The Washington Post has an article this morning discussing a Commonwealth Fund study about the impact of health “reform” on small business.  While the study attempts to trumpet the claim that 16.6 million workers are employed by small businesses eligible for the tax credit created by the law, the reality is that the credit’s impact will be much smaller.  An estimate developed for Commonwealth by paid Administration advisor Jonathan Gruber found that only 3.4 million workers are in firms that will actually receive the credit between now and 2014.  According to the Census Bureau’s population estimates, that means that only 1.1% of all Americans, and 1.7% of those with private health insurance, will receive any benefit from the small business tax credit – a paltry showing by most measures.

Conversely, all small businesses – and all Americans – will be affected by the higher taxes included in the law.  For reasons that might be self-evident, the Commonwealth study did not highlight most of these tax increases while attempting to tout the “benefits” of the health care law.  But the fact remains that thanks to the health law, many small business owners will be subject to a new 3.8% Medicare tax beginning in 2013 (on top of the largest tax increase in American history scheduled to take effect this January).  Moreover, small business owners will be disproportionately affected by the health care law’s new tax on insurance companies; because larger firms that self-insure their workers are exempted from the tax, smaller businesses will pay the lion’s share of this levy.  In addition, the law imposes 20 new insurance mandates, each of which could raise insurance premiums on small businesses by one to three percent.

To summarize, the health care law imposes permanently higher taxes and higher premiums on small businesses, so that only 1% of Americans can receive a temporary small business tax credit that expires after six years.  By any measure, that’s not “reform.”

RPC Analyst Chris Jacobs