NCPA - National Center for Policy Analysis

EMPLOYER TAXES MAY SPOOK SENATE ON HEALTH CARE

November 10, 2009

As the Senate prepares to vote on its version of health care legislation, one of the most contentious issues will be a provision requiring employers to provide insurance coverage.  With the jobless rate at 10.2 percent and expected to climb, penalties for employers who don't offer insurance benefits will make it difficult for moderate Senate Democrats to support the plan, says the Washington Examiner.

While most big companies provide workers with health insurance, many smaller employers do not, and they would end up having to come up with the money to either buy coverage or pay a penalty, explains the Examiner.

"There is no question it will result in job loss and it will encourage employers not to hire employees," says John Goodman, President, CEO and the Kellye Wright Fellow with the National Center for Policy Analysis.

  • In the Senate, Democratic leaders are considering a $750-per-worker tax on companies that employ more than 50 people but don't offer benefits.
  • The House bill passed narrowly on Saturday night requires employers to pay a tax of 8 percent of total payroll if they do not provide health care coverage that meets federal standards.
  • The House bill requires companies to pay 72.5 percent of a single worker's health care premiums and 65 percent of a family's coverage.

Goodman called the proposal "a huge tax on labor," especially if it is coupled with the 2.5 percent income tax that would be levied on an individual who went without coverage under the House bill.

The House bill would also assess a graduated payroll tax beginning at 2 percent for companies earning $500,000 annually and rising to 6 percent for those making between $670,000 and $750,000 per year.

"There are plenty of employers earning more than $500,000 annually," says Amanda Austin, director of federal public policy for the National Federation of Independent Businesses.  "That, in our estimation, is right around a 15- to 17-employee firm."

Source: Susan Ferrechio, "Employer taxes may spook Senate on health care," Washington Examiner, November 10, 2009.

 

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