A HIT We Can Avoid
As the owner of a small pension administration firm in Anchorage, I have had a front row seat for the economic turmoil of the last few years. From the scary and turbulent times of the recession to the cautiously optimistic feelings around the nascent recovery, I have seen how the economy has a real effect on the mental and material well-being of the people I work with.
My position allows me the opportunity to work with business leaders from every corner of the economy. From the service industry to healthcare to construction—my clients run the gamut. But as diverse as these clients are, they all seem to share one similarity: a concern for what a little-talked-about tax from President Barack Obama’s Affordable Care Act will do to their bottom lines.
The health insurance tax, or HIT for short, is a tax on the health care policies purchased in the fully-insured and individual markets. Over the course of the next 10 years, people purchasing these health insurance policies will pay a total of $100 billion just toward this specific tax. Much of that $100 billion in increased taxes will come straight out of the pockets of small business owners and their employees.
You see, unlike many large businesses and labor unions that use self-insured health care plans, 100 percent of small businesses and self-employed individuals purchase health insurance on the HIT-affected fully-insured and individual markets. All told, about 36 million Americans will be on the hook for a tax increase of $500 a year. For an individual or family, that is a significant amount. For a business that employs 20, 30 or 40 people, the numbers can get very big, very fast.
Alaska’s 68,000 small businesses and their 284,000 employees certainly have an interest in seeing the HIT repealed. But so do those not directly affected. The HIT could mean the local hardware store closes its doors, neighbors face reduced hours at work or lose health insurance, or companies cut back on employee perks such as matching 401(k) contributions.
The small business community is grappling with how to deal with this tax increase many did not know about or see coming. As with most things involving Congress and the federal government these days, there is a lot of uncertainty around the HIT. Many businesses I talk with have decided to hold off expanding or hiring new employees until they get a better feel for how the HIT will affect their bottom line. At a time when the national economy is struggling to dig itself out of recession, hitting small businesses with this huge tax increase is simply the wrong course of action.
Fortunately, there is help on the way. Despite the challenges with finding an area of agreement on anything these days in Washington, the HIT may actually be something that brings Democrats and Republicans together. Representatives Charles Boustany (R-La.) and Jim Matheson (D-Utah) have authored common-sense legislation to repeal the HIT. This bipartisan bill is an example of legislators setting aside political differences to act in the interest of the people that elected them instead of trying to score cheap political points.
Our country needs more leadership like that in the future. Our economy, meanwhile, needs to stop the HIT now.
Al Tamagni is the owner of Pension Services International, a pension administration firm in Anchorage. He also is the Chair of the National Federation of Independent Business/Alaska Leadership Council.