Saturday, July 23, 2011

Making Small Healthcare IT Start-Up Easier

Many friends and professional colleagues are taking advantage of the growth in healthcare IT spending to start their own companies, which I think is great.  Quite a number of them call me for a sympathetic ear to lament about their administrative burdens.  In the mid-1990s, I was a founder and partner in a very successful IT consulting and software development company... but the idea of doing it again makes me shudder.  The administrative paperwork, payroll taxes, and corporate taxes were a NIGHTMARE to manage-- one of the most stressful and distasteful uses of my time, ever.  Equally stressful and expensive was providing affordable, high quality healthcare coverage for our 50 employees.

More and more, I am convinced that the most effective way to stimulate the economy and efficiency of small business employment and innovation would come through the elimination of payroll and corporate taxes for companies with less than 100 employees... with an eye on eventually eliminating payroll and income taxes for all companies and employees...and replaced with a national, simple sales tax.  No more IRS, no more tax loopholes.  You buy something, you pay taxes. End of story.  Seven states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) and virtually all US cities operate on this "no income tax" economic model.  Can you imagine filing a tax return for your city?  Of course not... we've come to expect a sales tax as a means of funding local government and infrastructure.  Likewise, making no-frills, affordable healthcare coverage available through a government-run program-- i.e., making Medicaid/Medicare available for purchase-- would be enormously helpful to small businesses.  I am absolutely convinced that these two concepts would jump-start small business growth like we've never seen before.  And I'm equally convinced that the concepts would find support among enough Republicans and Democrats to make it happen.

Why not, during this time of economic and unemployment crisis, try this "tax free status" for small companies as a federal experiment for five years?  How about a five year experiment for small employer buy-in to Medicare and/or Medicaid?

Below is a great excerpt from a related blog in The Economist.  The full blog can be found here.

"We need to stimulate the prospects for employment, but we also need to make it easier for people to just work in ways that may not show up in the official unemployment stats. You can think of this as tearing down barriers to "self-employment", if you must. Clearly, decoupling health benefits from employment would help a lot. Less obviously, but at least as importantly, we need to eliminate the insane patchwork of regulations that keep folks from legally cutting hair for money in a kitchen, or legally making a few bucks every now and then taxiing people around town in a 1988 Ford Escort. De-formalising and de-bureaucratising labour certainly makes it harder for government to track who has paid what to whom, who owes how much in various taxes, and so forth. But it would be truly pathetic if the legal/economic organisation of our society was optimised for government surveillance and tax collection and not for the exercise of autonomy in pursuit of a meaningful life."

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