April 02, 2010
Tax Partner Joe Perry provides insight to small businesses regarding healthcare reform
By Michael H. Samuels
Reform may keep businesses from growing
The health care reform bill passed by Congress last month has small businesses reconsidering hiring, despite a 10 percent unemployment rate that has millions looking for jobs.
The reason: The bill hands out tax credits to businesses with fewer than 25 employees that provide health insurance to their workers.
Specifically, companies with fewer than 10 employees who make $20,000 on average will receive a 100 percent tax credit, while businesses with 25 or fewer employees who earn less than $50,000 will receive a 35 percent tax credit. Both provisions begin in 2011.
“If you hire one more person, it may cost you more,” said Joseph Perry, the partner in charge of tax services at Marcum in Melville. “You will have to figure out and measure the cost of that 26th person. There might be a more onerous cost to expanding than there was prior to the bill being turned into law.”
Other provisions, such as a requirement for businesses with 50 or more workers to provide health coverage or face a $2,000 fine, are effective starting in 2014.
More time will be needed to figure out all of the ramifications of the bill, according to Eliatt Di Lieto, a partner at Cerini & Associates in Bohemia. He said he’s been urging his clients to hold off doing anything until he’s had a chance to digest all of the provisions of the law, which fills more than 2,000 pages.
For instance, the bill includes a 40 percent excise tax on “Cadillac Plans,” or high-end insurance policies, starting in 2018, as well as a 0.9 percent Medicare payroll tax increase on individuals who earn more than $200,000 annually. The total for couples is $250,000.
While companies such as John Deer and Caterpillar have already taken $100 million adjustments as a result of the excise tax and the loss of deductions on tax-free subsidies they receive for providing prescription-drug benefits for retirees, Di Lieto said that may not be the case for other firms.
“The biggest thing that I have to stress is to not react until the legislation is understood,” he said, adding that he hasn’t even figured out how the measure will affect Cerini and its 36 employees.
But John Pellitteri a partner at Grassi & Co. in Jericho, said many of the provisions are just additional taxes piled on a business community already dealing with a myriad of new tariffs, including the MTA’s payroll tax.
“I represent a lot of wealthy taxpayers, and I do believe that it is our American duty to pay taxes for the services that we get,” he added. “Unfortunately, where there are limited resources, who is going to make up the brunt of the burden? It’s going to be the high-income earners.”
So, small business owners, don’t hire too many or make too much.