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What Is the Pizza Tax and What Does It Have to Do with Obamacare?

Papa John’s Pizza founder John Schnatter spurred new outrage over Obamacare when he said recently that the law will hike pizza prices. But his business isn’t the only one that will have to pass its new costs on to consumers—or cut back, which will mean even fewer jobs.

At least 60 percent of firms are estimating Obamacare will raise their health care costs, according to a new study released Wednesday by Mercer, a human resources consulting firm. One-third of those expect a cost increase of 5 percent or more. The study reports:

The employers that will be hit hardest are those with large part-time populations—employers in retail and hospitality services. Nearly half of these employers (46%) expect PPACA will push up cost by at least 3% in 2014—and another third don’t yet know what the impact will be.

A full third of the businesses can’t even estimate Obamacare’s impact yet—because so many of the law’s rules have yet to be written by the Department of Health and Human Services (HHS). And a number of its main provisions don’t go into effect until 2014. (continued below chart)

The impact of this outlook—staring down cost increases mixed with the uncertainty of more government mandates and costly regulations to come—falls heavily on the economy.

Obamacare requires all businesses with 50 or more full-time employees to provide health coverage for their workers or pay a $2,000 penalty for each employee after the first 30 workers. Some businesses have expressed that they are likely to avoid hiring so they don’t go over the 50-worker threshold for mandated coverage; also, they are likely to cut workers’ hours so that they don’t qualify as full-time to avoid the penalty.

This is especially tough for restaurants, which provide lots of jobs for low-income workers. The Wall Street Journal reported that “McDonald’s Corp. Chief Financial Officer Peter Bensen said in an earnings call two weeks ago that each restaurant will incur between $10,000 and $30,000 in added annual costs because of provisions in the law.”

The restaurant group that owns Hardee’s and Carl’s Jr., CKE Restaurants, will face the choice between expansion—creating new jobs—and tightening its belt to deal with Obamacare, its CEO lamented. Andy Puzder, CEO of CKE Restaurants, said:

The money to comply with the [Affordable Care Act] must come from somewhere. We use our revenue to pay our bills and expenses, to pay down our debt, and we reinvest what’s left in our business. That’s how we create jobs. There’s no corporate pot of gold we can go to, to cover increased health care costs. New unit construction will cease if we have to allocate moneys for that construction to the ACA. And building new restaurants is how we create jobs.

Of course, as costs increase on businesses, more will likely decide to drop health coverage for their workers altogether. Surveys have indicated that anywhere from 11 million to 35 million Americans will lose the health insurance they have through their jobs.

Yet this is part of Obamacare’s design. House minority leader and Obamacare advocate Nancy Pelosi (D–CA) said that “the way we see it is an innovative prevention-oriented way for businesses to be emancipated from health care costs because they have a way out or whatever works for them.”

Once businesses are “emancipated from health care costs,” their employees will be going to government to get coverage. As more people are dependent on government for their health care, the cost burden simply shifts to taxpayers.

Pelosi describes this as businesses’ “way out.” But the effects are harmful to job creators, workers, taxpayers, and consumers. There is no way out except repeal of Obamacare.

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