Slow Employment Growth? Look to Obamacare

Real Clear Markets ^ | 09/15/2011 | Diana Furchtgott-Roth

[SeekAndFind]

You can't open a newspaper or turn on the TV these days without tax talk. Should the reduction in worker payroll taxes be continued in 2012? Should it be extended to employers? Are Americans who earn over $200,000 annually entitled to the full value of their itemized deductions? Are the rich paying their fair share?

President Obama raised these questions in proposing how to pay for his $447 jobs bill.

But no one seems to be talking about the $2,000 per worker tax on employers, to begin in 2014. Enacted as part of the 2010 Patient Protection and Affordable Care Act, it will be levied on firms with 50 or more employees who do not offer the right kind of health insurance to their workers.

Millions of Americans are looking for work, and the number in poverty, 46.2 million, is the highest since the Census Bureau began compiling poverty data 52 years ago.

This tax might be one reason for the slow employment growth we observe two years after the end of the recession, in June 2009.

Although the tax will not take effect until 2014, businesses are adjusting now. They are not stupid, they plan ahead.

Some people might say that this tax is just a payment for a new service. However, if providing workers with new health insurance means that employers hire fewer workers, it is a self-destructive program.

Congress intended to exempt businesses with few workers from the new tax, but the new law made no provision for franchise businesses, small businesses that are part of a group of businesses whose combined employment might reach 50 or more.

[SeekAndFind]

Obama either does or does not realize it (if he does, then he’s DELIBERATELY destroying the economy), but the article is right on in its observations...

As it notes:

Franchisors, like Dairy Queen, and franchisees, the local business people who operate individual Dairy Queen stands, own groups of small businesses, such as stores, restaurants, motels, and hotels often employ 50 or more people at several locations that are commonly owned. Think of a group of Dunkin Donuts, or Jiffy Lubes, or McDonald’s. Each one may have fewer than 50 workers, but the group of restaurants together employs 50 or more.

Obamacare would put many franchise businesses at a disadvantage relative to local, non-franchise competitors by driving up their operating costs. The multi-unit franchisees will have a particularly difficult time operating in this uneven business environment.

Suppose a single multi-unit franchisee owns four establishments with 15 full-time employees each. Under the new health care law, this multi-unit franchisee will be treated as a single firm with 60 full-time employees, and the employer will be required by law to provide healthcare benefits for all employees or pay the tax of $2,000 per full-time employee per year.

But if these four establishments were owned and operated separately, they would be exempt from the requirement of providing healthcare benefits. Further, if these four separately-owned businesses choose to offer health insurance, they would in some cases be entitled to a small-employer tax credit.

When the employer mandates go into effect in 2014, many franchised businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status.

FOLKS, OBAMACARE HAS GOT TO BE TOTALLY (EMPHASIS) REPEALED.

The disincentive in Obamacare to hire additional workers is a matter if simple arithmetic.

If a business does not offer health insurance, then, beginning in 2014, it will be subject to a tax if it employs more than 49 workers in all its establishments. For 49 workers, the tax is zero. For 50 workers, the tax is $40,000, since the business does not pay the tax on the first 30 workers. For 75 workers, it is $90,000; and for 150 workers, the tax is $240,000. Each time a business adds another employee, the tax rises.

Employers will be forced to decide whether the tax rate, $2,000, is less than the cost of health insurance-as is entirely possible in today’s market.

Alternatively, businesses can reduce costs by substituting part-time workers for full-time workers.

[Buckeye McFrog]

nailed it!