SERVICE MEMBERS HOME OWNERSHIP TAX ACT OF 2009 -- (Senate - December 10, 2009)
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Mr. BOND. Mr. President, small businesses are the backbone of our economy. They make up 99.7 percent of all employer firms. They employ just over half of all private sector employees. They pay 44 percent of the total U.S. private payroll. They have generated 64 percent--a majority--of the net new jobs over the past 15 years. They create more than half of the nonfarm private gross domestic product, and they hire 40 percent of all high-tech workers.
Small businesses drive this economy. They are also the sector most in need of real health reform that will reduce cost and make it easier to buy insurance. It is estimated that 26 million of the uninsured are small business owners, employees, and their dependents. That is a majority of the uninsured. They continue to struggle to be able to afford health care.
Here are two examples: Jim Henderson, president of Dynamic Sales in St. Louis, has made every adjustment in the book to continue to provide health insurance to his employees. He covered both employees and their families back in the 1980s, but he is now at a point where he can only afford to provide for his employees. He pays 70 percent, his employees 30 percent. Jim is one of the very few small businesses that right now have weathered the storm despite the economy. He wants reform that lowers cost and helps individuals better spend their health care dollars.
Unfortunately, the Democratic health care bills we have seen so far--and I guess we haven't seen all of them--won't help Jim to continue to provide his employees health care.
Kathie and Tom Veasey own True Value Hardware in Wilmington, DE, the hometown of Vice President Biden. They employ 28 people, most of whom they consider family. They cover 100 percent of the cost for their employees and half for their families. But they have seen huge increases in premiums over the years, with a 36-percent increase just this year after an employee got sick. Each year, they are forced to shop for health insurance, but they continue to have limited choices due to an uncompetitive market.
Unfortunately, the Democratic bills won't fix the problem or help Kathie and Tom continue to provide their employees health care.
If we really want to get out of this recession, if we really want to address the problem of affordable and accessible health insurance, then the majority party needs to take a hard look at health care reform.
First of all, we need to allow small businesses to go together and purchase health care across State lines so they have true competition and so they can lower costs. We need medical malpractice reform, which would cut $120 billion to $200 billion out of the cost of health care.
However, when we look closely, the bills we see before us do not address the real health care needs, and, in fact, by imposing more taxes--and taxes which the CBO said will be passed from health care companies down to those who are paying the private bills--not only will it make health care less affordable for these small businesses, it will force many of them to drop whatever coverage they have now.
Tax equity is extremely important. An employee of a large corporation or a union member who gets health care premiums paid for by their employer or by their union doesn't have to record them as income. Small businesses, their employees, farmers, and individual purchasers need the same benefit that the employees of large corporations and union members get.
Now, instead of proposing commonsense health care solutions for small businesses, the bills we have seen coming out of the smoke-filled rooms run by the majority leader continue to heap costly new burdens on small businesses that are trying to keep their doors open. More and more it seems small businesses are under attack, and that is what they are telling us. One of the universities that visited me this past week is trying to do something to help small businesses, and I said: What is the attitude? They say: The attitude of small business is that they are under attack by what is being done in Congress and what is being proposed by the administration.
The 2010 budget calls for tax increases on those earning $250,000 or more. For small businesses that are taxed at their personal rate--proprietorships, partnerships, and sub S corporations--these tax increases hit the returns of those small businesses, and they are taxed at the punitive rate. Higher energy taxes on businesses in the cap-and-trade plan will put many small businesses in my part of the country out of work. New taxes and new mandates in the health care bill will be passed on.
Randy Angst of Lebanon, MO, says the following about the Senate bill:
The new taxes would eliminate roughly half of my profits. It would force me to let employees go, refrain from hiring new employees and prevent me from reinvesting in my business. The mandates would be very harmful and make it much more costly for me to operate my business.
This bill--the last bill we have seen--requires a costly $28 billion new mandate on businesses that do not offer health care. Who pays that mandate? Anybody looking for a job. If you tell businesses they have to spend big money on a mandate, they cannot spend it on hiring new workers. The mandates do nothing to reduce insurance costs, and because they are focused on full-time workers, the mandate gives companies an incentive to classify more of their workers as part time.
Gene Schwartz, with K&S Wire Products in Neosho, MO, says:
We are in a recession and I am in manufacturing. The legislation would be nothing but detrimental to us. Our workforce is already down 25 percent from last year, and if this bill goes through in its current form, the new taxes and mandates will force me to make further cuts. Also, this bill will increase my costs by further raising my already sky-high insurance premiums.
