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  • The House Health Fix: Even Higher Job Killing Employment Taxes

    While the House reconciliation bill keeps many of the Senate provisions that will already slow economic growth, the reconciliation bill goes even farther in punishing employers who do not offer sufficient health care. These penalties will slow employment growth and given employers a disincentive to hire anyone who purchases subsidized health care.

    Punishing Businesses That Hire Low-Income Workers
    Businesses that already offer insurance can be affected by the reconciliation bill. Even if the employer does provide health insurance, if any employees qualify for, and accept, a premium subsidy on the basis of their family size and family income, the employer will have to pay a penalty of $3,000 per year for each qualifying employee. Even more businesses are in danger of this penalty since the reconciliation bill ups the subsidy amount, meaning that more workers could take it. This penalty depends not on how much that employer pays, but on the employees total family income from all jobs held by all family members.  This means employers would have to know the income of each employee’s other family members to know whether they need to pay the tax.  The bill requires that the IRS provide this family information to the employer.

    Because qualifications for that taxpayer subsidy depend on the worker’s family size and family income, a worker with more dependents would be more likely to qualify, and one with a working spouse or other family members would be less likely to qualify.

    Employers faced with the choice of hiring—for the same job at the same pay—say, a single parent of three, and a parent of two with a working spouse (or a teenager with working parent(s)), the employer could face a $3,000 annual penalty for hiring the single parent—and is therefore likely to deny that person the job.

    Likewise, if one company lays off an employee with a working spouse, that could generate a $3,000 tax penalty for the other spouse’s employer—unless the other employer lays off the other spouse as well.

    If the employer hires two people in different family situations for the same job at the same pay, they could have vastly different health insurance options based on what their other family members are making. The one with another working family member would have to take a plan from one of their employers and pay up to 40 percent of the cost or face tax penalties; the one with no other working family members could choose either the employer’s plan or any plan in the exchange – in the latter case, with a subsidy paid for by the other workers’ taxes.

    Hammering Businesses Employing 50 or More Workers
    Businesses with 50 or more workers will now face higher tax penalties, which lawmakers have increased from $750 to $2,000 per full-time employee (FTE) as part of the employer penalty mandate. The $2,000 per FTE penalty will be assessed as soon as one of the FTEs receives a premium tax credit or cost-sharing subsidy to participate in the established state health exchanges.

    The penalty will not, however, apply on the first 30 workers. For example, if a business expands from 49 to 50 FTEs, then the marginal cost of this expansion will be $2,000 times 20 FTEs, or $40,000. The penalty will impact medium-sized companies as well, where a firm with 75 workers and subject to the employer penalty will have to absorb $90,000 in addition costs (or approximately 6 percent of the average annual payroll for a company with 75 workers).

    Last, the employer penalty will negatively impact a significant share of US businesses, and could create a strong disincentive for a large share of companies to not expand firm-level employment.  Using data from the Small Business Administration, there are approximately 190,000 total firms with 50 to 200 workers that could face this penalty.  Moreover, there are 116,000 total firms with 35 to 49 workers that could face the per FTE penalty, if they were to move beyond the 50 worker threshold.  This employer penalty would therefore reach a large number of US companies, and will dramatically affect these companies’ per-employee costs and their allocation of labor.

    Co-authored by John Ligon.

    Posted in Obamacare [slideshow_deploy]

    14 Responses to The House Health Fix: Even Higher Job Killing Employment Taxes

    1. Todd, Albany OR says:

      How many companies with 50+x employees will lay off x+1 to save themselves the cost of going through the "firewall" of 50? That 50th employee had better make the company an extra 40k every year or they won't get hired. That's really going to help the economy.

    2. Tim AZ says:

      I see three drivers in this taxing scheme. One would be to motivate people to have no children under penalty of becoming unemployed and losing all self worth through personal achievement. The second would motivate married couples to either divorce or become wards of the state and vote socialist to maintain their meager existence. The third would be to remove any possible motivation for those who are already wards of the state to ever try to better themselves by seeking employment and thumbing their noses at the state. I think this may be the best idea liberals have ever devised to destroy the family unit that in turn destroys all that is America.

    3. Melissa Sargent says:

      What is it that these People in Washington DC do not hear the people's outrage?

