HIT stands in way of small business job growth

This week, we should be optimistic about the present (an NFIB poll from earlier this month showed U.S. small business confidence at a one-year high) while carefully considering our concerns for the future. Despite a certain amount of optimism, small business job creators are still struggling to pull themselves out of the recession. According to a recent report from payroll-processing firm ADP, small business hiring is down nearly 50 percent from the start of the year. When you also consider that unemployment increased during May for the first time in 2013, you recognize there remains untapped potential for economic growth that could touch every industry and community in the country.

So what is the reason for the disconnect between small business optimism and a hiring slowdown? What stands in the way of a possible small business boom? While each individual business faces its own growth speed bumps, one possible answer may be the upcoming implementation of the Patient Protection and Affordable Care Act (PPACA) and, more specifically, its health insurance tax.

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Often lost in the broader debate over PPACA is a tax on health insurance policies sold in the fully-insured market. Since 88 percent of small businesses and the self-employed purchase their health insurance through the fully-insured market, this health insurance tax, or HIT, will be borne overwhelmingly by the small business community in the form of higher premiums. In fact, a study by Douglas Holtz-Eakin, a former head of the non-partisan Congressional Budget Office, predicts the HIT will cost the average family $5,000 over the course of the next decade.

This runs counter to the stated intent of the health reform legislation. Increasing health insurance premiums on the 34 million small business employees and the self-employed who purchase policies subject to the HIT is no way to ensure “affordable care.”

With the HIT taking effect in just six months, businesses are already planning for its impact. Those preparations could be behind the slow small business job growth. An April Gallup survey found that a plurality of small business owners – 48 percent – think PPACA will be bad for business. Even more – 51 percent – are holding off hiring additional staff because of concerns about the new health law. That is troubling, because small businesses could hold the key to lowering the national unemployment rate from its current position at more than seven percent. After all, small businesses have accounted for about two thirds of net new jobs since the 1970s.

We do not need to settle for the HIT handcuffing small business job growth. Bipartisan legislation introduced in the House of Representatives by Representatives Charles Boustany (R-La.) and Jim Matheson (D-Utah) would repeal the HIT. Together with its Senate companion bill, more than 200 bipartisan cosponsors have signed on to take action and lift an unnecessary burden off the back of our nation’s job creators. These policymakers should be applauded, and their concerns heeded.

While we pay special attention to small businesses during Small Business Week, with commonsense legislation and policies that promote economic growth, the nation’s job creators, including the hotel and lodging industry, could realize sustained growth and stability for many years to come.  

Lugar is president and CEO  of the American Hotel & Lodging Association.

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