What a Great Idea, Especially in A Recession

Let's put another tax on employment, making it more costly for companies to hire people.  That's the ticket out of the recession!

Employers who do not provide health insurance to workers would generally have to pay a fee or penalty to the government. The fee would be equal to 8 percent of wages for an employer with an annual payroll of more than $400,000.

Disclosure:  This has a personal impact on me and my business.  Wages in our company are 50% of revenues, we earn a 6-8% profit as a percentage of sales, and this will increase our wages by 8%.  You do the math.  The good news, I guess, is that this will gaurantee that I will not be subject to the new surcharge on high incomes.

  • Flatland

    And yet people still blame the price increases in goods and services on "big business"... Go Figure...

  • "The House Republican leader, Representative John A. Boehner of Ohio, said it was “criminal malpractice” for Democrats to be pushing “a new small-business tax.” But Democrats said small businesses would be among the bill’s prime beneficiaries."

    What planet are these leftist politicians from? How can they say with a straight face that this plan will benefit small businesses?

  • m

    Any chance you can use contractors? I realize the law is pretty specific about that but there's got to be a way...

  • Esox Lucius

    Would it be legal to just stick your employee with that bill. Sorry kids, you used to earn $10 Per hour but now you earn $9.20 because the Gubermint just taxed you for health care...

  • eddie

    Esox: Presumably, if Warren could pay his employees 8% less, he'd already be doing it.

    One reason he can't is that many of his employees are already making the minimum wage. They are older, retired, and happy to work for minimum wage plus the perks of the job (access to camp facilities, seasonal employment that coincides with their seasonal desires to go camping, flexible working hours and conditions). Warren has written about this in the context of minimum wage hikes forcing him to fire the elderly and hire more expensive but more productive younger staff.

    For the non-minimum-wage staff, he probably can't pay them less than he is now without having the quality of his staff suffer. The good employees (the ones worth their salary) will leave for other jobs. Granted, if all employers had to cut pay and/or profits by an equivalent amount, then he wouldn't be risking losing employees. But most employers aren't facing the 8% penalty, because most employers provide health benefits.

    The bill penalizes business models that depend on employees that have no interest in spending 8% of their salary on health benefits - employees such as the young (who don't need it) and the old (who have other sources of health coverage, like Medicare).

  • Dr. T

    This is yet another bad idea taken from the failed Massachusetts health care plan. The Massachusetts plan is much more expensive than the politicians claimed (what a surprise), and it gets low satisfaction ratings from patients and from health care providers (yeah, another big surprise). So, naturally, Obama wants to apply a similar plan to the entire nation. This fits in with my belief that Obama wants to destroy the economy so that worried citizens will support socialist or fascist "remedies" that put nearly all aspects of the economy under government control or ownership. (In his older speeches, he did not hide this intent or his dislike of America. He switched to "hope and change" speeches when running for president.)

  • Clearly you're not running your business with a sense of social responsibility to benefit the public good 😉

  • Warren, from what you have described in the past, you contract to run campgrounds for government agencies. So it would seem to me that if your income stream is from the government, then contractual charges have to go up . . . and if your income comes from campground users, then the nightly fee would go up as well as the price of your general store items.

    Now, don't get me wrong, because I greatly respect your Ivy League education, but losing money on every camper is not, repeat NOT, a recommended business practice. Reminds me of the old saw about A & P Tea that when they were gobbling up competitors fifty years ago; their sure-fire business philosophy was "if every sale is at a loss, the solution is to sell more."

  • Henry Bowman

    Did you mean to say that wages are 50 per cent of revenue, or 50 per cent of costs?

    Either way, the Obama Administration is doing everything in its power to crush the American economy. Once I thought it was just because the guy was an economic idiot, but now I'm inclined to think he is quite malevolent.

  • Follow the health care debate at http://www.ilovebenefits.wordpress.com

  • Mark

    Well, you will probably have to do what I plan on doing if they pass this law...take it right out of the employees gross. I am going to simply subtract the 8% from their gross. It will be line itemed too. SO, when they complain they can go talk to Obama.

  • gn

    I keep thinking that these proposals are today's equivalent to Smoot-Hawley in 1930... The exact opposite of the changes required to shift social (business) moods and get things moving again. Don't we ever learn?

  • First, won't this make your Medicare elders more competitive vs the younger workers?

    Second, of course you will raise fees. Everyone will have to raise revenues or discharge workers, and in most cases use both strategies.

    Third, won't this make you consider substituting the automated equipment for workers?

    Any employer mandate in an economy with these problems is of course going to raise unemployment by a percent or so.

  • Sandy

    Uh, no. All you have to do is provide your employees with health insurance. Why should taxpayers be responsible for your employees' health care because you don't pay them enough money to buy it themselves?

