If Kowalko and McDowell get their way, we go broke
May 15th, 2009 by David Anderson
For those who did not see the Delaware Health Security Act (SB 177 of the last GA) sponsored by Senator McDowell and Rep. Kowalko, I just want to bring its cost to your attention and ask can we afford to keep these guys now that they have an unchallenged majority? I am sure Thurmond Adams would keep something like this in committee (like he did last session), but how much longer can we count on that? It is time to clear the decks of those who would tax us into poverty. Could your small business afford a 9% payroll tax plus nearly doubling some income taxes?
Funding for the Delaware Health Security Act will be as follows:
All State and federal funds available for health and health care costs in Delaware.
Employer and employee graduated payroll tax of from 2% for self-employed individuals to 9% for businesses
with 50 or more employees.
A Health Security Tax of 2.5% on net taxable income for all heads of households and persons subject to Delaware’s income tax.
An additional Health Security income surtax on net taxable income of 2.5% for persons filing a Delaware income tax return in excess of $250,000. Married couples filing a joint Delaware income tax return shall pay an additional income surtax of 2.5% on net taxable income in excess of $500,000.
It is finally time for the wealthy to give a little more back to the state in a time of dire need, like now!
Dave,
Your forgetting (purposely ignoring?) that employers will no longer have to pay health benefits and consumers will not have co-pays or prescription drug costs. Even at 9%, it will be a net savings that goes right to the bottom line for most businesses and employees and their families.
If Kowalko and McDowell get their way, we go broke
If by “we” you mean “insurance company greedheads.”
They hand out million dollar checks with every business license.
How much did it cost us to bring Astra Zeneca here?
“…graduated payroll tax of from 2% for self-employed individuals to 9% for businesses with 50 or more employees.”
Sounds sensible to me. If you are a small company, you don’t have much to fear from CIT or the proposed health care tax; in fact you have much to gain.
Why not make it elective, so people can choose whether to participate?
The whole point is to make the pool include everybody to eliminate the cherry-picking and market-slicing that private insurers have used to gut our health care system. If the “haves” opt out, costs go up for everybody, and people fall off the system.
And this is not class warfare – most of us are “haves” during our productive working years, and “have nots” during our dotage.
Why not make national defense “elective”? Or roads and highway funding “elective”? How about we just make all taxes “elective”? Then people can choose whether or not to participate.
Sheesh.
What type of health insurance I purchase seems like a very personal choice while what type of fighter plane the nation needs isn’t. That is the difference between our points of view. I trust people to handle those type of choices.
Dave,
You did not address my comment #2 that this would actually be good for most employers and employees bottom lines.
David,
You cannot build a hospital, either.
It really isn’t about choice or comparative shopping. Unless you are very rich or have an expensive plan that allows you to choose any care provider that you want, your choices are limited. Most people that I know have plans that limit them to a network of care providers. And if you don’t have or can’t afford insurance or out-of-pocket care, it doesn’t matter how many choices that you have. You simply can’t provide medical coverage for your family.
If you or your child is seriously ill and you don’t have health insurance or can’t afford to pay for treatment, right now it is pretty much just “tough luck.” I think that is wrong. I think that a plan that provides for universal health care with equal opportunity for people and shared burden is a good thing. This plan looks as though it might provide that AND be good for businesses and people.
Okay from the start I will admit that I have yet to thoroughly research SB 177. This response is primarily to the information available in this post and the comments as well as my own experience.
I know that my clients go out of business if those new taxes happen. They are all on the brink as it is due to the economic colapse and/or rates rising on one thing after another. Of course that means I will likely go out of business too. Do I spend more than 2% of my income on health insurance? Most of the time yes. However, those savings won’t do much to make me feel good when my clients start going out of business and I loose income.
Honestly none of my clients is currently spending more than of 7% of their gross payroll expense on health care expenses. All of them employ less than 20 people even at their peaks. Some of them recently restructured their health care plans with Blue Cross, added Health Savings Accounts (deducting that from employee paychecks) while paying the full premium on the health care plans. It looks to me like a smart company can work a better deal than the state. (Perhaps that is unique to my clients, but I don’t think so.)
One of my clients also currently offers no health bennefits. This will hurt them more than the rest, and they will be the first to fall. They only employ part time workers that would have no health insurance AND no income without the jobs. The business has been hovering at the break even point since inception about three years ago and an extra 9% in labor costs would kill them fast and hard.
To all the progressives that like to experement with neat and cool ideas to help the poor and down trodden, I plead with you to consider the effects your experiments will have on more than just your targeted goal. I know you can come up with good ideas that will work and be benneficial to a lot of people. However, before instituting them you should also take a good look at people they might not bennefit or might even harm. Only then can you do an adequate cost bennefit analysis.
Even with the new taxes being levied will the Delaware Health Security Act be able to handle all the newly unemployed that it will help create?
“You cannot build a hospital, either.” – Anonone
Interesting, but somehow in Dover they have been expanding Bayhealth at a dramatic rate, and they built the new Eden Hill Medical Center even without the new Health Security Act. I know a large portion, maybe even all, of those expansions have been done with private, not public funds.
Dave,
You can build a hospital, if you have the money. You can build your own highways and bridges, too, if you have the money. You could even have your own militia, if you have the money.
I am not advocating for government-run system. Personally, I’d like to see a government-financed system, which is different from a government-run system.
