The changing cost of business under ColoradoCare
October 17, 2016
Supporters of Amendment 69, a plan to create a universal health insurance system in Colorado, claim that 80 percent of Coloradans could save health care costs under ColoradoCare.
But opponents argue that the other 20 percent, which includes small-business owners, location-neutral business people and some retirees, will unfairly carry the burden of the proposed 10 percent payroll tax to pay for the plan.
Under the plan, Colorado employees would pay 3.3 percent of their income into ColoradoCare, while employers would pay 6.67 percent. Business owners and independent contractors would pay the full 10 percent, including any business profits not reinvested into the business.
Longtime Steamboat Springs accountant Dana Treadway said for a business not currently paying for an employee's insurance costs, or a business paying only the minimum of $125 per month required for larger businesses under Obamacare, a new payroll tax of this magnitude could significantly affect businesses.
"To levy 6.66 percent across the board on 100 percent of the payroll costs of a company would be devastating to small businesses. The only way for them to absorb this would be to lower the compensation to the employee," Tredway said. "I can promise you that I would have to cut staff to absorb this type of tax."
Tredway said the proposition might be appealing to employees whose health care costs would go down, but employees can't be sure that all employers will be able to cover the cost without lowering compensation or reducing staff.
"To individuals dealing with health care, Amendment 69 seems like a great alternative; however, they cannot assume that employers will have the funds to pay them and pay this additional tax," Tredway said.
And though the impacts will vary based on a business' size, staff and current employer and employee contributions, Steamboat Springs Amendment 69 proponents Mayling Simpson and Paul Hebert believe many businesses would benefit.
According to Hebert and Simpson's research, businesses that already provide insurance to some number of employees are likely to save thousands under the proposal, while businesses of various sizes that insure two or fewer employees are likely to pay more than they currently do.
Two examples the couple studied were a construction company with 27 employees and less than two covered by insurance, which would pay an additional $37,000 annually under Amendment 69, and a medical practice with 13 employees, four of whom are currently insured, which would save an estimated $18,500 under the amendment.
Off the Beaten Path bookstore owner Ron Krall said he is philosophically supportive of ColoradoCare but wishes it were a national plan, and he does worry that small businesses like his own will be unfairly burdened.
"I am concerned that a disproportionate share of the cost will be borne by small, seasonal retail businesses," Krall said. "(But) I perceive a real benefit for our employees whose current health coverage is too often inordinately expensive and has extremely high deductibles, thus really only providing catastrophic coverage."
Krall said he offers health insurance to employees who have worked at the bookstore longer than one year, but most of the current employees have other insurance. The impact to the store would be an increased cost of about $2,500 to $5,000 if Amendment 69 were to pass, Krall said.
Like small-business owners, location-neutral business owners who choose to live in Colorado will be subject to the 10 percent tax as they are self-employed.
Though the Steamboat Springs Chamber Resort Association hasn't taken a stance on Amendment 69, CEO Jim Clark said he's heard feedback from businesspeople who have concerns about the impacts of the tax.
"The folks I've heard from are not in favor," Clark said.
Clark questioned whether the tax would deter wealthy retirees or large businesses from moving to or staying in Colorado.
"The cost of doing business is always a factor," he said.
Retirees who bring in income from Social Security, an IRA distribution or pension also will be taxed at 10 percent, as those forms of income are nontraditional, but the tax will occur only after the person has earned a certain amount — $20,000 for those 55 to 64 and $24,000 for those older than 64.
Those exemptions would allow lower-income retirees to avoid the tax depending on how much money they are earning each year, and the taxes would only apply to those whose primary residence is in Colorado, not second-home owners who primarily live elsewhere.
For those with more unique employment or financial situations, most proponents encourage people to consult a lawyer or tax professional about individual impacts.