The drafters and supporters of the 1,990-page health care restructuring bill released by Nancy Pelosi this morning really don’t understand how business works.
I’ve had only a few minutes to look at the bill, but one fundamental and profound stupidity jumped out at me.
The bill defines which businesses are subject to the health care tax based upon the dollar amount of employee payroll. There even is a sliding scale right in the bill (section 501, at page 276) which tops out at 8% for businesses with $750,000 of annual payroll. Annual payroll is defined as the “aggregate wages” paid by the employer.
This provision creates incentives for businesses to keep down payroll. One way would be not to hire anyone whose compensation would fall under the definition of payroll under the bill.
In other words, outsource whatever you can. Hire a software engineer in India, or ship manufacturing to China, or structure your business in such a way that you send 1099s not W-2s to the people who work for you (and hire an accountant and tax lawyer to navigate IRS rules on independent contractors).
The message of the bill is that whatever you do, if you want to grow your business without paying the health care tax, do not add employees.
Obama does not understand these provisions. Obama gave a speech this morning in which he stated that these provisions are directed at small businesses operating on thin margins. But these provisions have nothing to do with profit margins. This is a wage-based tax.
Obama does not understand the difference between profit margins and wages. This is exactly what you would expect from someone who always has been on the receiving end of wages, and never had to meet a payroll. Wages are not profits and have nothing to do with the success of a business. Just ask the auto companies.
I don’t think Obama and the other Democrats are lying about this aspect of the health care tax. They truly do not understand how the private economy works. In their blissful ignorance they are designing job-killings provisions which they do not understand.
It is not an overstatement to say “be afraid, be very afraid” of this monstrosity.