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In an article written for the Associated Press, Ricardo Alonso-Zaldivar takes a closer look at the new tax credits included in President Obama's health care overhaul law. Alonso-Zaldivar reports that many small business owners who were lead to believe that they would qualify for the President's health care credits were disappointed to find out that they are in fact ineligible:
When the administration unveiled the small business tax credit earlier this week, officials touted its "broad eligibility" for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage... Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.
The administration's failure to make note of this "fine print" has left many small business owners searching for their piece of the tax credit pie. One such owner, Zach Hoffman of Springfield, Illinois, was under the impression that his furniture company would receive federal assistance for the $79,200 it pays annually in health insurance premiums for its 24 employees. "It leaves you with this feeling of a bait-and-switch," he said once he found out that his company--which pays workers an average of $35,000 a year-- did not qualify for the credit.
Linda Blumberg, an economist from the Urban Institute public policy center, says:
You can get zero even if you are not hitting the max on both pieces.
That's because although on paper the credit appears to be available to companies with fewer than 25 workers and average wages of $50,000, in practice it's not as simple as that. Blumberg says that a complex formula that combines the number of employees and their average salary works against small businesses that have more than 10 workers and $25,000 in average wages. So even though it is possible for slightly larger small businesses to qualify for the tax credit, it is far less likely.
Hoffman says that in order for his furniture company to get the most out of the federal tax credit, he would have to cut his work force by 14 employees and lower the wages of those who remained. He believes that that seems like a strange outcome, especially considering the fact that unemployment is close to 10 percent.