Below is a link to an article citing a study from the National Center for Public policy which demonstrates how some of the tax credits given to small businesses under the new health care reform law actually create a disincentive for employers to hire new workers under certain conditions.
- Depending on the number of workers, as workers are added, tax credits for health premium spending decrease. In such cases, any new hires after a certain level come at an accumulated cost of salary, payroll taxes, benefits and now – reduction of tax credit.
Many small employers operate within very small margins and in some cases may be influenced by these new conditions. It may be far more advantageous not to hire after a certain level or to add contract employees instead of regular employees.
- According to CBO estimates, tax credits are of maximum value to employers at 13 employees.
- At 15 employees, the credits decrease by $1,400 for a new hire.
- Going from 20 to 21 employees results in a credit loss of $3,733.
- Hiring the 25th worker causes a $5600 hit to the credit amount.
- After 26 employees, credits become phased out.
In 2016, these tax credits disappear. This is due to the fact that state based health insurance exchanges having been open for two years. Credits or subsidies will then be available to qualifying participants who buy through the newly established exchanges.
Read the full article at: http://thehill.com/blogs/on-the-money/domestic-taxes/99387-study-healthcare-law-encourages-small-businesses-to-stay-small?tmpl=component&print=1&page=
Also see - Premium Tax Credits Update: http://www.mccarthystevenot.com/2010/05/26/small-group-insurance-premium-tax-credits-update/
The above article is for informational purposes only and not to be used for implementation. Actual provisions and any amended portions of the health care reform legislation apply.