Obamacare will kill small business

It will become abundantly clear to you after reading what follows that no one in Congress has ever either owned a small business, or, been employed by one.  And, should Obamacare pass, it is highly unlikely they ever will.

Title IV, Section 411 of the House bill (beginning at page 268) requires that all employers with gross payroll of $500,000 or more must provide insurance coverage for their employees, or pay a tax.  The tax ranges from 2% of gross payroll for payrolls in excess of $500,000, to 8% of gross payroll for payrolls in excess of $750,000.

Let’s examine this madness.

Assume you are a small business with 15 employees, and the average salary of each employee is $50,000.  You have met the $750,000 threshold for paying (in addition to your employees’ salaries) a $60,000 tax to Uncle Sam if you do not purchase “qualified” insurance for your employees, and, pay 72.5% of the premiums for that insurance.

Now what?

You don’t have $60,000 unless you take it out of your own pocket, but, if you do that, you will not be able to support your family.

You could go to your employees and remind them that, as you didn’t offer group insurance when you hired them, you paid them higher wages to offset the cost of their own insurance.  You tell them you will have to cut their salary enough to offset the cost of group insurance.  Even if all of your employees agree, Congress has made that impossible.  Section 411(b)(4) provides:

…any [premium payment] on behalf of an employee with respect to which there has been a corresponding reduction in the compensation of the employee shall not be treated as [a premium payment by the employer].

You could try to get group insurance for your employees, but, whatever that cost is, you will have to pay 72.5% of the premiums…money which you don’t have.

You are left with only one option.  To cover the cost of this totally insane provision of Obamacare (either the $60,000 tax, or your “share” of the of the group insurance premiums), you must fire at least one employee.

This should help our economy, don’t you think?

Oh, wait, I forgot…this law will not take effect until 2013, and by then Obama’s Stimulus Bill will have “created or saved” enough jobs so that our employment rate should be somewhere around 214%.

Forget everything I just said.

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The Sound Off Sister was an Assistant United States Attorney for the Southern District of Florida, and special trial attorney for the Department of Justice, Criminal Division; a partner in the Florida law firm of Shutts & Bowen, and an adjunct professor at the University of Miami, School of Law. The Sound Off Sister offers frequent commentary concerning legislation making its way through Congress, including the health reform legislation passed in early 2010.


  1. Dimsdale on November 4, 2009 at 5:24 pm

    Just comtemplating this makes me think of how accurate some of the immutable laws of human nature/behavior actually are:


    For Congress' hubris in thinking it can solve all through legislation and the repeated results of said hubris:

    Hanlon's (or possibly Heinlein's) Razor: "Never attribute to malice that which can be adequately explained by stupidity, but don't rule out malice." Alternately: "Do not invoke conspiracy as explanation when ignorance and incompetence will suffice, as conspiracy implies intelligence."


    For Obama's meteoric and inexplicable election, the Peter Principle: "In a hierarchy, every employee tends to rise to his level of incompetence." Of course, that could be applied to most of Congress as well…


    Congress truly is the opposite of progress, and the perfect manifestation of mob rule (control or government by a gang). Dimsdale's Law: giving Congress power over your life is no different and less wise than giving a hand grenade to a baby.


    SOS, you are doing yeoman's work here!  Tell Jim to give you a raise!


  2. Steve McGough on November 5, 2009 at 3:59 am

    Businesses need to make these decisions every day. Either the tax – that's what it is – comes out of their own pocket, they need to lower compensation, lay off employees, or raise the prices they charge to customers. In most cases an employer will do some combination of all options, but in no way can that be good for anyone. Who wins?

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