This bill also includes more paperwork which is costly for a small business. Section 9006 requires that every time a business vendor sells a service or property exceeding $600 to another business, the receiving business must report the transaction to the IRS. That is an enormous new costly paperwork burden that will hit almost every business regardless of how small.
These mandates and regulations disproportionately affect small businesses and come at a high cost. According to the SBA's own Web site, very small firms with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with Federal regulations. These very small firms spend 4 1/2 times as much per employee to comply with environmental regulations and 67 percent more per employee on tax compliance than their larger counterparts.
The bill clearly fails to bring down the cost of health care for small businesses. It fails to bring down the cost of health care at all, but it is especially hard on small businesses that can't afford coverage under the current law.
Small business owners from my State have come to me for two decades looking for more affordable ways to make health insurance available. They want to be able to provide insurance for their people. That is why I have long been a champion of small business health care reform.
Does the majority's bill include strong reform that will allow small businesses and the self employed access to more affordable, more accessible health care? No.
Does the bill include protections for small businesses that disproportionately feel the burden of increased government mandates and taxes? No.
In fact, CBO has said that this bill will increase premiums for individuals in the non group market by 10-13 percent.
Premiums for small businesses could increase by 1 percent or be reduced by 2 percent but it is easy math. If a small business cannot afford to provide health insurance now, they will not be able to afford to do so under this bill.
According to CBO, under current law families in a small group plan today pay about $13,300. In 2016, they will pay about $19,200 if this bill becomes law.
That is the wrong direction.
Health care is already too expensive for small businesses. We need to make it cheaper. It should not cost a family $19,200 in 2016 for health insurance.
This bill continues down the path of unsustainable health care costs.
In fact that is one of the main reasons the National Federation of Independent Businesses opposes this bill. They say, ``Small businesses can't support a proposal that does not address their number 1 problem--the unsustainable cost of healthcare. With unemployment at a 26-year high and small business owners struggling to simply keep their doors open, this kind of reform is not what we need to encourage small business to thrive.''
This bill also imposes new taxes and fees, like the $6.7 billion per year tax increase on health insurance companies.
Yes, the majority wants to sock it to the insurance companies.
Well, guess what. The insurance companies are going to pass the costs along to consumers.
Small businesses cannot self-insure, they must purchase products available in the marketplace. That is why CBO has found that increased costs due to fees being passed on to the consumer will be more pronounced for small businesses. NFIB has also said this new tax will fall almost exclusively on small businesses.
This bill just does not help small businesses.
I know the argument my colleagues on the other side offer.
They say they provide a tax credit to help small businesses.
What they don't say is that this is a bait and switch.
First of all, in order to get the full credit, you cannot have more than 10 workers who get paid an average of $20,000.
After that, the credit begins to phase out for each employee you have above 10. It also phases out for each $1,000 increase in average wages above $20,000. If you have 25 employees or you pay more than an average wage of above $40,000, you don't even get the credit.
The real kicker is that the full credit is only available for 2 years after the exchange takes effect. Then that is it.
A small business will either have to offer an employee health insurance--which will really not be any cheaper than it is today--or they will have to pay a fine. Or an employee can go into the exchange as an individual where insurance will cost 10-13 percent more.
Let us examine a realistic situation using Jim from St. Louis as an example.
As I mentioned before, the small business tax credit is filled with thresholds and variations that make it of limited value for the few small businesses that are eligible to claim the credit.
The full value of the credit, which is equal to 50 percent of the business owner's costs, is available for small businesses with 10 or fewer workers that pay their employees an average annual wage of $20,000 or less. But the credit also starts to phase out as the employer adds employees or gives raises, so the entire credit is gone if the employer has 25 or more employees and pays them an average wage of $40,000 or more.
Jim has six employees and his average annual wage is about $39,000. Jim has to ask if he meets the two threshold questions before he can determine whether he gets the tax credit. He passes the first test, since he only has six employees. But Jim's credit is reduced because he has paid his employees too much in wages.
Today, Jim's health care costs are $30,540. If he qualified for the full value of the credit, his annual health care costs would be $15,270--about half of what he pays now.
But the value of his small business tax credit is directly related to wage, so the value of Jim's credit is reduced to $763 based on the formula. That is a small fraction of his health care costs and wouldn't even cover the cost of hiring an accountant to figure out how much the credit is worth.
Because Jim is already so close to the highest average wage to be eligible for any credit at all, this means if he gives his employees a well-earned and well-deserved raise, he will lose the credit altogether.
