Friday, July 27, 2007

More Taxes

It been proposed in the Illinois State Senate that the Government oppose a 3 percent tax on businesses that spend less than 4 percent of there payroll on health care insurance for their employees in order to pay for a stripped down version of Governor Blagojevich health care plan, this plan has a number of problems with it. First it makes the assumption that companies have a duty to provide all or most of their employees with health insurance, while in many case it is a good policy for companies to offer health insurance as a benefit in order to increase their likely hood of attractive and retaining qualified employees but its not the place of the government to decide what benefits package a company should offer and penalize them if they don’t. Also some companies may choose to pay their employees more in lieu of providing them with health care, paying them enough that they could purchase it on their own. Many smaller companies might not have high enough profit margins to be able to afford either the cost of the 3 percent tax or spending 4 percent of their pay roll on health insurance cost.

The next problem with this is that will discourage companies from high low skilled/unskilled labor because these are the employees that companies gain the least benefit from offering health insurance from and if the company has a mixture of highly skilled workers that they offer insurance and low skilled/unskilled workers, the more low skilled/unskilled labor that a company hires would increase their overall payroll and decrease the percentage of their payroll that goes to health insurance cost. This would encourage companies to hire fewer low skilled/unskilled labors in Illinois, particularly large companies that can more easily shift this kind of work out of state, and raising the unemployment rate for these groups in the state. This means fewer jobs for Illinoisans overall and slower economic growth and it will make Illinois a less attractive place for companies to do business in by raising the cost of doing business here. Final this will end up being a stealth tax on the consumer as some portion of the tax will be passed on to the consumer in the form of higher prices, as with any other taxes of this nature it will have a larger effect on the lower income groups that spend most if not all of their income on consumption and lesser effect on higher income groups that save a portion of their income.

Comes down to the crux of the problem with the Illinois State budget, that it’s not a revenue problem but a spending and management problem, some of the state leaders want to spend far more than the state can afford to spend.

On sad note former Illinois State Representative, Jay Ackerman was killed this week in a accident, I known Jay and his family for a number of years and they have my deepest sympathies during this time.

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