Tim J,
It looks like the cost to businesses will be progressive based on the size of the business – would your clients be paying less than 7% at 20 employees if the max is 9% for 50 or more? Dunno, but maybe.
Some businesses and some people may be hurt in the short-term, particularly those operating at the margins of profitability, but if the program can save more businesses money in the long term, maybe they can use the savings to hire more people. Also, healthy people are more productive workers.
It may, in fact, help reduce unemployment. But, like you say, a good cost-benefit analysis is in order.
Some businesses and some people may be hurt in the short-term, particularly those operating at the margins of profitability
And I think we can do without any business that, in order to exist, must pay fifty or more Delawareans so little that they cannot afford health care.
If the person who washes your clothes or mows your lawn does not have health care because the employer cannot afford it – then they aren’t charging you enough for your cleaning or your lawnmowing. Or you need to do it your own damn self.
What percentage of hospitals are government owned? What percentage of those are in the top 10%? Case closed.
“The current health system needs to be replaced, but not by a government-run system.”
Why not government run?
The government does a better job of running Medicare for seniors than the insurance companies do for the rest of the population, both in terms of administration costs (way better – much lower costs!), and in terms of permitting choice of doctor.
Why must we burden our medical costs using insurance and pharma companies making healthy profits? It makes no sense at all!
Case back open….
“…by a number of measures, this government-managed health-care program–socialized medicine on a small scale–is beating the marketplace. For the sixth year in a row, VA hospitals last year scored higher than private facilities on the University of Michigan’s American Customer Satisfaction Index”
Thanks for you thoughtfull response anonone. It shows that even though your priorities are to get everyone insured, you actually care about all sides involved in the health insurance dilema. When I get home I will look into what the rates are at different tiers including the ones that will effect my clients.
Interesting philosophy noman, granted some companies do follow it. Starbuck, for example was charging customers more for its empoyee health care program than for its coffee and other products. Next time you buy a hamburger ask for a side order of their employees health care with it. Then when your landscaper comes buy ask them to plant some health bennefits in your side garden. When you go drop off your cloths at the dry cleaners you can ask for extra starch and employee health care on them. See if the bill changes, and in some cases see if they even want to do business with you anymore.
My philosophy is that employers have a responsibility to provide customers with a quality product they can afford. They also have a responsibility to provide employees with just compensation for services provided, nothing more. If they want more from either the employee or the customer they can provide more in return but they don’t have a responsibility for the excess, just the option.
I don’t know what kind of health insurance my one client’s employees can or can’t afford. I only know that they only hire part-timers and they don’t provide the bennefits themselves. Anyone who works 20 hours or less a week, may need full health insurance coverage, but they haven’t earned it from that employer.
Look anytime the government says it is going to save me money, especially if it says it is going to provide me with more services at the same time, I want to know what it is taking away, from me, and from others. That means what are they taking away in cash, in services, and in options.
Tim says: “Honestly none of my clients is currently spending more than of 7% of their gross payroll expense on health care expenses.”
But Tim, we have about 50 million uninsured, which is about 20% of the workforce. What about them?
A recent statistic I saw stated that for a family of four earning $50K per year, if privately insured spends 1/3 of their after tax income on health insurance. This is intolerable!
Another consideration you do not discuss re your clients is the deductible, copays and coverages that their employer provided health insurance policies provide.
Employer provided health insurance has declined from 69% of employers in 2000 to 60% now.
Families are being squeezed re healthcare more than ever. This is not the case in countries that have universal healthcare for their people. We are well behind the curve, to our great shame!
Dave,
One way to drive down costs is to buy in volume, which is what a government single payer plan can do.
Also, provider’s health care insurance administration costs should also go down.
First of all, who says that the number of employees is a barometer of business value?
I agree with you completely that it isn’t a good measure of business value. It is a disincentive to hire, as you point out. There has to be a better way to make the tax progressive.
It’s as stupid an idea as taxing gross receipts.
I am fine with the gross receipts tax, personally. You just have to build it into your costs and pricing.
Dave,
They are not held to the same standard. The gross receipts tax is applied differently to different businesses. Personal services businesses pay different percentages of gross receipts taxes than retail stores, for example. Most businesses in DE pay no gross receipts tax. I don’t know what the specifics would be in the cases that you cited, but you might also consider that the supermarket requires a lot more infrastructure (such as roads) than the consultancy.
Nevertheless, the gross receipts tax is a cost of doing business in Delaware. Whether you have a supermarket or a consultancy, you plan for it (the hidden sales tax!). If the supermarket business isn’t profitable enough for somebody, gross receipts tax or not, then they can start a consultancy. After all, that is what free market economy is all about.
Dave,
Most businesses in Delaware don’t pay the gross receipts tax (GRT) or a corporate income tax. Most businesses in Delaware don’t have receipts high enough for the GRT to kick in and most small businesses are structured so profits flow through to the owners as income so they aren’t subject to corporate taxes.
Delaware is actually a great state to run a small business, considering the other benefits of living here. (Not a great place to start one, though, if you’re looking for a good entrepreneurial infrastructure.)
But, isn’t “if they can’t hack it then sayonara” kind of at the root of competition in a capitalistic economy?
“But, isn’t “if they can’t hack it then sayonara” kind of at the root of competition in a capitalistic economy?” – anonone
Not so much when it is the government’s growing tentacles that they can’t hack.