Businesses And Employee’s Brace For ACA
A new study from the National Bureau of Economic Research estimates that President Obama's Affordable Care Act (ACA) coverage expansion may cause up to 900,000 current employees, to leave the workforce as these workers opt for free state-provided medical care, rather than receive coverage through their employer.
A recent Research and Commentary on the effects of the ACA on business and employment points out that 71% of small businesses say the federal healthcare law will hinder employment expansion. An estimated 41% of small businesses have frozen hiring in anticipation of the "employer mandate" which forces businesses with at least fifty employees to pay for employee healthcare under the threat of a fine.
Worse yet, 18% of small businesses have reduced working hours for employees, and 19% of small businesses have even laid off workers, to avoid costs associated with the federal healthcare law. These employment reductions don't just punish workers, but they also reduce business productivity, thereby leading to higher prices for consumers and lower corporate profits.
Health Care News reported that, "Steven Lozinsky, Vice President of Sparkle & Shine Cleaning Service, Inc. of Apex, North Carolina, which employs approximately 240 low-income workers, testified to the House Energy and Commerce Committee that he had three choices for his business. He could get all employees under 30 hours, try to downsize to around 100 employees and hope that he could afford the requisite fines, or close up shop entirely and lay off 240 people."
As the healthcare industry is becomes further centralized and subjected to more regulations, businesses are expecting rising premiums and employment costs. Navigating the effects and mitigating the damages posed by the ACA as it takes effect over the next decade is requiring a great deal of analysis by experts.
This week's edition of The Leaflet features Heartland work addressing the effects of Obamacare on businesses, internet access taxes, state tax reform, the Dick Durbin debit card fiasco, shale gas and Arkansas Common Core.
Director of Government Relations
The Heartland Institute
Research and Commentary: Effects of Obamacare on Businesses and Employment
There has been much debate over how the Patient Protection and Affordable Care Act will affect business decisions and job creation.
On July 2, the Obama administration announced the Affordable Care Act’s “employer mandate” will be pushed back a year to begin on January 1, 2015. The mandate requires employers with 50 or more full-time employees to deliver health care coverage or pay a $2,000 penalty for each employee after the first 30 workers.
Despite the administrations’ delay, businesses making hiring decisions must consider the additional expenses that will be created by the mandate once it goes into effect.
According to a survey by the U.S. Chamber of Commerce, 71 percent of small businesses say the health care law makes it more difficult for them to hire. Energy and Commerce Committee Chairman Fred Upton (R-MI) stated, “These statistics are not just projections on a sheet of paper. They have significant consequences as millions of American workers will see lower wages and less take-home pay because of the law.”
In a Gallup poll of 603 employers whose businesses have less than $20 million in annual sales, 41 percent said they have frozen hiring because of the health care law, and 19 percent answered “yes” when asked if they had “reduced the number of employees in your business as a specific result of the Affordable Care Act.” Only 9 percent of the small employers agreed Obamacare would be “good for your business.” Eighteen percent have “reduced the hours of employees to part-time” in anticipation of the ACA’s effect, the poll found.
Andrew Puzder, CEO of CKE Restaurants, questioned the Affordable Care Act’s feasibility in a Wall Street Journal op-ed. CKE Restaurant general managers earn an average of $50,000 per year. Should they decline insurance coverage, they will pay the initial penalty of $500 and a maximum penalty of $1,250. The estimated employee health insurance premium through the company plan will “range between $2,000 and $3,000 per year, well in excess of any potential penalty.” Puzder fears the ACA could cause the number of covered employees to decrease because the consequence for declining coverage will be low compared with the cost of coverage.
The Affordable Care Act will increase the financial burden on businesses and employees. As a result, employers will be much less likely to take on new commitments like expanding, hiring new workers, or even maintaining the full-time employees already in place. Once businesses are released from health care costs, their employees will go to the government to get coverage, which will shift the cost burden to taxpayers.
Research & Commentary: Internet Access Tax
The Internet Tax Freedom Act of 1998 was designed to promote the growth of the Internet by placing a moratorium on state and local taxation of Internet access and the creation of discriminatory taxes on emails and other data. The moratorium is set to expire in 2014, but a new proposal introduced by Sens. Ron Wyden (D-OR) and John Thune (R-SD), titled the Internet Tax Freedom Forever Act, would permanently extend the ban on Internet access taxes. It also would keep state and local governments from imposing multiple and discriminatory new taxes on digital items such as apps and music, as many governments have begun to do with wireless phone service.
