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ObamaCare and Your Business

If you have been following healthcare reform, you have waited eagerly for the Supreme Court to issue its decision on the constitutionality of the Patient Protection and Affordable Care Act... AKA ObamaCare. Their ruling is expected to happen tomorrow at noon.

How do you think the Supreme Court will rule?

I believe that the Supreme Court will rule in one of the following ways:

  1. Uphold ObamaCare in its entirety.
  2. Eliminate only the individual mandate.
  3. Eliminate the mandate and two other provisions.
  4. Throw out the entire law.

If upheld, how will this law affect me - the small business owner?

The law creates a "small employer health credit" through 2014 which theoretically allows a business to claim a credit for up to 35 percent of the cost of providing health insurance to employees.
The problem is, the credit was written in such a confusing way that no small employer is actually taking advantage of it. However, if this law is upheld, we can decipher the complex & convoluted text to ensure this credit will be beneficial to you and your business.

There will be a Medicare payroll tax increase on small employers. Under Obamacare, the Medicare payroll tax for wages and self-employment earnings in excess of $250,000 ($200,000 for singles) will rise from 2.9 percent to 3.8 percent. This is a direct tax hike in the marginal income tax rate paid by the self-employed and general partners. It will also affect the wage component of Subchapter-S earnings. And since the majority of small employer profits are taxed in brackets that exceed $250,000, this is also a direct marginal tax increase on the majority of small employer profits.

Obamacare also imposes a 3.8 percentage point surtax on "investment income," starting in 2013. Some of this so-called "investment income" is actually small business profits. Investors in small businesses (limited partners and passive shareholders in Subchapter-S corporations) will face this tax. Active trade or business income is excluded, but of course most will face the higher Medicare tax described above. This provision, I predict, will make it harder for employers to raise capital in order to create jobs and expand business operations.

The European Union Crisis
When the Supreme Court releases their decision to the public, I will be on my way to France. Although what the Supreme Court decides is important and impacts us all financially, it pails in comparison to the problem the failure of the European Union poses. On my trip, I will be studying the economic mess that Europe has become. My mission is to gain an understanding of how the financial decline of Europe will unfold and how it will impact you, my small and midsize client. Stay tuned!!!

Supreme Court Upholds Health Care Act... Taxes Go ...
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