When it comes to the tax reform proposals being promoted by congressional Republicans, one of their own has come out against the plans because they won’t do much for America’s small businesses.
“We can’t leave anybody behind, which is why they came up with the 25 [percent] rate for pass throughs,” Sen. Ron Johnson (R-Wis.) said, himself a former small-business owner. “The problem is, neither the House or the Senate version really honored that commitment to pass-through businesses, which I argue are a huge engine of economic growth.”
Sen. Johnson is exactly right about the role of small businesses in our economy, and he’s right that neither the Senate nor the House of Representatives have offered proposals that would help more than a handful of small firms, while also blowing up the deficit by adding $1.5 trillion over 10 years.
Sen. Rand Paul (R-Ky.) may be a doctor, but he obviously doesn’t have the cure for what ails small businesses. During a discussion on health care policy in his home state, Paul said President Donald Trump is likely to legalize association health plans on the federal level, which would allow more groups of similar businesses to band together to purchase insurance. Paul claims this would allow small businesses to negotiate lower rates and insure more people, but what he and others who support this idea fail to understand is that these plans would actually do the opposite.
Some lawmakers, including Sen. Mike Enzi (R-Wyo.) and Paul, have long touted association health plans as a great solution to the health care needs of small businesses. Unfortunately, Enzi and Paul simply don’t understand what would actually happen to insurance markets if these plans were ever widely available. Small businesses frequently buy plans through the small-group market, which is subject to different rules and protections than the large-group market. The regulatory difference between the two is significant. As a report by the Kaiser Family Foundation noted, plans sold in the large-group market can charge people more based on their health status, and they’re not required to cover essential health benefits like prescription drugs, emergency services or maternity care. However, Obamacare-compliant plans in the small-group market provide protections against being charged more based on health, age or gender and include these essential benefits.
As President Donald Trump and congressional leadership stump for tax reform, it is becoming increasingly clear they do not understand why most small businesses will not benefit from drastically slashed corporate tax rates.
House Speaker Paul Ryan’s (R-Wis.) tax blueprint, for example, calls for reducing the corporate rate to a flat 20 percent because he believes this will help small employers.
President Trump, meanwhile, has floated a maximum corporate rate of 15 percent, saying recently that he intends to “dramatically reduce the tax rate for America’s small businesses, which have created more than 60 percent of new private-sector jobs in the recent past.” He claimed this rate reduction would bring relief to millions of entrepreneurs.
Despite months of speeches, speculation and tweets suggesting that the federal government would not continue to provide critical payments that support the Affordable Care Act (ACA) marketplaces, President Trump still has yet to announce a final decision on the future of cost-sharing reduction subsidies (CSRs), which help reduce out-of-pocket healthcare costs for low and moderate-income enrollees. While the president did agree to make the CSR payments for August, there is no telling what he will do in coming months, and his ongoing rhetoric about wanting to let the ACA collapse is hardly reassuring to small business owners and their employees who depend on the exchanges for coverage. This is why lawmakers must act now to pass bipartisan legislation that will strengthen the ACA marketplaces.