August 06,2010

Small BusinessTax Credit for Health Insurance is Lacking

Floor Speech of Sen. Chuck Grassley on Small Business Tax Credit for Health Insurance and 01/03 Tax Relief
Submitted to the Senate Record
Thursday, Aug. 5, 2010

We spent nearly six weeks debating a bill that would help small business.

My friends on the other side of the aisle claimed that the bill was a jobs bill, one that would help small business – the engine of our economy.

The senior senator from Louisiana – who I have great admiration for as an advocate for small business – said, “if the Democrats aren’t for small business, I don’t know what we’re for.”

Well, the small business jobs bill was not passed by this body.

My friends on the other side will claim that Republicans blocked the bill. 

But, I think my friends need to look in the mirror when placing blame on their inability to govern.

Even if the small business jobs bill would have passed, the tax measures in that bill are only a drop in the bucket when it comes to the taxes and increased regulation small business is going to have to endure.

Although Democratic leadership and the White House continue to say that they are for small business, any legislative measure that has been advertised as helping small business has not lived up the hype.

Let’s start with the new health care reform law.

During the debate over health care reform, my friends on the other side of the aisle – including top officials in the White House – explained that the new law would provide tax credits to small business to help them pay for health insurance.

My friends said it so many times, you would almost think that the so-called tax credit was the best thing since sliced bread.

Many Democratic Senators based their vote in favor of the health care reform bill solely on the belief that the small business tax credit for health insurance would help struggling small businesses.

Well, even after the White House spent taxpayer dollars to send postcards to four million small businesses informing them of the so-called tax credit for health insurance, the tax credit has been a dud.

That’s not according to this Senator.  That’s according to small business owners and brokers who are in the business of selling insurance to small business.

For example, just the other day – Thursday, July 29th – the Bloomberg news organization wrote an article noting that the response to the so-called tax credit for small business “has been cool,” according to “health-plan brokers across the country.”

I ask unanimous consent to place the Bloomberg article into the record.

Here are some quotes from the article about the small business tax credit:

James Stenger, director of business development for Benefit-Mall said, “The reality is it doesn’t meet the hype…It’s had very little traction so far…”

Russ Childers, a broker in Americus, Georgia, said, “It fell short of what was needed to help businesses.”

Todd Page, of Warrenville, Illinois, said, “We’ve really wanted it to work, because we’d sell more…It just hasn’t worked out, and most firms have been disappointed.”

Thomas Harte, president of Landmark Benefits Inc., said, “We’re not seeing more people becoming insured as a result of a subsidy coming their way.”

They are not the only ones decrying the so-called tax credit for health insurance. 

The chief executive officer of the largest organization representing small business – the National Federation of Independent Business – questioned the effectiveness of this tax credit. 

Small business owners who also had high hopes that the credit would help them were surprised and extremely disappointed when they found out they did not qualify for the credit.

A May 20th Associated Press article chronicles these frustrations.

I ask unanimous consent to place the May 20th AP article into the record.

I’d like to read one passage from the article before I move on.  The article said:

“Zach Hoffman was confident his small business would qualify for a new tax cut in President Barack Obama's health care overhaul law.  But when he ran the numbers, Hoffman discovered that his office furniture company wouldn't get any assistance with the $79,200 it pays annually in premiums for its 24 employees. ‘It leaves you with this feeling of a bait-and-switch,’ he said.”

Every day I hear from Iowa small business owners who are frustrated with the so-called small business tax credit for health insurance.

I have been told that after gathering all of the required information and paying an accounting professional to calculate all of the phase-outs and limitations, the time and cost almost outweighs any benefit for those businesses lucky enough to qualify.

Steven Yeater of Wilton, Iowa – the co-owner of a products finishing business – wrote me a letter telling me that the tax credit is:

 “(1) not well thought out or discussed, (2) ridiculously complicated for a small business owner to understand and implement, and (3) once again, Congress is over-selling/over-promising the benefits of the tax credit.” 

I ask unanimous consent to place this letter into the record.

This is just one example where the Democratic majority has failed small business.

This is one example where the Democratic majority has touted a so-called benefit for small business that did not live up to its hype. 

And now, small business is faced with mounting tax increases and regulatory burdens.

What do I mean?

The new health care reform law included 20 tax increases.

13 of them fall on individuals and families and 7 of them hit businesses.

These tax increases will be devastating for small business.  Moreover, these tax increases far outweigh the benefit of the so-called small business tax credit for health insurance that some businesses are lucky enough to receive.

And this is not the only tax increase small business will face.

When Congress returns after the August recess, we are going to debate the bipartisan tax relief that was enacted back in 2001 and 2003.

That tax relief is set to expire at the end of this year unless Congress acts.

Allowing the bipartisan tax relief to expire would result in the largest tax increase in our nation’s history.

My friends on the other side of the aisle have indicated that they would like to extend the bipartisan tax relief for the “middle class.”

I want to emphasize that this means that my Democratic colleagues want to extend 80 percent of the bipartisan tax relief that they like to call the Bush tax cuts.

Actually, the only reason why they call it the Bush tax cuts is to vilify the tax relief.  But, my friends seem to support 80 percent of the tax cuts they enjoy vilifying so often.

Which brings me to my final point.  My friends on the other side of the aisle would extend some of the tax relief, but not all of it.  My friends want to allow the top marginal tax rates – and a number of hidden taxes that affect these taxpayers – to expire.

Why?  Because my friends say the country – our federal government – cannot afford to give tax cuts to the “rich.”

But, it’s not the rich who are going to be burdened if the rates were allowed to expire. 

It is small business that will suffer.

So in closing, I refer back to the statement of the distinguished senator from Louisiana which was, if Democrats are not for small business, I don’t know what we’re for.

The Democratic leadership is not for extending all of the bipartisan tax relief.  So, I will leave it to others to decide whether or not my Democratic colleagues are for small business.