New health care taxes on business explained

What Financing ObamaCare Means to Your Business
By Oregon Tax News,

Oregon businesses that do not provide health insurance for its workers might face up to a 10-percent payroll tax increase.  Speaker Nancy Pelosi (D-CA) is working on a bill to finance ObamaCare.  Under Speaker Pelosi’s plan, America’s Affordable Health Choices Act, firms with employee payrolls above $250,000, and without a company health plan, would pay a tax starting at 2% of wages per employee. That rate would quickly rise to 8% on firms with a total payroll of $400,000 or more.  The House bill will require firms to pay at least 72.5% of health-insurance premiums for individual workers and 65% for families in order to avoid the tax.

So how would this affect your business? According to a 2008 Kaiser Family Foundation survey, three in five small businesses fail to meet the “Pelosi test” and would be required to pay the tax. Sageworks, Inc., a financial consulting firm, calculated that companies with a total payroll between $750,000 and $1 million a year would on average lose one-third of their net profits. This loss is on top of the 45% income tax and surtax that many small business owners would also pay as part of the proposed House bill.  The total reduction in some small business profits would climb as high as 80%, which could lead to a reduced workforce.

In addition to the payroll tax, House democrats are also proposing a surcharge plan to finance ObamaCare.  Beginning in 2011, couples who file jointly with adjusted gross incomes between $350,000 and $500,000 would pay an additional 1 percent in income tax, while those with incomes of $500,000 to $1 million would pay an additional 1.5 percent.

The total cost of the ObamaCare Health Plan is estimated at $1.5 trillion, about $1 trillion more than the tax surcharge would generate. The other $1 trillion would come from a combination of spending cuts, business taxes and penalties for employers and individuals who do not get coverage.

The U.S. Senate postponed the vote for ObamaCare until September, while a bi-partisan group of Senators serving on the finance committee work to reach an agreement.  Whether the plan is funded by a payroll tax, an income tax, or both, Oregon businesses must find ways to pay for employees health care expenses without reducing jobs.

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