Healthcare Reform: As Congress Debates, Small Business Hiring in Paralysis

Healthcare reform creates uncertainty among employers.

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Irwin Stelzer asks how private-sector employers are responding to the healthcare debate in Washington:

Small-business men I met with this week tell me they are in a state of paralysis as they watch the debate over the health care "reform" bill wending its way through Congress. Lurking in its 1,502 pages (the Senate version) are provisions that will markedly raise their costs, and their personal taxes. So even as business gets better, they won't take on more staff because they can't figure out what it will cost them to do so.

What are these cost-raising provisions? In my analysis of the Baucus bill, I mentioned the tax penalties that would apply to businesses that do not provide healthcare for employees who would be subsidized under the plan. But those penalties only applied to firms with 50 or more employees—only 4 percent of all employer businesses. The bill Congress is currently debating, however, is more expansive.

In this bill, tax penalties kick in for firms with payrolls above $500,000. That's 784,302 firms—13 percent of all employer firms (according to Census data). More significantly, the workforce of these firms is comprised of 97,409,858 employees. Another way to put that is 81 percent of all employees of firms in the country.

So if Stelzer is right that many of these firms are holding back on hiring to see how painful healthcare reform will be for their payrolls, that could be a significant drag on employment. Proponents of the plan will cite this as evidence that there can be no more delays—businesses need to start making their plans now, so get the bill passed. Opponents will cite this as evidence that the taxes in this bill are too costly for the economy to take right now.