While people might agree that “Dave’s Plan” to replace Obama care would cost no more than per capita while actually giving the best incentives to obtain the lowest costs in the future, the one criticism we keep hearing is that the plan raises corporate taxes. Well, this is partially right. For those corporations that provide health insurance, it could easily increase their payments to the IRS. How does this work? Let’s say a potential employee is deemed to be worth a cost of $60,000 to the corporation, a large established corporation could offer a package of a $50,00 Salary plus healthcare worth $10,000. By separating out healthcare saves the corporation $620 in payroll taxes they would have to pay than if the $10,000 was just added to salary. Further payroll taxes have to be paid whether the company makes money or not. Administration costs spread over a large number of employees are minimal, while size gives them a strong bargaining position to get the best deal on health insurance or even self insure.
A small business is in the opposite position. The cost of insurance and administration are higher. In some cases much higher. Because of this they might not offer to cover employees, choosing instead to pay higher salaries instead. But to compete to for the same employee they would have to pay more to give that employee the same value while paying more in payroll taxes. In effect this gives big business a government subsidized competitive advantage in the race for the best employees. No wonder they like the present system. However, do we really want to keep the generators of most of our future progress and jobs at a disadvantage?
“Dave’s Plan” would level the playing by getting rid of this crony capitalism leftover from World War II. A good trade-off for the change would be to lower all corporate taxes to a level competitive with Ireland and Canada which help all corporations and the economy. (For people new to Detour the series on “Dave’s Plan” begins under Policy in October of ’14)