      Oh I know it is they have never had to make a payroll or they are so rich that the increased taxes, that I see coming, won't hurt them.

      But the pain we employers or potential employers will face with new Taxes is nothing more than suicide for any kind of real recovery.

      I cannot hire anyone now, I just cannot afford it. I will cut back and continue to work harder than ever to keep going. This bill is going to hurt so many businesses.

      We are being lied to by our President and the Democratic Party.

      This is plain old Tyranny.

      Wake up America and throw out the people who work so hard to crush our country and look to recreate this country in there image.

      Lord help us!

    4. Melissa, El Paso, TX says:

      What is it that these People in Washington DC do not hear the people’s outrage?

      Oh I know it is they have never had to make a payroll or they are so rich that the increased taxes, that I see coming, won’t hurt them.

      But the pain we employers or potential employers will face with new Taxes is nothing more than suicide for any kind of real recovery.

      I cannot hire anyone now, I just cannot afford it. I will cut back and continue to work harder than ever to keep going. This bill is going to hurt so many businesses.

      We are being lied to by our President and the Democratic Party.

      This is plain old Tyranny.

      Wake up America and throw out the people who work so hard to crush our country and look to recreate this country in their image.

      Lord help us!

    5. Ray, Hampton VA says:

      Unfortunately, very few in Congress understand economics. Even fewer still have ever run a small business, had to make payroll, or had to hire and fire employees, or create jobs. They do not understand the business of business. They do not understand when they decide to tax businesses for health care, or EPA, or whatever it is, or they pass laws putting more and more rules/regulations onto businesses, they are strangling the "goose that lays golden eggs". The economic engine that runs this country is small businesses – not GM, Chrysler, etc. Small businesses employ 60% of the workforce in this country. Congress is killing jobs and small businesses by constantly passing taxes and more and more laws/regulations affecting those businesses. Jobs of substance are not created in Government! They are created in business! But the business community has to have the freedom to create those jobs and put people to work! We can't do that with Government constantly pushing for more and more regulation and taxes! You want jobs? Stop taxing us!!!

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    7. Drew Page, IL says:

      The people who stand to benefit from this health care reform bill, and that includes those in Congress voting for it, DO NOT CARE about those who don't want it. Those in Congress will be exempt from the Obamacare plan, whatever it turns out to be, as they will retain their federal employees' insurance, administered by the insurance companies they purport to despise. Those in Congress will get to keep their insurance after leaving office for the rest of their lives.

      Regardless of the majority of the public that does not want this legislation, if it passes, Mr. Obama will still be in office for three more years, congratulating himself on what he has done for America and his sychophantic following in the media will laud his "historic achievements".

      Ignoring the howls of protest from those whose taxes will increase because of this, he will move on, undaunted, to another extravagantly expensive piece of social legislation. Most likely, that will be called Immigration "Reform", and within that legislation will be blanket amnesty. Of course the word amnesty will not be used, but it will be blanket amnesty, nevertheless. This will be repayment to Hispanic Congressmen like Louise Gutierrez, from Chicago, who withheld his 'yes' vote on the Senate health care bill until Mr. Obama's position of Immigration "Reform" was explained to him. And by the stroke of his pen, Mr. Obama will live up to at least one of his promises, that being no illegal aliens will be covered under his health care reform bill. If illegal aliens are suddenly made legal citizens, they, like all other American citizens, will of course be covered under Obamacare.

    8. Scott, Indiana says:

      How many companies out there with 50 or more workers currently don't offer insurance? I would estimate that its an exceedingly small amount of companies. What this actually does is gives incentives to drop employer based coverage and pay the $2k/worker fine (which is much less than the cost of insurance).

    9. D. Belle CA says:

      Someone clarify this. Where does the Cadillac tax come into play for higher cost benefit programs? Does it vary by state. One such program in ND may have significant cost difference than in CA.

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    14. joyce, Los Angeles says:

      This law is very much favorable with the young workers looking for Employment for 18 Year Olds but honestly this will really hurt the business owners, if we really look at it, who belong to the majority? the employers or the employees? If we want our country to really progress the way want it to be, let's consider the majority.
      http://www.aspire2work.com/jobs-part-time-under-1

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