Annapolis Institute Overview


Health plan puts small business on critical list

by Phil Burgess, Unabridged from the Rocky Mountain News, October 5, 1993

The Clintons’ health-security plan is now on the table. Though many stakeholders are nibbling around the edges — e.g., physicians, hospitals, pharmaceutical and insurance companies — the real opposition will come from small business and the people they employ. Reason: The new health-security plan imposes a huge new “employee tax” on American business. This so-called “employer mandate” requires employers to pay for at least 80% of each employee’s health insurance policy.

Employee’s health insurance will not be cheap. Under the Clinton plan mandatory insurance will cost at least $1,440 per employee — and up to $4,200 for an employee with a family of four.

Clinton’s huge new employee tax will give business new incentives to avoid hiring people. Reason: As Milton Friedman has said, you tax the things you want less of and subsidize the things you want more of.

So, many companies will defer hiring new people as they find a way to “get by” with current staffing in order to avoid taking on another “health-care liability.” Others will substitute technology for labor. And some businesses will lay off a few people so they can finance health care for the rest.

As a bakery worker told me last week, “If I have to choose between my job and health care — or even the job of one of my co-workers — I’d rather have a job.”

But the Clinton plan has even more draconian implications for small business. Reason: Most big businesses that provide insurance for their employees will pay less under the Clinton plan (at least in the beginning) than they now pay. It is the small and medium-sized businesses — the ones that employ most Americans and create most new jobs — that will shoulder a real increase in spending per employee.

The Clinton health care tax is also an extremely regressive tax on small business. Reason: Most big businesses have a lot of costs over and above the cost of labor. But most costs in most small businesses are people costs. Accountants will call them a “health-care liability.” People call them jobs. Result: The typical small business will pay a much higher percentage of its total revenues to finance the new Clinton health bureaucracy than the typical big business.

So, like the Clinton economic program earlier in the summer, the Clinton health program is another frontal assault on America’s enterprise economy — and especially small business.

If the American people want government-run health care, then let government tax the incomes of people and corporations to get the money — and make the tax even-handed.

The approach embodied in the Clinton program — a regressive employee tax on small businesses — makes no sense at all. Unless, of course, you are an Old Democrat. With new taxes and new spending to finance a new entitlement and a new federal bureaucracy to hand it out, the health security plan is Old Democrat to its very core.

Even all the new paperwork doesn’t bother most supporters. Old Democrats, after all, invented paperwork. But, as the pink slips begin to flow, I’ll bet that Congress, like the bakery worker, will find a way to put jobs first.

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