Compiled and Edited by Meredith Wood Bahuriak, Nuzoo Media
There is no doubt that today’s small business community is bombarded with an ever-expanding list of political hot topics, each of which seem to carry with them a steadily recurring theme. In a word, that theme is one of reform.
The subject of reform, regardless of context, is usually marked by controversy, complexity and debate. For most Americans, the issue of healthcare reform is no exception.
SMALL HEALTH CARE AND HEALTH REFORM
Small businesses play an important role in the U.S. economy and are a strong driver of job growth and innovation. But small businesses are severely disadvantaged by the current U.S. health care system relative to their larger counterparts. A new report by the Council of Economic Advisers (CEA) examines the challenges faced by smaller firms under the current health care system, and the likely impacts of health care reform on small businesses and the workers they employ.
The Affordable Health Care Act
You may already know that President Obama has signed into law health reform legislation that reduces health care costs for American families and small businesses, expands coverage to millions of Americans, and ends some of the worst practices of insurance companies. However, you might not be aware of all the ways that this legislation can help you, your business, and your employees.
Small Business Health Care Tax Credit
The Affordable Care Act will provide enormous benefits to the millions of small business owners and the tens of millions of small business employees by expanding coverage options, lowering costs and giving consumers, not insurance companies, control over their own health care.
The tax credit, which is effective immediately, can cover up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent.
• The Congressional Budget Office estimates that the tax credit will save small businesses $40 billion by 2019.
• Both small for-profit businesses and small not-for-profit organizations are eligible.
• Available Immediately. The credit is effective January 1, 2010. As a result, small businesses that provide health care for their workers will receive immediate help with their premium costs, and additional firms that initiate coverage this year will get a tax cut as well.
• Broad Eligibility. The Council of Economic Advisors estimates that 4 million small businesses are eligible for the credit if they provide health care to their workers. Qualifying firms must have less than the equivalent of 25 full-time workers (e.g., a firm with fewer than 50 half-time workers would be eligible), pay average annual wages below $50,000, and cover at least 50 percent of the cost of health care coverage for their workers.
• Non-Profits Eligible. Tax-exempt organizations are eligible for a 25 percent tax credit in 2010. In 2014, this rate increases to 35 percent. (The credit rates are lower for non-profits to ensure that the value of the credit is approximately equal to that provided to for-profit firms that cannot claim a tax deduction for the amount of the credit claimed.)
• Gradual Phase-Outs. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
• Premium Cost Eligibility. To avoid an incentive to choose a high-cost plan, an employer’s eligible contribution is limited to the average cost of health insurance in that state.
REFORM SWIPE FEES NOWS!
Reform Swipe Fees NOW! is a project by the Retail Industry Leaders Association (RILA). The project unites U.S. business owners, small and large, in a campaign for fair debit and credit card swipe fees.
An amendment to delay debit card swipe fee reform was shot down by the U.S. Senate June 8 in an action hailed by business trade groups as a victory for small businesses and consumers.
New rules limiting debit card swipe fees are scheduled to go into effect on July 21, 2011 – one year after the Dodd-Frank bill was signed into law.
• Dramatically lower debit swipe fees by an estimated 70 percent and slash the charge per transaction to 12 cents from an average of 44 cents.
• The Senate’s action will save small-business owners and their customers more than $19 billion a year, the International Franchise Association said.
June 9, 2011 more than 50 small business owners from across the country with
Reform Swipe Fees NOW! rallied on Capitol Hill today to thank Congress for supporting Main Street and opposing the Tester-Corker Amendment that, if passed, would have undone critical swipe fee reforms that were part of last year’s Dodd-Frank financial reform package.
Still, staunch conservatives don’t like the government meddling in the free market, so the measure is drawing some flack. Where many big card-issuing banks were collecting 1% to 3% of every card-based transaction (which averaged 44 cents per transaction), the government intervention will limit those fees to 12 cents per transaction. That’s a lot of money lost for banks in an industry ruled by the debit card.
The hard-line conservative argument (let the free market correct itself) is rooted in a sound principle, but one that doesn’t apply here. The market couldn’t correct itself, because retailers had no control. If retailers wished to accept cards, they were forced to accept fees that were, in many cases, ridiculously unjustified.
The response of the banks will be interesting to watch. Will they reduce or eliminate rewards programs to make up for the deficit in lost revenue? Will they scale back on card marketing, to the chagrin of Visa and Mastercard? Will they increase fees in other areas to patch the shortfall?