Obama's Job Loss Plan

Robert Morris University associate professor of economics Ralph Reiland, writing for the Pittsburgh Tribune-Review, offered six reasons why Democratic presidential nominee Barack Obama's economic / tax plan will result in job losses.

After interviewing two plumbing company owners about Obama's economic proposals for small businesses, Mr. Reiland offered the following: "Both owners had the same reaction to Obama's proposed new taxes and mandates. To not have their bottom lines reduced by government fiat, both said they'd be forced to lay off employees."

Going into a bit more detail, Reiland quoted the owner of the larger of the two companies talking about six specific Obama proposals for small businesses. Dollar amounts used in the calculations were based on an average wage of $15 per hour for 52 employees.

First, according to the business owner, citing the Obama campaign web site, Obama "...will require that employers provide seven paid sick days per year. I give three paid sick days." The added cost for this owner under the Obama plan: $24,960. "That's one of the women in the office," the owner stated. "I can make up that cost by letting one of the office people go."

Second, Reiland writes that Senator Obama's plan calls on employers to pay the full cost of health insurance premiums for all employees or be hit with a tax penalty. "I pay 75 percent of their coverage," the owner says. "The family policy is about $11,000. For single guys, it's about $5,000." The added cost for this Obama requirement: $91,000. "That's the price of three installers," according to the owner. "Just to stay even with where I am, I'd have to fire three more people or raise some prices and fire two."

Third, Reiland says, Senator Obama wants the estate tax raised to 45 percent for estates worth more than $3.5 million. Since this owner estimated the value of his business at more than $3 million, he said, "Why would I want to grow to 100 employees? What'll stop them from changing it to 75 percent?" In other words, there is a disincentive to continue business growth if one's family will be penalized as a result.

Fourth, talking about the Obama plan to raise the minimum wage to nearly $10 an hour over the next three years, the owner says, "That's bad for two reasons. I don't have anyone at minimum, but raise the bottom by $3 and a guy making $15 wants $18. Plus it's bad for productivity when people think their pay raises are coming from government instead of from their own individual effort."

Fifth, Reiland says Obama's card check proposal for secret union balloting could cause this particular small business owner to close up shop. "That'll never be," the owner said. "I'm in business because I'm independent, not to take orders from a grievance chairman. I'd shut down."

Finally, Reiland writes, "...the increase in taxes on this small business owner from Obama's proposed hike in the income tax rate from 36% to 39.8% on incomes above $200,000 and the proposed increase in Social Security taxes comes to $32,000 per year." The owner's response: "That's another employee."

The lesson: nothing is without cost, and the costs imposed on businesses by higher taxes and regulatory requirements will be passed on in the form of lost jobs or higher prices.