Dr. Merrill Matthews asks if the proposed “pay or play” mandate included the health care agenda of President Obama and congressional leaders is “one of the biggest corporate tax increases in history”?
Matthews notes:
The proposal requires employers to provide health insurance coverage or pay a penalty of 8 percent of payroll. Employers with payroll between $250,000 and $400,000 would pay on a sliding scale of between 2 percent and 8 percent…
According to the Tax Foundation, the U.S. corporate tax rate is 39.1 percent, when federal and average state income taxes are combined. That’s second only to Japan. The health insurance tax adds at least 8 percent of payroll to all businesses with 50 or more employees.
Thus, for high labor-cost, low-profit margin companies, the Democrats’ insurance tax could cost them more than their corporate income taxes.
Of course, many larger employers that already provide health insurance may not mind too much. It may be little or no extra cost to them and their smaller competitors that didn’t provide coverage would be a little less competitive.
It should not surprise anyone that this very large tax hike on business would hit smaller firms hardest.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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