Out of the Recession and Into the Frying Pan (Opinion)

As barometers of economic health, small businesses are the first to bounce back in a healthy economy and are unfortunately the first to feel the pain of a weakening economy.

As the co-owner of a furniture store during one of the worst housing downturns of recent history, I can assure you the pain was felt far and wide. We quickly learned when people aren’t buying homes or are being forced to downsize because they lost their jobs, they certainly aren’t buying furniture.

As the second generation co-owner of Sam’s Furniture, I’ve learned that building a business that is strong enough to sustain economic hardships takes a lot of work, determination and the ability to risk failure and losing it all. Since my parents founded the company in 1991, they have shown me that hiring and retaining talented and loyal staff is critical for a small-town business to compete against larger companies.

That is why we have always offered health insurance benefits to our employees and in turn our dedicated staff stuck with us as we weathered the worst of the recession. In fact, we’ve not only weathered the recession, but we’ve come back even stronger and were able to double our staff size from 25 in 2008 to more than 50 today.

I share my parents’ aspirations for enlarging our business and employing even more Arkansans, but now we are faced with a hurdle that could actually do more damage than the recession — a new tax imposed by our own government.

As a part of the president’s health care law, this tax called the health insurance tax, or HIT, will directly raise health care costs for small business owners and their employees. Beginning in 2014, the HIT will be assessed to insurers offering coverage in the fully-insured market, but will be passed onto the consumer in the form of higher premiums. Since 88 percent of small businesses purchase their insurance in the fully insured marketplace, the burden of this tax will land squarely on our shoulders. Recent estimates from Doug Holtz-Eakin, the former director of the Congressional Budget Office, calculated the cost to amount to about $500 per employee and their family per year.

For a company like mine with more than 50 employees, that means tens of thousands of dollars more in health care costs than in previous years to continue to provide the same coverage for my employees.

Just as recently as early this year, I was looking into opening another store in the Little Rock area, which would have meant adding 30 to 40 employees to the payroll. These jobs would pay above average salaries, provide good bonuses and retirement benefits, and most importantly, offer substantial health care coverage.

Now that I know about the HIT and am anticipating its impact, my company has had to give serious thought to whether we can afford to open another store. That is not the path the president had projected when he signed healthcare reform into law. Just as we are making strides to get the economy back on track, companies like mine across the country are going to be forced to return to recession-level employment and revenue levels just to remain in business.

During the last presidential election, the message was all about improving health care and creating jobs to get Americans back to work. We could have been a success story of the improving economy by expanding our company, hiring more full-time employees and offering each of them quality health care coverage. Instead, I am spending my time with my accountants just ensuring that I am prepared to cover the business and employees on my payroll.

If the HIT is implemented in 2014, the pain will be felt by more than 1.7 million small businesses and the millions of Americans they employ. In Arkansas alone approximately one million residents are employed by small businesses. Now is the time to prove to Americans that Washington stands behind its message of a better tomorrow. Repealing the HIT is a good way to start. 

Joe Donaldson is the co-owner of Sam’s Furniture in Springdale and Rogers. He can be reached at 479-871-9031, or by email at [email protected].