Letter to Vice President Pence: Extension of HIT Tax Moratorium to 2020 a Boost to Small Business

By at 13 November, 2018, 11:02 am

Vice President Michael R. Pence

The White House

Office of the Vice President

Washington, D.C.  20500


Dear Mr. Vice President,

Entrepreneurs and small business owners remain confident about the U.S. economy and the outlook for their firm’s growth. The many policy initiatives pursued and implemented by the Trump Administration have made a big difference for the health of small business finances, expansion opportunities, and startup activity in the United States. SBE Council is very grateful for your leadership and work in many key policy areas, and we look forward to our work together in the months and years ahead.

During the final days of the 115th Congress, there is an opportunity to further fuel small business confidence and growth into 2019 and beyond. Several key policy reforms, if enacted, will provide small businesses and entrepreneurs with the certainty and relief they need, which in turn will help to sustain the strength of our growing economy.

One of those key issues is the cost of health coverage. Costs remain high, yet entrepreneurs are very enthusiastic about the reforms and changes initiated and implemented by your Administration. The lifting of Obamacare burdens, and the pursuit and development of reforms to lower costs and boost choices (through, for example, Small Business Health Plans, more practical short-term plans, and improvements to health reimbursement accounts, to name a few) will help small businesses and their employees access insurance coverage that is reasonably priced, and the health care they need. Still, more reforms are needed to unlock innovation and new models of coverage for the delivery of quality care at lower costs for entrepreneurs and their employees.

That is why I am writing today. SBE Council’s nationwide membership of more than 100,000 entrepreneurs and small businesses strongly support an additional-year extension of the health insurance tax (HIT tax) moratorium for 2020. In order to have maximum impact for small businesses, this extension needs to occur right away, which means Congress must act before the end of this year.

The unfair HIT tax directly strikes the self-employed, small businesses and their employees. Thankfully, Congress passed a one-year moratorium on the HIT tax for 2019.  But those savings will be short-lived with the return of the HIT tax in 2020. Cost increases will be on the mind of small business owners not far into 2019, which means plans for dealing with rising health insurance premiums will impact owner psyche and investment decisions well before 2020 arrives. This dynamic could undermine the positive economic climate Administration policies have helped to create, as well as the profitability and competitiveness of small businesses.

According to a report by Oliver Wyman, premiums in 2020 would likely increase by 2.2 percent with the HIT tax’s return. For the self-employed and small businesses, that means increases ranging from $154 to $479 depending on the enrollee and product. Projected increases will amount to $196 per person in the individual market, and $154 per person and $479 per family increases in the small group market. The increases would remain for subsequent years.

Even in a great economy, higher costs put small businesses at a competitive disadvantage. Regarding health coverage, this key benefit allows small firms to compete with larger companies as they work to attract and retain the employees they need to scale and operate efficiently.

While the ideal policy solution is to repeal this unfair tax, Congress must extend the moratorium through 2020 and do so during the lame duck session. Small businesses cannot afford new costs and surprises that undermine confidence and the growth of their businesses. Addressing the HIT tax for 2020 by the end of this year would be a welcome piece of good news for small businesses. The policy change will keep small business optimism and growth in high gear.

Thank you again Vice President Pence for your leadership and long-time support of small businesses. Do not hesitate to call upon SBE Council to assist you in your efforts in support of a return to strong entrepreneurship and sustaining the optimism and growth of America’s small businesses.


Karen Kerrigan, President & CEO

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