The Iowa Senate has unanimously voted to create a new state tax credit for Iowa small businesses that provide health care benefits to their workers.
Senator Matt McCoy, a Democrat from Des Moines, said small business owners pay, on average, about 18 percent more than large businesses to provide health care coverage to their employees.
“This tax credit is one step in an effort to bring down health care costs and make coverage affordable for all small businesses,” McCoy said.
McCoy estimated 73,000 Iowa small businesses with fewer than 25 employees would qualify for this new credit.
“We have a long ways to go,” McCoy said, “but the markers are set now and we are moving towards a goal and ultimately the goal is to provide every Iowan with health coverage and that is a goal that we will accomplish if we work together.”
Businesses with fewer than 25 employees already are eligible for a new federal tax credit if they provide health care coverage to workers. The bill that passed the Iowa Senate would let those same small businesses in Iowa claim 25 percent of their federal tax credit as a state credit.
Senator Jack Hatch, a Democrat from Des Moines, explained the math: “If a company spends $50,000 a year on employee health benefits, combined with the federal tax credit that they can obtain plus the new state tax credit we will be able give them, they will be able to get $21,875 back.”
Democrats and Republicans in the Senate supported this new tax credit. Senator Jake Chapman, a Republican from Adel, said his family owns “several businesses” that could take advantage of this new tax credit.
“But you know I think it’s interesting that the federal government passed an Affordable Care Act,” Chapman said. “If it was affordable, why are we doing tax credits to help these small businesses? It’s because it’s not affordable.”
AUDIO of senate debate of SF449 (mp3 runs about 12 min.)
If the Iowa House goes along with the idea, this new tax credit would apply for the current 2013 tax year. A small business owner could use the new credit to off-set any kind of tax payments they owe the state for their business — and they would get a refund from the state if the amount of the credit is larger than what they owe in taxes.