On March 23, I was privileged to be able to witness history as President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). After over a year of contentious and often politicized Congressional debate, it was rewarding to know that we succeeded in overcoming tremendous special interest lobbying to enact sweeping health care reforms that will help individuals and businesses thrive. Every American will now have access to affordable, high-quality coverage making health care a right, not a privilege for those who could afford it. We fixed a broken status quo by reigning in skyrocketing health care costs that would have crippled the federal treasury and threatened the employee-based health care system. Never again will Americans be discriminated against for having pre-existing medical conditions. Families can keep their children on their plans until age 26. The quality and value of Medicare and Medicaid delivery will be improved dramatically. And new resources will be available to help small businesses provide their employees with health insurance.
Ensuring small businesses were made part of the solution was one of my top priorities when helping craft the Patient Protection and Affordable Care Act. Small businesses drive Washington state’s economy, making up nearly 80 percent of all our businesses and employing hundreds of thousands of Washingtonians. But with increasing costs, decreasing benefits, and the economic downtown, too many small businesses seeking to provide their employees with health insurance find that it is unaffordable. Despite these challenges, nearly half of all small businesses in Washington state offer their workforce health insurance coverage. With the passage of health care reform, we hope to see the number of businesses offering coverage grow substantially.
For those small businesses already providing health insurance, a tax credit included in the health reform law is immediately available to help offset the costs of providing health insurance. This much needed financial relief is available to four million American small businesses, including 92,500 businesses in Washington state that employ nearly 400,000 workers. Over the next decade, this tax credit will provide small businesses with a direct benefit worth $40 billion.
Specifically, this tax credit is available to small businesses who cover at least half of the premium costs for their employees and retain 25 or fewer full-time employees with average annual wages of $50,000 or less. Through 2013, this tax credit will be worth up to 35 percent of the expenses the business pays towards an employee’s health insurance. Starting in 2014, the tax credit expands up to 50 percent.
For example, if a small bakery employs 10 full-time workers earning an average salary of $30,000 and pays $70,000 a year towards their health insurance premiums, it stands to receive $24,500 in tax credits. When the credit expands in 2014, the example bakery will receive $35,000 in tax credits to help cover the cost of insurance for its employees.
Non-profit organizations, which often provide critical social services to help the most vulnerable among us, are also eligible to receive this assistance. Because this tax credit is refundable, tax-exempt organizations meeting the same qualifications as a for-profit business are eligible for a tax credit worth up to 25 percent of the expenses paid towards workers’ health insurance. The credit cannot exceed the total Medicare and income taxes that are withheld from employees’ wages each year. In 2014, this credit expands up to 35 percent.
This tax credit is only one of many provisions in the new health care law that lowers the cost of health insurance for Washington state’s working families. As we continue implementing this historic legislation, I hope to continue providing Washingtonians with updated information on how to take advantage of all the benefits offered by this law. In the meantime, please visit the Internal Revenue Services’ website at www.irs.gov to determine if your small business is eligible and apply for this tax credit. Senator Maria Cantwell is the junior Senator from Washington state.