Blue Dogs several times before (Here and here) as last week they sent a letter to Speaker Pelosi and Majority Leader Stenny Hoyer of the Democratic leadership in the House warning them that they weren’t necessarily on board with the current direction that Democrats in the House were going on healthcare.

One of the items on their list was a concern about small business.

Small Business Protections – Any additional requirements for employers must be carefully considered and done so within the context of what is currently offered. Small business owners and their employees lack coverage because of high and unstable costs – not because of an unwillingness to provide or purchase it. We cannot support a bill that further exacerbates the challenges faced by small businesses.

Thus far the Blue Dogs have been wholly ignored by the Democratic leadership, at least as far as protections for small businesses goes. The current plan being sponsored by the House Democrats puts a crushing tax on small businesses just when we need the rejuvenating power and innovation from small business to rebuild our faltering economy.

So what does the Democrat plan portend for small business? Here are some bullet point facts:

• More than 50% of filers who will pay the Democrat surtax have small business income.
• The Democrat small business surtax has an automatic revenue grab when it doubles itself in 2013.
• The Democrat plan, according to a study by the Tax Foundation, would raise the top tax rate in 24 states to more than 50%.
• According the National Association of Manufactures, an industry hit hard by the economy, 68% of manufactures file as S-corporations with an average income of $570,000, well above the $350,000 base the Democrats have set for the surtax.
• In addition to taxing small business income, the Democratic bill also institutes a payroll tax on small business payrolls. The Democratic bill requires small businesses who do not currently offer health insurance to pay a payroll fine of up to 8% of the their total payroll.
• According to 2006 data from NFIB, businesses with between five and nine workers, representing about one million employers, had an average payroll of around $375,000 a year. A report from the Kaiser Family Foundation found that only about half of firms with three to nine workers offered health benefits in 2008.
• Even if a small business does offer insurance, they are still required to pay a payroll tax if an employee chooses to opt out and enter the government plan.

Now, these are exactly the sort of punishing requirements, regulations and taxes that prevent small business from hiring new workers, expanding when they can, and prevents them from thriving.

We need small business today more than ever to get this moribund economy on the mend. But with Obamacare on the march, we must expect small business to stay depressed and unable to help life this country back to prosperity.

Sure, maybe we’ll have “insurance,” but without jobs to pay the bills, what good will it do us?

(Cross posted at HealthcareHorseRace.com)

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