Across Arizona, more than 900,000 workers rely on small and mid-sized businesses for their paychecks. My company is one of these employers, and we’re striving to ensure our 110 employees will continue to have jobs and enjoy wages and benefits adequate to support a family. Unfortunately, achieving this objective is getting harder every day. One of the biggest challenges is the Health Insurance Tax, or HIT, a new tax on health insurance imposed by Congress as part of the Affordable Care Act.
Having run a company for over 15 years, I can tell you—it’s always a shock when benefits time rolls around. We scour the market for the best deal, yet we’ve seen costs rise by $400,000 overnight while the actual benefits package dwindled. And we may be the lucky ones. Many of our customers are mom and pop businesses, and they are really struggling. Some can’t even afford health insurance anymore.
Adding a tax that raises costs even further is not only unfair, it’s illogical. The HIT costs businesses about $500 per year per employee—and that can add up fast. My company’s insurance premiums are about $55,000 higher due to the HIT. And since the tax rate is scheduled to increase every year, prices will only go up from there.
The HIT is a cost few companies can absorb. Too many workers are seeing the funds taken out of their paychecks and away from their families. What’s worse, the tax is punishing those who can least afford it. The HIT applies to the fully insured market, where 88 percent of small businesses get their health coverage. Large competitors that self-insure don’t face the added cost. As a result, the more than $100 billion the HIT will raise over a decade is being stripped from America’s Main Streets. It’s an assault on the very entrepreneurs who drive growth and innovation.
The consequences, however, will face every American, no matter where they work. Analyses by both the Congressional Budget Office and the National Federation of Independent Business confirm that the HIT will reduce U.S. GDP by up to $33 billion and private sector employment by 250,000 jobs by 2022. It’s no wonder that nearly 80 percent of surveyed small businesses say the HIT will force them to make changes, such as laying off workers, delaying hiring, and cutting back on wages and benefits.
One of the few bright lights is Arizona Congresswoman Kyrsten Sinema. She has headed the charge on repealing the HIT and is the lead Democratic co-sponsor of H.R. 928, a bipartisan bill in the U.S. House of Representatives that would relieve small businesses and working families of this burdensome tax. Thanks to efforts by Congresswoman Sinema and a strong bi-partisan majority in Congress, a one-year suspension of the HIT passed Congress last year, providing businesses and families with relief from the HIT in 2017 and providing our elected leaders some breathing room to find a long-term solution.
However, the HIT will come back in 2018 and we cannot allow this short window of opportunity to close without action by Congress. A permanent repeal of the HIT is the only answer for Arizona’s small businesses, communities and our economy. If the HIT is not eliminated soon, we will all pay the price when the tax returns in its full and damaging force in 2018.
Jared Smith owns bluemedia, a design, fabrication and signage installation company in Tempe, Arizona.