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Washington Watch
May 15, 2003
NASE Member Testifies Before
Congress on Affordable Health Coverage
An inequity in the tax code penalizes 16 million
self-employed individuals, forcing them to pay an
extra 15 percent in taxes on their health insurance
premiums every year, NASE Member Keith Hall told
Congress last week. No other business owner or
employee in America bears this extra burden, said
Hall, also a Certified Public Accountant.
Hall’s comments came during a hearing of the
House Small Business Subcommittee on Tax, Finance
and Exports on covering the uninsured. In the nation’s
current health care crisis, micro businesses and the
self-employed have been hit particularly hard, facing
rising costs of health care combined with laws that
require these business owners to pay an extra 15.3
percent in self-employment taxes on their health
insurance premiums.
“Imagine going to the movie and the person in front of
you pays $14.00 for his ticket. When you get to the
window, the clerk charges you $16.00 because you have
your own business. The same movie, the same seat, the
same popcorn, but you have to pay 15.3 percent more
because you are self-employed,” Hall said. “It doesn’t
make sense, and it’s not fair.”
The tax code technicality resulting in the health care
cost inequity lies in the payment of self-employment
tax on health insurance premiums. While corporations
are able to deduct health insurance premiums as a
business expense and to forego FICA (Social Security
and Medicare) taxes on these expenses, the
self-employed are unable to deduct premiums as a
business expense and are required to pay an additional
15.3 percent self-employment tax on these expenses.
The
Self-Employed Health Care Affordability Act, H.R.
1873, addresses this inequity by eliminating the
requirement that the self-employed claim health
insurance premiums when determining self-employment
tax.
“H.R. 1783 is an easy decision mixed up in a very
difficult issue,” Hall told the subcommittee.
“Providing the small-business owner with the same tax
treatment that big business already has is the right
thing to do and will have an immediate impact on the
affordability of health care for millions of
self-employed business owners. There is no reason why
my movie ticket should cost more just because I am
self-employed; and the same goes for my health
insurance.”
The average self-employed individual pays $7,954
annually in health insurance premiums for family
coverage. Not only are these owners unable to deduct
their premiums as a business expense (as larger
businesses do); they must pay an additional $1,216
(15.3 percent) in taxes on this amount.
“At a time when insurance premiums are skyrocketing –
increasing an average of 13 percent last year for the
self-employed – this inequity means the difference
between having and not having health insurance,” said
NASE President Robert Hughes. “These added costs are a
key reason why the self-employed and micro-business
owners are the majority of those without health
insurance today.”
Over sixty percent of the nation’s 41 million
uninsured are from families headed by a self-employed
person or working for a small business. According to
an NASE survey, seven in 10 micro-businesses do not
have health coverage for themselves, or provide it to
eligible employees, citing cost as the number one
reason.
Hughes said the Self-Employed Health Care
Affordability Act is a major step in leveling the
playing field for these businesses, helping to ensure
that they can afford insurance and freeing up money
that can be used to help their enterprises succeed.
Visit the NASE
Legislative
Action Center and ask your federal representatives
to end this inequity, and help make access to health
coverage more affordable for the self-employed.
Read Hall's Testimony
Some Small Business Contracts Went to Big Business, Report
Finds
A government report found that large businesses were being
awarded small-business government contracts. The
General Accounting
Office – the investigative and audit arm of Congress – found
that of the 50,000 companies that received small business
contract awards in 2001, 5,000 of them also received awards as
large businesses. The GAO examined the contracts at the request
of the
House Small Business Committee.
“Not only is it wrong and unfair that large businesses win
small-business contracts, but it also inflates the federal
government's track record for achieving its small-business
goals,” Congresswoman Nydia Velázquez, Ranking Democratic Member
of the Committee, said. “In 2001 - the most recent year data was
available on contracts awarded - the federal government missed
its small-business goal of 23 percent. Now with the latest GAO
findings, we will learn that the government didn't just miss the
mark, but it missed it by more than we had originally thought
since the large business contracts were miscounted - and
misrepresented as small ones.”
The report, “Contract Management: Reporting of Small Business
Contract Awards Does Not Reflect Current Business Size
(GAO-03-704T),” found that the same companies were awarded
contracts as both “small” and “large” businesses because federal
regulations permit companies to be considered “small” over the
life of the contract, even if they grow, merge or are acquired
by a larger business. The problem is exacerbated because
contracts can last up to 20 years – leaving a lot of time for
the small company to grow. The report also discovered that
contracting officials relied on databases with incorrect
information about the size of some companies.
”I can tell you what we need to bring about some real change - a
complete and comprehensive overhaul of the entire federal
procurement system," Congresswoman Velázquez said. "We need to
start with strengthening the appeals process and empowering
small businesses to fight and actually win when they are treated
unfairly. We need to put in place a regulatory body that can
truly police agencies. We need to hold these agencies
accountable. It is only then that we will see small businesses
get their fair shake - and their fair piece - of the $220
billion procurement pie.”
Senate
Committee on Small Business and Entrepreneurship Chair
Olympia Snowe was also upset with the report.
“I am deeply disturbed by the GAO’s findings and also am
concerned that the initiatives underway by the Office of Federal
Procurement Policy, the Small Business Administration and the
General Services Administration to address this problem may not
be sufficiently coordinated to ensure greater accuracy,” Snowe
said. “Ensuring that small businesses have a fair opportunity to
compete for federal contracts is among the highest priorities of
this Committee.”
NASE to Testify on Regulatory Affairs and
Micro-Businesses
The NASE will testify later this week at a
House Small Business Committee Regulatory Reform and Oversight
Subcommittee hearing on how federal agencies treat small
businesses. Look for NASE testimony on a range of self-employed
and micro-business issues at the
Legislative Action
Center.
Do any of these issues
affect you? Visit the NASE
Legislative Action Center and “Tell Your Small
Business Story.” This will help the NASE understand -
on a personal level - how key legislative issues are
affecting your business and your bottom line.
For more information about any of the articles in
Washington Watch, contact Maureen Petron, NASE public
affairs manager, at (202) 466-2100 or
mpetron@nase.org.
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