March 23, 2005
Equity for Our Nation’s Self-Employed Act Introduced in the Senate!
As Americans across the country prepare their tax returns, a bill introduced in the Senate last week would eliminate an inequity in the tax code that requires 14 million self-employed individuals to pay an additional 15.3 percent in taxes on the cost of their health insurance premiums.
According to the National Association for the Self-Employed, the bill would end a significant disparity that has contributed to the nation's health-care crisis by abolishing strong cost penalties in health insurance imposed on the self-employed.
“It's like charging most people $10 to see a movie, except sole proprietors are forced to pay $11.53 to get in to the same movie,” said Robert Hughes, president of the National Association for the Self-Employed. “That's the kind of inequity that currently exists. There's no reason for it, and with this bill, Senators Bingaman and Thomas are trying to level the tax playing field.”
Championed by Sens. Jeff Bingaman (D-NM) and Craig Thomas (R-WY), the Equity for Our Nation’s Self-Employed Act, S. 663, allows sole proprietors to deduct the cost of health insurance premiums as a normal business expense when calculating their federal self-employment tax. Currently, all business entities except sole proprietors deduct their health premiums as a business expense and forego FICA (Social Security and Medicare) taxes on these expenses. This leaves filers of Schedule C and Schedule E tax forms as the only business entities paying a 15.3 percent tax on these costs.
Adding to the already skyrocketing cost of health premiums, this additional payment contributes to the number of working uninsured. According to the Census Bureau, 45 million Americans do not have health coverage, and 60 percent come from families where the head of household is self-employed or works for a small business.
Because they buy insurance on the individual market, premiums for the self-employed are already approximately 18 percent higher than larger corporations are able to negotiate. According to the Kaiser Foundation, sole proprietors pay $9,950 per year for health coverage of a family of four. Come tax season, since that expense is not deductible when calculating self-employment tax, they pay $1,522 more to the federal government in payroll tax on these premiums. No other business entity must pay this added cost.
“This problem affects all self-employed who provide health insurance to their families,” said Hughes, a CPA and expert on health care and tax issues affecting the self-employed and micro-businesses. “The inequality can mean the difference between having and not having health insurance. These added costs are a key reason why the self-employed and small-business people are the majority of those without health insurance today."
To encourage your Senators to cosponsor this legislation, visit the NASE online Legislative Action Center at http://advocacy.NASE.org.
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NASE Submits Micro-Business Tax Concerns to President’s Tax Reform Panel
The National Association for the Self-Employed (NASE) formally submitted important suggestions for tax code changes to the President’s Advisory Panel on Federal Tax Reform last week. This summer, after many hearings and much deliberation, the panel will recommend a way to create a simpler and fairer tax system.
The NASE submission focused both on simplification of the entire tax code and micro-business tax reform priorities. Many micro-business owners, home-based business owners, and the self-employed prepare their own taxes. The complexity and paperwork burden of the current tax system hinders them from getting all the deductions and returns possible.
“The self-employed and micro-business owners are responsible for managing every aspect of their business. Every second spent contending with burdensome record keeping and tax preparation takes away from the time they expend running and growing their business,” said Robert Hughes, president of the NASE. “That is why the NASE urges the Advisory Panel to find ways to combine and simplify tax forms and instructions.”
The NASE also advocated changes in the following areas:
Self-Employment Tax on Health Insurance Premiums Home Office Deduction Simplification Clarification of Independent Contractor Classification
“Clarifying tax regulations allows those preparing their taxes to more readily understand the law and their responsibility of complying. Both the IRS and taxpayers will benefit from a simpler system with less administrative burden,” said Kristie Darien, NASE executive director of the legislative office. “We hope that the panel will take micro-business tax concerns seriously as it considers tax reform for this country.”
“Simplifying and reforming the tax code will make it easier for taxpayers to plan for the future, save for retirement, educate themselves and their children, and manage their affairs,” said former Sen. Connie Mack (R). Mack and former Sen. John Breaux (D) chair the President’s Advisory Panel on Federal Tax Reform.
The NASE will continue to monitor the tax reform debate and champion micro-business needs for changes to the current tax code.
To read the entire NASE submission to the President’s Advisory Panel on Federal Tax Reform, visit the NASE In Action Web site, http://advocacy.nase.org/advocacy_efforts.asp. For more information about the advisory panel, visit http://www.taxreformpanel.gov/index.shtml.
LAST CHANCE: NASE Social Security Member Survey
Take the online member survey on Social Security reform. Let the NASE know your opinions on Social Security by visiting the MyNASE Web site at http://my.nase.org/. Log in to your free MyNASE Web Account. If you have not set up an account, you can do so at http://my.nase.org/ with your member number. Let your voice be heard in the association by taking this Social Security survey until the end of March.
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House Small Business Committee Pushes to Lessen Regulatory Burdens
Last week the House Small Business Committee held a hearing to discuss the Regulatory Flexibility Improvements Act, H.R. 682. The bill, introduced by Small Business Committee Chairman Donald Manzullo (R-IL), would make improvements on the current Regulatory Flexibility Act (RFA) and calls for stricter enforcement of the procedures associated with it.
“The 109th Congress has the opportunity to amend the RFA and SBREFA to improve the regulatory climate for small entities,” said Thomas Sullivan, Chief Counsel for Advocacy U.S. Small Business Administration. “Even though the last few years have yielded a number of successes, there are certain loopholes in the RFA that were not addressed. H.R. 682 is truly a comprehensive bill that addresses many problem areas in the RFA.”
The RFA, signed into law in 1980, imposed analytical and procedural requirements on federal agencies. Namely, it called for agencies to consider the economic impact of regulations on small entities while giving these small entities a voice during the shaping of policies and rules. The Small Business Regulatory Enforcement Fairness Act (SBREFA), signed into law in 1996, amended the RFA to require agencies to hold a small business advocacy review panels and provide assistance with compliance guidelines. Even with these laws, there have been struggles to get federal agencies to comply.
H.R. 682, if signed into law, would require agencies to perform detailed analyses of proposed regulations, consider the indirect effects of regulations on small entities, and allow the Office of Advocacy Chief Counsel to disseminate information to agencies for RFA compliance.
To contact your Members of Congress on the Regulatory Flexibility Improvement Act, visit the online NASE Legislative Action Center at http://advocacy.NASE.org
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Amendment Will Ensure Small Business Contracts Overseas
An amendment that would require contracts funded by H.R. 1268, the Supplemental Appropriations Bill, to be included in the calculation of the federal government’s small business achievement goals, was introduced by the Small Business Committee Ranking Member Nydia Velázquez (D-NY). The amendment passed with a voice vote.
H.R. 1268 will provide $81.3 billion for operations in Iraq and Afghanistan, mostly for contracts for overseas work. Without the Velázquez amendment, most of the contracts could have gone to large corporations.
“Unfortunately, while 23 percent of contracting dollars spent domestically must include small businesses, no requirement that small companies have access to the bulk of overseas contracts,” Velázquez said. “This amendment changes that by requiring that small companies have access to international contracts, just as they do for domestic work.”
“This amendment gives small businesses a chance to compete and succeed,” Velázquez said. Currently, only one percent of the government overseas contracts have been awarded to small companies. This amendment will hold the government contractors to domestic standards.
For more information, visit http://thomas.loc.gov/.
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