Part of the story about who would feel the payroll tax on employers contained in the House-passed health care bill has gone missing. The media coverage I’ve seen and the Congressional rhetoric I’ve heard focuses on the small business lead by an entrepreneur who started the company. That’s part of the story, but it isn’t the whole story. The Joint Tax Committee’s “technical explanation” makes clear that this is a tax on all employers, both for-profit and not-for-profit. (See the discussion that starts on page 31, under the opaque title “Responsibilities of Nonelecting Employers”.)
A lot of non-profits do not offer health insurance. They are at risk of paying the 8% payroll tax. Data from the Medical Expenditure Panel Survey (MEPS) shows 36 percent of non-profits do not offer health insurance. With a universe of 534,554 non-profits in the MEPS survey, that says about 200,000 do not offer coverage.
I wish the media paid more attention to the plight of non-profits under the House bill. Those with payrolls over $750,000 that do not offer health insurance would be required to start offering coverage or pay an 8 percent payroll tax. I wonder about the non-profit that provided curbside recycling in the town where I used to live. Some on the city council wanted a “living wage” ordinance that would have required higher wages or health insurance. The non-profit said the prices it got for selling materials to recyclers meant it could not stay in business if it paid the living-wage rate or provided health insurance. Given the relatively low wages the recycler pays, the tax would be cheaper than offering coverage, but I don’t know what it would do if it had to pay an 8 percent payroll tax. The message from the House bill is the curbside pickup recycler and other non-profits that can’t fit insurance or the payroll tax into their budgets should not be in business.
— Hanns Kuttner is a visiting fellow at Hudson Institute.