Senator Says Pa. Payroll Tax for Health Insurance won’t Pass

Pennsylvania lawmakers are unlikely to pass Gov. Ed Rendell’s proposal to impose a new payroll tax that would help expand state-subsidized health insurance because of questions about its legality and its effect on businesses, a state senator said Tuesday.

“I haven’t met a legislator yet who’s going to vote for this tax, on either side of the aisle or in either chamber,” said Sen. Jake Corman, R-Centre, during a hearing before two Senate committees on the proposal. “Since we don’t have any votes to pass it, we’re just sort of wasting time here.”

The payroll tax, which the state would collect from businesses that do not currently insure their employees, is one of several funding sources for Rendell’s “Cover All Pennsylvanians” initiative. The plan aims to insure about 800,000 adults who lack health care coverage and enable small businesses to cover low-wage workers at a discount.

Some lawmakers have complained the proposal would encourage some employers to drop private insurance coverage if it is cheaper to pay the payroll tax for state-subsidized insurance. The tax rate would be 3 percent for each of the first three years and would then increase to 3.5 percent in the fourth year.

Other critics said the proposal is similar to a Maryland law that would have forced Wal-Mart to spend more on employee health care. That law, which was overturned by a federal appeals court in January, would have required non-governmental employers with 10,000 or more workers to spend at least 8 percent of payroll on health care or pay the difference in taxes.

A lower court ruled that Maryland’s law was pre-empted by the federal 1974 Employee Retirement Income Security Act.