It seems that Obama’s Administration has taken the path of least resistance with implementing the Affordable Care Act. Big businesses either remain unaffected or benefit from it while pressures and inconveniences affect the general public and small business most of all because of the way Obamacare targets them. Analysis of the impact of Affordable Care Act on small business allows concluding that small businesses in the US will pay higher taxes and experience stall of expansion and loss of talented and qualified workforce in the coming years.
Internal Revenue Service (IRS) Regulations place the burden of taxes on self-employed individuals and small businesses by boosting insurance costs about 2,5 %. Additionally, “National Federation of Independent Business conducted a research that allows forecasting that higher insurance costs will shrink hiring by 146,000 to 262,000 jobs over the next decade, with 59% of those losses hitting small business”(A Large New Tax on Small Business, 2013). Congressional Budget Office and industry experts say that small businesses and consumers will bear a load of increased taxes to bring in expected $8 billion in 2014 and nearly twice as much in 2018. Therefore, small firms are facing uncertainty and expect their insurance costs to grow by at least 20% (Needleman, 2013).
However, in Obama’s opinion, former simpler tax system served as a loophole that helped to lower corporate tax rate and placed an additional burden on the middle class (Seib, 2013). From an employer’s perspective, high costs of employees’ health care have put small businesses at a disadvantage. Under Obamacare, businesses have the possibility to discontinue offering employer-sponsored insurance (ESI) to employees. Big companies will benefit from dropping ESI even if senior management will choose to compensate employees through offering other benefits or higher salaries. At the same time, small businesses are limited in their capabilities of offering compensations, additional benefit packages, wellness programs, clinics at the worksite, or partnerships with providers of medical services. Also, in response to the drop of health insurance coverage, the government may further raise taxes or institute penalties. Japan health care reform led to the increase of sales taxes, and similar scenario might take place in the US. Obama is aware of “universal healthcare mission” of the World Bank, and Jim Yong Kim, World Bank President, in particular (Obe, 2013). If Obama’s healthcare reform is linked to the global World Bank healthcare mission, large businesses will benefit since they do international operations. On the contrary, small businesses that pay higher taxes will lose. Additionally, small business owners will experience the increased amount of paperwork. Much discussed small business tax credit designed to help carry the burden of increased taxes will be potentially available only for six years, the shorter period than one-third of small businesses will qualify (Danner, 2010). Critics of Affordable Care Act claim that new requirements will stall the growth of small companies and result in lots of new bookkeeping and additional administrative burdens.
In order to forecast and get a glimpse of how small businesses might be affected, one can evaluate how they have been affected to date. It appears that nearly half of small businesses held off on plans to hire new employees and pulled back on plans to expand in other ways. One-tenth of small businesses indicated that they already have laid off workers or cut back their hours. Estimates vary widely, but premiums in the small group market might increase by as much as 50%. Small companies will be affected either by the employer mandate (and subsequent costlier plans) or higher premiums. Congressional Budget Office has estimated that perhaps only 12% of small businesses will use tax credits. The stall of growth and expansion will be inevitable under Obamacare (Tanner, 2013).
Small businesses already suffer from lack of clarity of 2,000-page Obamacare law. However, businesses are expected to explore available coverage options, evaluate eligibility for the tax credit, and sign up for health insurance. Employers must make crucial financial decisions based on unclear coverage options and lack of opportunities to receive professional advice. Because of the pressure and haste that accompany the implementation of Obamacare, a lot of advice small businesses receive is limited to suggestions to check relevant information. Currently, many advisors are incompetent, “navigators” are overloaded, and consulting with licensed insurance brokers (agents) increases the costs. In other words, the government expects small business to play a fair game guided by confusing rules of Obamacare (Maxey, 2013). Thus, conducted the analysis of the effects of Affordable Care Act on small business allows concluding that small businesses in the US will pay higher taxes and experience stall of expansion and loss of talented and qualified workforce in the coming decade.
- A large new tax on small business. (2013, December 29) The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10001424052702304465604579220413773642016
- Danner, D. (2010, May 27). ObamaCare vs. small business. The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10001424052748704113504575264802756326086
- Maxey, D. (2013, October 31). Helping small businesses with new health plans. The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10001424052702303618904579169462228350066
- Needleman, S. E. (2013, November 22). For small businesses, a hidden tax on health care? The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10001424052702304607104579210133556240634
- Obe, M. (2013). Japan joins World Bank’s universal health-care mission. Retrieved from http://blogs.wsj.com/japanrealtime/2013/12/06/japan-joins-world-banks-universal-health-care-mission/?KEYWORDS=obama+care+taxes
- Seib, F.G. (Interviewer) & Obama, B. (Interviewee). (2013). President Obama on health care, the deficit and corporate taxes [Interview transcript]. Retrieved from The Wall Street Journal online website http://online.wsj.com/news/articles/SB10001424052702303531204579207753616706332?KEYWORDS=obama+care+tax
- Tanner, D.M. (2013, August 18). Will the health-care law help small businesses? No: It will make it harder for small firms to grow. The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10001424127887323899704578587980558664600