NCPA - National Center for Policy Analysis


August 3, 2009

Recently, a 1,018-page health care proposal was introduced in the House of Representatives that would cost nearly $1 billion per page and still wouldn't solve the problem of providing coverage to all Americans.  In fact, according to the Congressional Budget Office, under the House bill, the number of Americans without health insurance would increase over the next three years.

The House proposal would expand Medicaid, raise taxes, create a new government-controlled insurance market, and just in case these provisions aren't comprehensive enough it also creates a government-run public option.  However, the current proposal would still fail to provide insurance for more than 35 percent of the currently uninsured.

Who is going to pay for increased coverage?  Small business, says Terry Neese, an entrepreneur and a distinguished fellow with the National Center for Policy Analysis.

  • To pay for new spending, the House Democrats are proposing a surtax (ranging from 1 percent to 5.4 percent) on those persons who make $280,000 or more; the tax would continue to rise the more money you make.
  • The proposal doesn't include any exemptions for S corporations or other small businesses, many of which file as individuals for tax purposes; in fact, half of all small businesses with 20 to 249 employees are likely to have their income affected by the surtax.
  • The new Blue Dog "deal" struck with moderate Democrats still would impose new taxes and mandates on small employers with 17 or more employees.
  • Based on the U.S. Small Business Administration numbers, the small businesses that are affected by the "deal" employ 70 percent of all small business workers, or 42.3 million workers.
  • Finally, this "deal" still imposes the full 8 percent payroll tax on small businesses with only 32 employees.

The bad news doesn't stop there, says Neese:

  • If the surtax doesn't generate enough revenue to cover the costs of the bill by 2013, the surtax automatically would double.
  • For business owners, that is like charging your customers double for a product because you can't meet your numbers for the year.

It gets worse still, says Neese:

  • Employers whose payroll exceeds $400,000 and who cannot provide coverage to their employees would be hit with a penalty equal to 8 percent of workers' wages.
  • According to the National Federation of Independent Businesses, this new mandate would result in the loss of more than 1.6 million jobs over five years, 1 million of those from small businesses.

Source: Terry Neese, " 'Blue Dog' prescription is bad business; Higher costs could mean higher prices or more closings," Washington Times, July 31, 2009.

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