In this Research & Commentary, Senior Policy Analyst Matthew Glans contends that allowing Internet access taxes to emerge would hit broadband users everywhere and have a strong negative effect on both online markets and the overall economy. While supporters of increased access taxes have argued that the taxes are needed to fund programs to help expand broadband to underserved areas, Glans argues that broadband coverage is already widely available and these programs may be unnecessary. Internet access taxes place an unnecessary burden on consumers in order to do something the market is already handling quite effectively. Making the Internet access tax moratorium permanent would help broadband access and development expand while reducing the need for government broadband spending.
Budget & Tax
Tip Sheet: State Income Tax Reform
Income taxes are considered by many economists to be the most destructive tax, stunting economic growth by taking dollars out of the hands of consumers and businesses and stifling production, innovation, and risk-taking, the main factors driving economic growth. In this Heartland Institute Policy Tip Sheet, Matthew Glans examines income taxes and outlines several policy solutions that states can take to limit the negative effects that these taxes can have on economic growth.
In 2013, many states across the country considered major tax reform proposals that would reduce their reliance on income tax revenue and encourage businesses to move to their states with tax policies friendly to economic growth. Glans presents North Carolina’s recently passed comprehensive tax reform plan that as a possible model for states to follow. This tax reform flattened and lowered both individual and corporate income taxes by eliminating and limiting some exemptions.
“Lowering personal and corporate income taxes could dramatically improve a state’s economy while generating new jobs. The ideal reform for state income taxes would be to eliminate them altogether. Barring that, states should lower and flatten their tax systems with as few tax brackets as possible. This can be done in many ways including limiting the growth of spending and devoting budget surpluses to income tax cuts.”
Finance, Insurance, and Real Estate
The Dick Durbin Debit Card Fiasco
Debit cards have become one of the primary means of financial transaction for millions of consumers, benefitting banks, shoppers and retailers alike. A recent court decision combined with legislation pushed by retailers clamoring for lower transaction fees could have dire effects on the ability of banks to offer debit card services. In this article, written by Richard A. Epstein of the Hoover Institution, examines the court decision and the effects of the Durbin Amendment on debit card products.
“One of the great financial innovations of the 1990s was the now ubiquitous debit card. But its salad days may well be coming to an end. Why? Because of two events. First, the Federal Reserve in 2011 set rates for debit card transactions at $0.21 per transaction. Second, this past week, Judge Richard Leon of the Southern District of New York set aside two of the Fed’s regulations in NACS v. Federal Reserve.
In the case, the Fed was sued by a group of retailers who claimed that its rates were too high. Judge Leon ordered the Fed to order new rates, which will approach $0.03-0.06 per transaction. Many observers fear that Judge Leon’s decision will create “turmoil” in the debit card industry.”
Epstein argues that if Judge Leon’s decision goes into effect, it will lead to a significant slash in debit card fees while also imposing on the operators of the debit card system costly new obligations to redesign their basic system. These new fees are likely to be passed on to consumers in other ways, the end result benefitting only retailers.
Letter: Shale gas better climate solution than carbon tax
In a letter published in yesterday’s Baltimore Sun, Policy Analyst Taylor Smith responds to former Presidential Adviser Carol Browner’s commentary in which she praised Maryland Governor Martin O’Malley’s climate proposals. Smith charged that if Browner truly cared about enacting proactive climate solutions, whether or not they increase the power of the state, she would have at least mentioned shale gas as a proven strategy, given its track record of reducing CO2 emissions.
But Taylor also says, “[E]ven if the entire U.S. reduced its carbon emissions by 10 percent, that would only bring a 0.11-degree Fahrenheit reduction of global warming per century — far less than the background effect of natural variability. Before Maryland thinks about imposing costly carbon-restricting regulations on the state's economy, perhaps it should not be asking how much carbon can these programs possibly reduce, but rather how much temperature increase can they realistically save?
Research & Commentary: Arkansas Common Core
The Arkansas legislature is holding hearings on the Common Core national education standards and tests in math and English that 46 states, including Arkansas, have adopted.
Research Fellow Joy Pullmann says “Those concerned about the Common Core set of standards point out no state, school district, or even a single school has ever used it before. The standards are entirely experimental, and Common Core’s own validation committee was never given research demonstrating the standards will improve student achievement. Several committee members consequently refused to sign off on the project.”
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