June 23, 2010 | Factsheet on Federal Spending, Federal Budget, Taxes, Entitlements

Obamacare: Hurting Small Businesses and Doctors

Side Effects of ObamacareMajor Tax Increases

  • Increase in Payroll Taxes: In 2013, employees making over $250,000 annually ($200,000 for individuals) will see an increase in their Medicare payroll tax from 1.45% to 2.35%. When combined with the employer portion, the total percentage from the employer and employee will reach 3.8%.
  • All New Taxes on Investments: For the first time, the Medicare tax will be placed on investment income (capital gains, dividends, rents, and royalties), and also used to pay for something other than Medicare (i.e., Obamacare). This new tax begins in 2013 and will pay the government 3.8% of all profits from investments.
  • Tax on Health Insurance Plans: Obamacare imposes a 40% excise tax on insurance plans valued at over $10,200 for individuals and $27,500 for families. This new tax, which is scheduled for 2018, will drastically increase the cost of health care, and many families who make less than $250,000 a year and have high-end health care plans will be hit with this tax.

Small Businesses Hit Hard

  • More Health Care Costs: Small businesses will be burdened with more taxes, fees, and mandates under Obamacare. These new expenses will eventually make it more costly for small businesses to offer coverage, likely forcing many to drop coverage altogether.
  • Ineffective Tax Credits for Small Businesses: The small business tax credit included in Obamacare is a short-term program—it lasts for only six years—and is available only to firms with 25 or fewer workers in which the employer pays at least 50 percent of the costs. This will not address the many uncertainties small businesses face in deciding whether to offer health insurance coverage to their workers.
  • Higher Compliance Expenses: Many small businesses will be forced to add more administrative staff to handle the increasingly complicated regulations on coverage and the tax compliance regulations, such as those related to filing corporate tax forms for business-to-business transactions of $600 or more.

Physician Shortage

  • Discouraging Outlook for the Medical Profession: In a recent survey of doctors, 79% of physicians are less optimistic about the future of the profession, 66% would consider dropping out of government health programs, and 53% would consider opting out of insurance completely.
  • More Medicaid, but Fewer Doctors: Under Obamacare, 18 million of the 34 million people who would gain health care coverage over the next 10 years would obtain that coverage through Medicaid. But in a recent poll, 67% of primary care physicians said new Medicaid enrollees would not be able to find a primary care physician in their area.
  • No Long-Term Solution for Doctors: Obamacare ignores the longstanding Medicare reimbursement problems and provides only short-term Medicaid relief to physicians. Once the federal taxpayer-funded increases end, either the payments to physicians will have to be restricted or states and state taxpayers will have to take on these additional costs.
For more information, please visit: http://www.heritage.org

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