US Health Care Proposal – Help or Hurt Small Business?

The latest news coming from Capitol Hill does not look good for American small businesses. Why? The proposed health care bill, while still being worked out, has some interesting provisions.

First, who’s going to pay for the estimated 1.5 trillion dollars over the next 10 years?

Businesses with less more than 25 employees will be mandated to pay for their workers’ health care or pay $750 per full time and $375 per part time employee to the government.

That”s before the government figures out that won’t pay for their mandate. Then, they may follow Massachusetts’ lead and drop the mandate to small businesses with 10 or more employees.

What does that mean?

Small businesses are going to make sure they have less than the limit, even if it means firing employees or outsourcing jobs.

The government also is proposing a “surcharge” on successful business people. The House is going to place a 1% surcharge on those individuals making over $280K per year up to 5.4% on those making over $800K per year. The Tax Foundation reports that in some states that would bring the overall tax rate to over 57% (not including property tax, sales tax, FICA (payroll) tax, communications tax, cigarette tax, alcohol tax, gas tax, etc.).

Small business owners usually file their taxes as an LLC or Subchapter S corporation, meaning they pay individual income tax rates on profits rather than corporate tax rates.

In the U.S., corporate tax rates are 35% – the second highest in the world! But, individual tax rates are even higher, scheduled to go back to 39.6% when the Bush tax cuts expire by 2011. Add state income tax, Medicare tax and the proposed surcharge and you’ll be paying 57.54% in Oregon with 39 states having a combined tax of over 50%.

What does that mean? Don’t make money. Don’t be successful. Or, since you can run an online business from anywhere in the world, move to someplace that appreciates successful business owners (although I’ve read that if you move to another country and renounce your U.S. citizenship, the IRS claims they can still tax you for 10 years).

President Obama just told everyone today to “buck up” while they spend 1.5 trillion more dollars of taxpayer money. Really. Why is it my first instinct is to say “Buck You”?


Further reading:

House bill would make health care a right (Associated Press)

Senate eyes 25-employee threshold for health mandate (Portland Business Journal)