Union Tax Deal a Slap in the Face to Small Business

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Jan 15, 2010, 01:33 ET

WASHINGTON, Jan. 15 /PRNewswire-USNewswire/ -- The announcement late yesterday that the White House brokered a deal with unions to exempt them from the proposed excise tax on so-called "Cadillac" plans delivered a stinging punch to small business. A key concern of small businesses, NSBA has repeatedly called on Congress and the administration to seek alternative methods of paying for the bill as the excise tax will more than likely be passed on to small businesses.

"Contrary to all the pro small-business rhetoric we've heard from Congress and the White House, this back-room deal with unions sends a loud-and-clear message to America's small businesses: we have other priorities," stated Todd McCracken, president and CEO of NSBA.

As reported, the White House agreed to exempt unions from the excise tax on high-cost health insurance plans until 2018, while small business would be forced to pay it starting in 2013. The deal would raise slightly the threshold for the 40 percent tax to plans that cost more than $8,900 for individuals and $24,000 for families. The agreement also included the exclusion of vision and dental from the overall calculation -- a minor concession.

For many months, NSBA has been warning against this tax because it will punish small businesses with plans that cost more simply due to the make-up of their workforce. There is no specific prohibition against insurance companies avoiding the tax by charging higher premiums to all small businesses. Small-business owners will have to complete detailed and complex reports on every single company they use for their benefit plans. Finally, this tax is NOT indexed for medical inflation and will begin to ensnare more and more small businesses every year.

From day one, NSBA has been calling for a more reasonable and fair method of paying for this bill by simply limiting the tax exclusion for employer-provided health insurance.

There is little disagreement that small businesses have been hit the hardest when it comes to rising health care costs -- back in 1995, 67 percent of small businesses offered health insurance, today that number is down to 38 percent. According to NSBA's 2009 Year-End Economic Report -- to be released Jan. 20 -- health care costs are becoming a larger barrier to job growth than they were just six months ago.

"Small businesses are barely staying afloat in this terrible economy and few of us can afford quality health insurance," stated Keith Ashmus, NSBA chair and co-founding partner at Frantz Ward, LLP in Cleveland, Ohio. "Now that this agreement has let expensive union plans off the hook, small businesses are very reasonably apprehensive that we'll be left paying their share of the bill."

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Since 1937, NSBA has advocated on behalf of America's entrepreneurs. A staunchly nonpartisan organization, NSBA reaches more than 150,000 small businesses nationwide with members as diverse as the economy they fuel. For more information, please visit www.nsba.biz.

SOURCE National Small Business Association