Obama Proposes Tax Credits for Small Businesses That Offer Health Coverage to Workers

Presumptive Democratic presidential nominee Sen. Barack Obama (Ill.) on Sunday during a speech at the annual conference of the National Council of La Raza announced a proposal to help small businesses offer health insurance to employees, the New York Times reports.

Under the proposal, small businesses would receive a refundable tax credit valued at as much as 50% of health insurance premiums for employees (Zeleny, New York Times, 7/14). Small businesses would have to offer a "quality health plan" for all employees and cover a "meaningful" share of the cost to qualify for the tax credit, according to Jason Furman, economic policy director for the Obama campaign. Small businesses would receive the full tax credit, which would be phased out as companies become medium sized. Finalization of the details of the phase out and other parts of the proposal would require negotiation with the Department of Treasury and Congress, Furman said (Trottman, "Washington Wire," Wall Street Journal, 7/13).

The proposal would cost about $6 billion annually (New York Times, 7/14). Obama would finance the proposal in part through a plan to allow market entry of generic versions of biotechnology medications, which would increase competition and reduce federal spending on such treatments. In addition, Obama would use some savings from a reduction in disproportionate share hospital payments included in his health care proposal. Obama credited his former rival for the Democratic presidential nomination, Sen. Hillary Rodham Clinton (D-N.Y.), for the small business tax credit idea (Reuters/Washington Post, 7/13).

Comments
Obama said, "I'm announcing my plan to provide real relief for small-business owners crushed by rising costs" (New York Times, 7/14). The proposal would "help more employers provide health benefits for their workers instead of making it harder for them," he said, adding, "We know that small businesses are the engines of economic prosperity in our communities, particularly Latino communities" (Roug, Los Angeles Times, 7/14). In addition, Obama said, "My plan won't impose any new burdens on small businesses. Instead, we'll help them not just create new jobs, but good jobs -- jobs with health care, jobs that stay right here in America, the kinds of jobs we need in our communities" (Johnson, AP/Philadelphia Inquirer, 7/14).

Tucker Bounds, a spokesperson for presumptive Republican presidential nominee Sen. John McCain (Ariz.) criticized the proposal as an expensive mandate that would have "a devastating impact" on small businesses. He said, "This is an obvious and crude effort to spackle together a quick political fix, but it lacks specifics, lacks funding and he lacks credibility" (New York Times, 7/14).

According to the Arizona Republic, the proposal is part of an effort by the Obama campaign to attract Hispanic voters, who have become "an increasingly influential political force in electorally crucial" states (Nowicki, Arizona Republic, 7/14).

Health Care Proposals
In other election news, the Republic on Monday compared the health care proposals of Obama and McCain and examined the importance of the issue in the presidential election.

"Nearly everyone agrees that there is no magic pill for the nation's health care ills," but Democrats and Republicans disagree on proposals to address the issue and have begun "wooing voters with plans that offer a stark contrast on the best way to ensure high-quality, affordable medical care for the masses," according to the Republic. According to recent polls, U.S. residents expect the next president to address the problems with health care and often cite the issue as one of their top three domestic issues, but the "prospect of reforming the nation's health care system is a tricky one," the Republic reports (Alltucker, Arizona Republic, 7/14).

Editorials
Summaries of three recent editorials that address issues related to health care in the presidential election appear below.

• Baltimore Sun: Some "significant weaknesses in the social safety net intended to protect older citizens are becoming apparent" and indicate the need for reforms to Medicare and Social Security, but proposals to address the issue from both presidential candidates have "serious shortcomings," according to a Sun editorial. According to the editorial, Medicare is "in trouble," adding that within the next 10 years, the "cost of providing senior health care" through the program is "expected to soar by billions of dollars, requiring significant increases in withholding taxes or cuts in coverage for senior citizens." In addition, traditional pensions that "provided a dependable guaranteed income are disappearing, as is employer-provided retirement health insurance," the editorial states. "The answers to all of this are likely to be painful," the editorial states, adding, "Among the possibilities: cuts in health benefits, more years of work for many, some form of universal health care, mandated retirement savings plans and tax increases" (Baltimore Sun, 7/14).
  
  
• New York Times: "McCain's main campaign promises" on health care and other issues "would lead to huge budget deficits," and, because "McCain cannot balance the budget on a crusade against pork and a one-year freeze in a sliver of federal spending," he either "has a secret plan to balance the budget or he's blowing smoke," according to a Times editorial. "It is safe to assume there is no secret plan," the editorial states, adding, "To balance the budget in the face of ever-increasing tax cuts would require untenable near-term cuts in Medicare, one of the biggest drivers of budget imbalance," a move that "would harm elderly Americans, arguably Mr. McCain's most important constituency." The editorial states, "Controlling Medicare costs is essential to restoring budget health," but "no politician, least of all Mr. McCain, is simply going to slash the life out of the program." According to the editorial, the "demands of a tanking economy, coming on top of years of unmet needs," such as health care, "will require the next president to spend more and to raise taxes to support that spending" (New York Times, 7/12).
  
  
• Washington Post: The proposal from McCain to balance the federal budget by 2013 is "not credible," a Post editorial states. According to the editorial, although McCain has said that he would reduce federal spending on entitlement programs by $160 billion as part of the proposal, he "does not explain how." In addition, "McCain's opposition to the pending Medicare bill does not offer comfort on his willingness to deal with entitlements," as he appears "willing to reverse $13 billion in scheduled cuts to doctors but opposes paying for it by reducing overpayments to the private Medicare plans," the editorial states. The editorial adds, "These overpayments -- the plans cost, on average, 13% more -- are just about the lowest-hanging fruit in tackling Medicare" (Washington Post, 7/14).