Not all area small firms gain from tax credit

About 85 percent of Ohio and Michigan small businesses are eligible for federal tax credits this year to help pay for employee health-insurance coverage, but a report shows the number of such businesses to receive the credits will be far lower.

Several local small businesses say they cannot afford to offer health insurance in the first place, and one that does may pay employees too much to qualify for tax credits.

At Fleeger's Pro Hardware in Toledo, health insurance is not offered to about 20 full and part-time employees. Full-time employees, however, have health insurance through their spouses' employers, and the store covers their portion, said Laura Fleeger-Koenig, president.

Fleeger's would offer health insurance to employees if it were affordable, she said, but health reform is not likely to lower costs.

"I know it's not going to," she said. "I really don't see how it's going to benefit us at all."

Based on employee size and average wages, 127,800 Ohio firms with 25 or fewer employees and 126,300 Michigan small businesses are eligible for federal tax credits, according to the advocacy groups Families USA and Small Business Majority.

But only about a third of such businesses offer health insurance, and they must pay for half of premium costs to qualify for the tax credit, according to the National Federation of Independent Business.

Plus, as the number of employees rises above 10 and average wages rise above $25,000 a year, the maximum federal tax credit of 35 percent phases out, the federation's tax counsel, Bill Rys, pointed out. A firm with 17 employees and an average wage of $38,000 will get no credit, he added.

About 78,074 of Ohio's busi-nesses with fewer than 25 employees offer health insurance and pay for more than half the costs, while 58,512 of Michigan's small businesses do, the federation said. It has not estimated how many businesses actually will receive a tax credit.

Funk Luetke Skunda Marketing in Toledo has the equivalent of 13 full-time employees and pays 85 percent of their health-insurance premium costs. Whether the business will qualify for tax credits since it pays professional wages is unclear, said Sandy Luetke, the firm's controller.

"I'm not totally clear what the federal government is going to be able to do for us," she said.

Still, the federal tax credits may help convince some service or other lower-paying companies to offer health care, Ms. Luetke said.

Until the early 1980s, Lonsway Automotive Inc. in Toledo offered health-care coverage and paid half of premium costs. But that became too costly for both the auto-repair shop and employees, so it was dropped, manager Matt Cassidy said.

While the business would offer health coverage again if employees wanted it and costs were affordable, it is unlikely, Mr. Cassidy said. Health-care reform, he said, will not help.

"We're barely getting by now," Mr. Cassidy said. "I don't know where any extra money would come from."

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.