House GOP claims health reform taxes would hurt businesses

But Democrats defend provisions that raise revenues to subsidize the purchase of insurance and fund other reforms to the health system.

By Charles Fiegl amednews staff — Posted April 26, 2012

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House Republicans are objecting to taxes earmarked to fund key health system reforms, saying that raising new revenues from businesses would hinder employers from hiring workers.

The House Small Business Committee held an April 18 hearing to discuss taxes created by the 2010 reform law. Republicans are pushing to lower taxes on businesses, but a dozen taxes related to the law will be levied on companies and individuals by 2014. They include tax penalties on certain businesses that do not provide health coverage to workers and surtaxes on investment income for individuals with income more than $200,000.

“Small businesses are especially sensitive to expected tax policy because they must make important, long-term decisions today on investment, hiring and expansion,” said Rep. Sam Graves (R, Mo.), the committee chair.

Starting in 2013, a 3.8% surtax will be levied on investment income of more than $200,000 for individuals and more than $250,000 for couples, according to a committee memo. The Medicare payroll tax also will increase to 2.35%, from 1.45%, for individuals earning at least $200,000 and families earning $250,000 or more.

Starting in 2014, the employer health insurance mandate will be applied, if it is not invalidated by the U.S. Supreme Court or repealed by Congress before then. Companies with 50 or more workers would be required to offer health coverage or be assessed a $2,000 per full-time employee penalty. That penalty rises to $3,000 if an employee receives subsidized coverage through a health insurance exchange.

Rep. Bobby Schilling (R, Ill.) said the reform law has created great uncertainty for businesses coming out of the recession. The law will make it more difficult for employers to provide health coverage, he said.

For instance, new Medicare payroll taxes and taxes on capital gains could have unintended consequences, said Martin J. Mitchell, vice CEO of Mitchell & Best Homebuilders in Rockville, Md. “We are now operating on razor-thin margins if we are on the black side of the ledger at this point in time, so any [kind] of an increase even at 2.5%, which may not sound like a significant amount, but on your overall employee base it will be a significant burden.”

Accountant Leonard Steinberg, of West Windsor, N.J., said the new taxes will take money out of business owners’ pockets. Convenience stores, laundromats and hair salons would not be able to hire local workers as a result. “How are they supposed to stay in business if you take more money away from them?”

Rep. Mick Mulvaney (R, S.C.) has proposed legislation that would repeal some of the tax provisions.

But overall tax revenues are at an all-time low, said Rep. Kurt Schrader (D, Ore.). He said the reform law protects the same small businesses that Steinberg had mentioned. “The revenues in that bill are for large businesses,” Schrader said.

Rep. Nydia Velazquez (D, N.Y.) suggested that the committee focus on making the tax code less complex.

“Tax policies can disadvantage small businesses as they seek to compete domestically and abroad,” she said. “Small firms now spend up to 67% more on tax compliance than their corporate competitors and face constant changes to the tax code, creating further confusion and hindering job creation.”

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