As we celebrated National Small Business Week across the country last week, here in Utah we recognize that small businesses are the fuel that keeps our economic engine running. There are more than 241,692 small businesses in the state, and in addition to serving as the backbone of local commerce in cities like Sandy, they have served as a bulwark for our community during the economic crisis and have helped our state maintain one of the lowest unemployment averages in the country.
Small businesses play a very big role in creating jobs in our communities. In Utah alone, small businesses account for 96.9 percent of the state’s total employers, accounting for approximately 1.15 million jobs.
Not only are small businesses the No. 1 creators of private sector jobs in our state, they are also incubators of innovation and creativity. So common sense would dictate that now, more than ever, policy makers would do everything in their power to help small businesses grow and create incentives to add new small businesses to the economy.
However, for all of the rhetoric we have heard from Washington recently on the importance of the small business community, a tax lurking deep within the thousands of pages of the health care reform law threatens the future of hundreds of thousands of small businesses and jobs, and needs to be repealed.
This Health Insurance Tax, or HIT, will strike a blow to small businesses across the U.S. as it will cost them and their employees $87 billion within the first 10 years alone. Supposedly intended as a tax on large insurance companies to help fund the costs of reform, the reality is this tax will be passed on to small businesses, which purchase the policies on which the HIT is levied. Much like the fee a consumer pays at the local ATM or gas pump, small businesses and their employees will face costs taken from their paychecks that will go straight to Washington’s coffers.
When the HIT goes into effect in 2014, approximately 2 million small businesses across the nation and in Utah will be left on the outside looking in. Not only will the HIT negatively impact the bottom lines of small business, it will cost small business employees with a family plan $500 in the first year or $5,000 in the first decade alone.
Small business owners, already wary of adding new hires to HIT, will find their options for growth limited as this tax will hurt their ability to offer pay increases, take on new hires or make equipment purchases or other investments necessary for growth. The most frightening aspect of all is the bill has no sunset progression; it goes on forever with yearly indexed increases. The first 10 years cost small businesses $87 billion. The second 10 years costs $208 billion.
According to a study conducted by the National Federation of Independent Business, the HIT will reduce private sector employment by 125,000 to 249,000 jobs in 2021, with 59 percent of those losses falling on small business. Thankfully, and much to the relief of businesses, legislation was recently introduced in both the House and the Senate to repeal the HIT is rapidly gaining momentum.
Utah’s Sen. Orrin Hatch along with Sen. John Barrasso, R-Wyo., have introduced the “Jobs and Premium and Protect Act,” and bipartisan companion House legislation has more than 141 cosponsors, including Reps. Rob Bishop, Jason Chaffetz and Jim Matheson. Fortunately for small business, the repeal HIT bill will go through the Senate Financial Committee which could be chaired by Hatch.
There is already a bipartisan consensus on the need to support our small businesses. We must do everything we can to help small businesses grow and get our economy back on track. However, if the HIT is not repealed, many other efforts currently under way to boost small business growth will be futile. Washington, the time to repeal the HIT is now. Our future depends on it.