Will New Health Care Law Really Help Small Businesses?

President Obama today touted the small business tax credit in the health care law, even as company owners remain uncertain about what the sweeping changes really mean for them.

In Portland, Maine, an energized Obama sold his health care law as "pro-jobs" and "pro-business," and one that would start to help small firms this year.

ABC News video of President Obama speaking in Portland, Maine.
null

"Starting now, small business owners that provide health care to their workers can sit down at the end of the week, look at their expenses, and begin calculating how much money they're going to save," the president said. "For small business owners who don't currently provide health insurance, they'll be able to factor in this new benefit in deciding whether to do so. And with that savings, employers may be able to cover an additional worker or hire that extra employee they've needed."

VIDEO: President Obama announces new nuclear policy, while the RNC looks for changes as well.
null

The tax credit that the president was promoting will take effect in 2010, but other benefits don't kick in until 2014.

Small businesses would get up to a 35 percent tax credit on the premiums they pay for their employees' health coverage. Businesses, including non-profit organizations, will be eligible for the tax credit if they have fewer than 25 full-time employees, pay an average salary of $50,000 or less per year, and cover at least 50 percent of their workers' health costs. Small businesses, however, won't technically see returns until next year when they file their 2010 tax return.

By 2014, the tax credit will be upped to 50 percent, and the White House estimates that 4 million businesses will benefit from it.

The tax credit is estimated to save small businesses $2 billion this year and $40 billion over the next years, costs that the federal government will bear, according to the Congressional Budget Office.

Some economists say the savings and the number of uninsured who will get coverage because of the tax credit are only a drop in the bucket.

"I think that there are going to be some firms that are on the edge and they'll look at this and say, 'given the fact that our employees will need to purchase health insurance... it might make sense to do this,'" said Gus Faucher, director of macroeconomics for Moody's Economy.com, but "in terms of increasing coverage, [this] is a small piece of the puzzle. ... This is not going to be like the [individual] mandates or the individual subsidies" that will be implemented by 2014.

Some small business organizations say the tax credit will help in the short term, but once it is phased out, firms will have to bear the full costs.

"When it comes to the tax credit, it's not going to hurt. The challenge is the tax credit is temporary. When it runs out small businesses will be left paying out the full amount," said Molly Brogan, vice president of public affairs for The National Small Business Association, an advocay group that opposed the health care law. "And the bigger challenge that we have raised... is we don't think it is sufficient in containing the costs of health care."

For Gene Marks, who owns a 10-employee company that sells business software products and related services, the tax credit will certainly help, but he is skeptical about the long-term cost benefits.

"How can a small business owner not like what he [Obama] is offering right now," said Marks, who frequently writes for Business Week and Forbes.

Page
  • 1
  • |
  • 2
  • |
  • 3
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...