In these tough economic times, the government is encouraging small business owners like Jim to create more jobs, but if they create too many or pay people too much, then the government will reward them by taking away their small business tax credit.
And even worse, the phase-outs mean that Jim has a disincentive to hire more workers.
So this bill completely misses the mark for small businesses.
Mr. President, our small businesses are struggling. We owe more to this critical sector of our economy which is responsible for half of the private-sector jobs and employees than a bill that mandates taxes and fails to provide real health care reform.
In a recent letter to Senator Reid, the NFIB outlines how the bill will adversely affect business owners.
When evaluating healthcare reform options, small business owners ask themselves two specific questions. First, will the bill lower insurance costs? Second, will the bill increase the overall cost of doing business? If a bill increases the cost of doing business or fails to reduce insurance costs, then the bill fails to achieve their No. 1 goal--lower costs.
In both cases, the Patient Protection and Affordable Care Act (H.R. 3590) fails the small business test and, therefore, fails small business.
They further say in the letter:
Despite the inclusion of insurance market reforms in the small-group and individual marketplaces, the savings that may materialize are too small for too few and the increase in premium costs are too great for too many. Those costs, along with greater government involvement, higher taxes and new mandates that are disproportionately targeted at small business and are being used to finance H.R. 3590, create a reality that is worse than the status quo for small business.
It is worse than the status quo.
Mr. President, it is time to stop attacking small business and work on real reform. We should defeat this proposal that does not make insurance more affordable, is a massive government intrusion into health care and that will pay for new entitlement programs on the backs of our small businesses.
Let us put this debate in context. If small businesses do most of the hiring, and we are counting on them to help lead us out of the recession, why would we want to increase their costs of doing business and make it less likely they will hire new workers?
President Obama hosted a Forum on Jobs and Economic Growth last week, where he invited ideas to jump start job growth in our sluggish economy.
Now, he and the majority are considering a new plan to jump-start job growth using ``unspent'' or returned TARP funds. Have they forgotten that it is all borrowed money, and thus deficit spending, in the first place?
Let me submit that the bill before us will hurt job creation.
Before practicing medicine, doctors often take an oath, the Hippocratic Oath, where they promise to refrain from doing harm. I would like to see Congress and the President take the same oath.
How can you on the one hand legislate new taxes on businesses in the name of health reform--coupled with new energy taxes in the name of climate protection--and on the other hand ask businesses to generate new jobs? It cannot be done. Massive tax increases and job creation are mutually exclusive.
Employers who face uncertainty regarding new, oppressive taxes and mandates are not going to want to sink money into new jobs. It is that simple.
We should think about the harm we will do to small businesses through this legislation and instead work on commonsense reforms that have bipartisan support.
Mr. President, I ask unanimous consent to have printed in the Record the letter from the National Federation of Independent Businesses.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
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Mr. BOND. Mr. President, I have a couple of other comments I wish to add.
We have now learned that there is a new proposal coming out of the back rooms--the smoke-filled rooms. Every time something new is thrown up on the wall, we stand around with a great deal of interest to see whether it sticks. When you look at this one, I don't believe it sticks. I think it stinks.
If you read the Washington Post's lead editorial today, its headline is ``Medicare sausage? The emerging buy-in proposal could have costly unintended consequences.''
Mr. President, I ask unanimous consent to have printed in the Record, after my remarks, the Washington Post article.
The PRESIDING OFFICER (Mr. Udall of New Mexico). Without objection, it is so ordered.
(See exhibit 1.)
Mr. BOND. At the end of the article, it says:
The irony of this late-breaking Medicare proposal is that it could be a bigger step toward a single-payer system than the milquetoast public option plans rejected by Senate moderates as too disruptive of the private market.
To say that it moves toward a public takeover is confirmed by one of the most outspoken backers of the public option, the one most interested in getting public control or governmental control of all of health care, New York Representative Anthony Weiner. He is quoted in Politico today as having hailed the expansion of Medicare as an unvarnished triumph for Democrats like himself who have been pushing for a single-payer run health care system. In the article, he says: ``Never mind the camel's nose, we've got his head and his neck in the tent.''
I think that is clear. Trying to expand Medicare will almost assuredly drive all the private plans out of the market. Why? Medicare pays 80 percent of the cost of hospitals and less for doctors, and they have to make up the rest of their cost by charging privately covered patients more money. It will raise the cost so that private health care can no longer succeed.
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