Three years ago this month, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. For individuals, families, and small businesses struggling to pay for health care, this milestone is no cause for celebration. Today we will examine the impact of the key tax provisions of that law.
The President’s health care law contains over a trillion dollars in new taxes on employers, medical device makers, families buying health insurance, and others. These unprecedented new taxes could hardly come at a worse time, as our economy continues to struggle through the slowest recovery on record. With CBO predicting that unemployment will remain above 7 percent through 2015, the law’s new taxes make it more costly for employers to hire, more expensive for families to purchase health insurance, and more difficult for the health care industry to innovate.
And it is getting worse every month. Federal agencies are busy issuing new regulations to implement the law, adding over 150 million new compliance burden hours a year and billions of dollars in costs that will be borne largely by employers – these are time and red-tape costs on top of the new taxes. This is not the recipe for economic growth and job creation. Today’s hearing will explore these new taxes and their economic effects.
The new medical device tax is particularly destructive, as it targets one of the few remaining industries where America continues to lead the world in innovation. This is an industry in which companies often go years without making a profit, hoping to survive long enough to reach profitability and introduce innovative life-saving medical products. But the new tax hits employers regardless of profitability, and has already resulted in layoffs and additional delays in new products reaching the market.
The new insurance tax and employer mandate threaten to stifle small business growth across all industries. Beginning next year, job creators will be saddled with burdensome new rules and taxes that disincentivize hiring new employees and provides economic incentives to reduce employee hours and drop health insurance coverage altogether. Before knowing whether the IRS will deem job creators a “large employer” and thus subject to the tax, employers will have to work out a complicated algorithm aggregating the hours of all part-time workers and adding in the number of full-time workers.
With the new law, Washington is effectively telling many Main Street businesses to cut their workforce and stop growing. Hardly the incentives we need to be giving employers in our current economic climate.
Today’s hearing is especially important because we will be hearing from not only economic and tax experts, but also job creators from across the country. These are individuals who spend their days trying to grow their businesses and expand economic opportunity, but are forced to do so against prevailing headwinds of new taxes and regulations from Washington DC. They know the effects of the new law first hand, because they live them. I was also hoping to welcome a witness who runs a small business in my district, but unfortunately he had to cancel after his business partner had a medical emergency. We wish his partner a speedy recovery, but this just goes to show how unpredictable and vulnerable a lot of small businesses operations are. Washington should be making their jobs easier, not more difficult.
Last year, the Subcommittee held hearings on a provision in the health care law that requires holders of FSAs and HSAs to get a prescription in order to use those accounts to buy over-the-counter medicine. The House subsequently passed legislation authored by Congresswoman Jenkins repealing this provision, as well as the medical device tax repeal, which was authored by Congressman Paulsen.
I have also introduced legislation repealing both the employer mandate tax and health insurance tax. These issues all reinforce the fact that the President’s health care law was not simply a health care law – it was an enormous tax change. As such, it is proper for the subcommittee to examine these laws, which are within the scope of tax reform.