  • Michael

    Sandy, here in Cincinnati, people making $10 to $15 an hour make plenty to pay for health insurance. The problem is the combined federal, state and local payroll tax is 40%. Property tax is another 10%. When half your pay off the top goes to government with another 10% to 15% in hidden taxes going to government, buying health insurance can be a problem. But most people buy the wrong type of insurance anyway. I can buy a high deductible ($1000 per sickness/accident) for $100 to $150 per year. I don't have to worry about medical bankruptcy and my out of pocket health expense is low because I know better than to run to the doctor every time I get a runny nose.

  • Jody

    Why should taxpayers be responsible for your employees’ health care because you don’t pay them enough money to buy it themselves?

    Indeed. Some would say that requiring the taxpayers to be responsible for employees' health care was unconstitutional, just as requiring employers to be responsible for it is equally unconstitutional. Glad to see you're as unhappy with the bill as we are.

  • Anon

    Sandy:

    Health insurance costs money. Forcing employers to provide health insurance or pay a penalty increases the cost of each employee to the employer.

    Everyone, including you and employers, buy less of stuff when the cost goes up. Increase the cost of having an employee, employers will have fewer of them.

    In other words, this will increase unemployment.

  • Anon

    Or to put it another way:

    Ask yourself honestly, "What is the most my employer would pay to keep me as an employee?"

    If the government made it the law that you had to be paid $100 million dollars a year, would you be paid that or would you be laid off?

    How about $10 million? $1 million? $100 thousand?

    Somewhere there's a point where the employer can no longer afford to have you as an employee. If an 8% penalty or the cost of health insurance pushes your total cost past that point, you will be laid off.

  • Noumenon

    Wages in our company are 50% of revenues, we earn a 6-8% profit as a percentage of sales, and this will increase our wages by 8%. You do the math.

    I wanted to do the math but the denominators don't match. Why did you report one number as a percentage of revenue and the other as a percentage of sales? I tried the Wikipedia for "revenue" trying to make up for never having taken a business class, but it didn't help.

  • Not Sure

    "Why should taxpayers be responsible for your employees’ health care because you don’t pay them enough money to buy it themselves?"

    -Sandy

    So the solution is for employers to just pay people more? Why didn't anybody think of this before? We could pass a law mandating a certain level of pay that employers couldn't go below, and call it a- I don't know- "Minimum Wage" law, I suppose.

    Of course, this will mean that some people who are currently employed will lose their jobs when employers decide that the work they were doing can be done instead by those workers who are lucky enough to be retained. And other people who already don't have jobs will have an even harder time finding one in the first place.

    But on the other hand, people like you will get to pat yourselves on the back for seeing to it that all those workers who manage to keep their jobs are now being paid a "living wage", so it's all good.

    It's just unfortunate you don't appear to have any concern for the unseen people whose lives would be harmed by your good deeds.

  • Franco

    Sandy, get a clue. The cost to a business for family health insurance runs about $12,000 per year per family employee. I have seen it up to $18,000 per year. You, obviously an employee and not a business owner, only see a small part of the total cost, the firm eats the rest. You seem to grossly underestimate the cost of health insurance. Small business owners cannot just offer health insurance with a wave of a wand. Many of them barely make ends meet. They cannot afford to pay these costs of which they are mandated to pay at least 65% under the proposed law. They will instead be forced to pay the 8% tax. I know of at least one small business which will probably close due to this and another which certainly will not expand. The business that will close is a hair salon which is making no money and has already been harmed by an increase in minimum wages. My friend, the owner, is making no salary nor any profits. This will be the last straw. He should mail the keys to our clueless congressional rep, Debbie Halvorson, who will be directly responsible for the demise of this business.

  • Jeff

    This is a recipe for inflation and wage stagnation. Can anyone think of a faster way to relive the glory days of the Carter years than this? The Government is going to increase the cost of labor by 8%, causing massive price increases, during a period of high unemployment.

  • DKH

    Noumenon:

    I assume he means wages are 50% of costs. Also, I would say that sales are 106%-108% of costs. Now we've matched the denominators. If wages increase by 8%, overall costs will increase by roughly 4%. So now sales are roughly 102%-104% of costs. I'm pretty sure this is a low profit margin (coyote has some previous posts that show profit margins for various industries).

    Obviously, there are several potential responses such as raising prices or cutting workers. However, those don't sound very positive and will force hardship on somebody because of the government's decision to force choices on others.

    Note that the government forcing hardship on one party's part (i.e. employers must provide insurance), means that hardship gets spread eventually. Wages are cut or positions are eliminated or prices are raised on customers. In a fluid economy, it is tough to truly target one particular point and affect the incentives around that decision. (This is true for positive incentives, such as the stimulus, too. But in that case, the government deliberately forces stimulus money to flow through inefficient processes.)

  • Franco

    He could mean wages are 50% of revenue. In service industries the costs can easily be 50% of revenue, they are in our business. The revenue number is probably net of whatever he pays the local governmental entities for the concessions.

  • Mesa Econoguy

    Obamalini suuuuure is different……..