The plight of the recent college graduate will continue. We are a highly educated generation, yet job prospects remain perpetually bleak. You, like me, are probably worried about what you will do when you graduate. You’ve invested irretrievable wealth and time in your college degree, but it seems in vain. The president’s health care bill presents good news for college-aged students though. We will be able to stay on our parents’ health insurance until we are 26. Why is this good news? Because we won’t have jobs to purchase our own insurance when we graduate, thanks in large part to the health care bill.
Instead of fighting for job growth, the president and the Democratic-held Congress has spent the bulk of their political goodwill on health care reform. How does this affect the job market? Because the legislation directly attacks businesses and individuals who have hiring power. The legislation produced by Democrats will raise taxes over $410 billion, thus diminishing profits on corporate earnings statements and freezing job growth.
In economics class I noticed a remarkably obvious trend: When business expenses increase, hiring capacity decrease. And that’s exactly what the health care bill imposes on business – new expenses. The health care bill changes the conditions that large corporations can deduct employer-sponsored retirement health benefits from their taxes.
You may say, “I am looking for a job, I’m not planning for retirement.” Well, most large companies have long-term retirement benefit obligations they must meet. When a company can’t deduct these costs from their taxes, they are forced with the decision to either cut benefits or lay off workers. Unfortunately, the latter is typically the result.
Additionally, most large corporations already provide generous health insurance plans. These plans, outlandishly dubbed “Cadillac plans,” have become the target of a 40 percent tax that insurance companies must endure. This tax will drive up the cost of the so called “Cadillac Plans” and force companies to chose between providing quality benefits or slashing jobs. Last week, Caterpillar announced the health care bill will cost them $100 million in new expenditures in 2010 – before most of the bill even takes effect.
You argue, “Businesses that college graduates work for are usually small businesses anyways.” Well, companies with 50 or more workers will be forced to provide employee health insurance or face a fine of $2,000 per worker. Again, as cost goes up, the availability of entry-level jobs that college graduates seek will go down.
Still not convinced that the health care bill will kill job growth? Are you interested in a career in real estate or insurance? Rental property income, a $250 billion business annually, has been targeted with a new Medicare tax of 3.8 percent. Rental property is a capital intensive industry that is sustained by small margins over long periods of time. To stay afloat, they will be forced to cut costs. The first cost cut is almost always in the form of human capital. Insurance companies, already highly targeted by the federal government for new taxes, will lose vital tax deductions if they pay executives more than $500,000 per year. As tax deductions decrease, hiring will also decrease.
But the new taxes just keep on coming. Capital gains tax has been increased from 15 percent to 23.8 percent. Unearned revenue has also been slapped with an additional 3.8 percent Medicare tax. And ladies, evening tanning salons will feel the wrath, in the form of a 10 percent excise tax.
If some lucky companies have managed to avoid the above tax increases, they are merely surviving on borrowed time. Each state will be forced to pick up the tab for new Medicaid entitlements (except Nebraska). Currently, Medicaid is one of the highest state budget expenditures. To shore up revenue shortfalls, states have been forced to slice budgets. This new entitlement will increase expenditures even further. States will eventually be left with only one choice: raise taxes. State taxes affect everyone, especially the hiring capacity of small businesses.
To be fair, the health care bill will provide some new jobs – with the IRS. The president has mandated the hiring of 16,500 new IRS agents to enforce the tax mandates in the health care bill. Intrusive?
However, we can try to stop this bad public policy. We can collectively reject this legislation by voting for and electing new leaders to Congress dedicated to repealing and replacing the legislation. We need decisive leaders who will fight for our interests. Proponents of the Democrats’ version of the health care bill will argue that “we have a societal obligation to reform health care.”
We all admit health care needs reforming, but not at the expense of job growth. If you believe the government is helping you by passing health care reform, I hope you will reconsider.
Hunter Lipscomb is a graduate student majoring in business administration. He can be contacted at [email protected].