Bad healthcare reform will cause a quarter million jobs to disappear

While Sacramento special interests spend millions of dollars influencing legislation that will create a mandated healthcare tax, it is the voices of small businesses and their employees that go unheard and who will once again pay the ultimate price for Sacramento's meddling.

The California Legislature is currently debating Assembly Bill 8 (AB 8), introduced in December 2006 by Assembly Speaker Fabian Nuñez (D-Los Angeles).

The aim of AB 8 is to reform California's healthcare system and provide coverage to the 6.6 million uninsured Californians, but this mandate misses the mark.

While AB 8 is well intentioned, it contains numerous flaws that will hurt California's small businesses and result in the loss of 249,000 jobs.

AB 8 will create an enormous state-run insurance pool-paid for by employers.

All companies in California that do not currently offer health insurance, regardless of size, will pay a 7.5 percent payroll tax.

And for companies that do offer health benefits that cost less than 7.5 percent, their payroll will be taxed the difference.

While some employers may be able to afford such a mandate, small businesses, particularly those in the labor-intensive retail, trade and construction sectors, will bear the greatest financial burden.

A study conducted by Bruce Phillips of the National Federation of Independent Businesses (NFIB) Research Foundation shows that over a course of five years, a total of $8.3 billion will be drained from California businesses in the form of employer payroll taxes, administrative costs and insurance search costs.

Additionally, AB 8's plan to pay for coverage for the uninsured solely with money from an employer payroll tax will eventually create a funding shortfall.

At that point, an under-funded, unelected state board will be free to increase taxes without legislative or voter approval, or pick the pockets of other programs such as education and transportation.

AB 8's heavy tax on employers will have serious consequences for California workers. Companies with less than 500 employees will be forced to lay off workers at an estimated 2 percent within the first five years.

Later these affects will spill over to surrounding states that California normally conducts business with, and they will experience the same kind of job losses.

Companies in the retail, food, construction and more labor-intensive sectors will be forced to lay off more than 150,000 employees.

Though affordable, accessible healthcare for all Californians is an admirable goal, the course of action being taken by the Legislature is dangerous and should be given much more thought and consideration.

With the passage of AB 8, 249,000 jobs will disappear and along with it the livelihood of those people that the state meant to help in the first place.

Kabateck is Executive Director of The National Federation of Independent Businesses (NFIB) in California. More information about NFIB is available online at

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