Proposed Health Plan a Disaster for Small Business

by | Jul 20, 2009 | In The News, Weekly Column | 6 comments

health care planIf the government health plan proposed by Congress makes it into law, it will devastate at least one small business owner who called me this week.

His business has 20 employees, each making about $25,000 a year in retail positions that typically attract younger, entry-level workers. He currently can’t afford to pay health insurance. Under the proposal, he will either have to pay an 8% tax on his $500,000 payroll, which will cost $40,000, or provide health insurance, which may cost even more. The owner’s gross salary and profit is $120,000 a year, or $100,000 after taxes.

He is considering four options:

1. If he can find a job paying over $60,000 with a competitor, he would be better off to take it and close his business. Why take all the risks and pressures of running a business when he could make the same money working for someone else? Of course, his 20 employees would lose their jobs, which certainly wouldn’t help them buy health insurance.

2. Another option is to lay off ten employees so his payroll is under the $250,000 exemption threshold. This means keeping the business, but on a reduced basis that will reduce his own income. Ten employees would still be out of jobs, putting those families into financial crises and requiring more tax dollars to support them.

3. He can keep his business and pay the tax—which means adding $40,000 a year to his overhead. That $40,000 would do nothing to help his business grow, nothing to create additional jobs, nothing to help the local economy of his community, and nothing directly to help his employees obtain health insurance. The only “benefit” of that expense would be a $40,000 reduction in his own family’s income. For his family to live on 40% less, they would need to sell their home and drastically slash their spending, thereby cutting someone else’s income.

4. A last possibility would be to reduce his employee’s wages to cover the increased cost of providing health insurance.

Each of these options would have a direct negative impact on his small businessescommunity’s economy. That negative impact would be multiplied across the country by the number of small businesses that would be similarly affected. The result would be increasing strain on our nation’s already damaged economy, as well as even less tax revenue to counterbalance our cascading national debt.

This proposal is ill timed and will result in dire consequences to the economy. Our politicians evidently learned nothing from the missteps of Franklin D. Roosevelt, who turned a severe recession into a generational depression by raising taxes in a similar manner. It is frightening to see history being repeated.

Adding even more reason to fear a government health plan was an article in the London Times on Sunday, July 12, titled, “Pay Up If you want To See a GP.” Apparently, the often glorified health care system of the UK is falling apart. Even a national VAT around 15%, income taxes around 40% (on incomes over 35,000UK), and assorted other taxes are not enough to keep up with the spiraling costs of the National Healthcare System. There is no place left to go for funding except the users. The Times says, “If we want to maintain an equitable and high-quality health service, it is time to challenge a long-held political taboo and consider the case for charging patients.”

obama on health careSince other nations’ government health care systems are failing, what makes our politicians think starting one here is the answer to our own health care woes? We need to learn from our own and others’ past mistakes, not simply repeat them.

Print Friendly, PDF & Email