• President’s Advisory Panel on Federal Tax Reform Suggests Changes
• Health Care Studies Paint Grim Picture, Need for Change
• November Member Poll: Finding Financing – What’s Your Opinion?

President’s Advisory Panel on Federal Tax Reform Suggests Changes

The President’s Advisory Panel on Federal Tax Reform made its final recommendations last week. The panel was implemented by an executive order and charged with recommending a way to create a simpler and fairer tax system. The NASE contributed a formal submission to the panel this spring on behalf of micro-business owners’ tax needs. After much deliberation, the panel has presented two possible tax plans, the Simplified Income Tax Plan and the Growth and Investment Tax Plan. Both plans would repeal the Alternative Minimum Tax (AMT) and consolidate or eliminate many tax credits and deductions. This will lessen the paperwork burden but critics are upset about the limitations on deductions and credits that may result. Additionally, state and local taxes will not be deductible, which is the case currently. Where the two plans differ is on the taxation of businesses and capital income. Under the Simplified Income Tax Plan, there would be four individual tax brackets instead of the current six (15 percent, 25 percent, 30 percent, and 33 percent). The plan would tax interest at regular income tax rates and would not tax dividends paid from U.S. corporations. It would also exclude 75 percent of capital gains and the 25 percent that is taxed would vary between 3.75 to 8.35 percent. Here, small business would be taxed at individual rates, the top rate having been lowered to 33 percent. The Growth and Investment Plan would move to a three bracket system (15 percent, 25 percent, and 30 percent). Dividends received, capitals gains, and interest will be tax at 15 percent. Sole proprietors will be taxed at individual rates and other small businesses will be taxed at 30 percent. The panel had considered ideas of a value-added tax, a national retail sales tax, and a progressive consumption tax but none were recommended in the end. President Bush has no obligation to heed the recommendations and it seems too early to tell if Congress will try to incorporate the recommendations. Changes to tax policy will not be an issue until at least next year. The NASE is currently evaluating the recommendations and their potential effect on micro-businesses. For more information on the tax panel’s recommendations, visit http://www.taxreformpanel.gov/. For more information on the NASE position on tax reform, visit http://advocacy.NASE.org. Health Care Studies Paint Grim Picture, Need for Change The nation’s uninsured population is growing at a disproportional rate to growth of the health safety net that seeks to meet uninsured needs, according to studies from the Kaiser Commission on Medicaid and the Uninsured. After adjusting for inflation, total federal spending for care for the uninsured increased by 1.3 percent from 2001-2004 while the number of uninsured increased by 11.2 percent. These trends resulted in an 8.9 percent decline in spending by the federal government per uninsured person. Another study by the commission and the Urban Institute found that federal support for community health centers increased by more than 50 percent over the past four years, but still only accounts for less than 3 percent of total federal spending on the health care safety net. Additionally, since more than 70 percent of federal support for the uninsured flows through Medicare and Medicaid, which are both under budgetary pressures, it is unlikely these programs will be able to make up for the discrepancy. A survey commissioned by the Technology CEO Council found that both health care providers and patients widely believe that incorporating information technology (IT) medical practices will improve quality (86 percent and 79 percent respectively). Seventy-six percent of medical providers surveyed thought the biggest impediment was the high-cost of implementation and 82 percent support the Federal Government providing some funding to begin the building of an electronic health record system. Providers saw widespread benefits tow implementing health care IT: Enable them to better respond to a patient’s medical needs – 86 percent. Make them more efficient and be able to see more patients – 78 percent. Improve their knowledge of best practices – 76 percent. Enable them to comply with reporting requirements – 82 percent. The NASE recently surveyed micro-business owners on their ability to afford health insurance for themselves and employees. A majority of survey respondents (51.1 percent) said they do not currently offer, nor plan to offer, a health insurance plan through their business for themselves or their employees and nearly 62 percent cite cost as the single most significant barrier to offering health care to employees. Additionally, over 85 percent of respondents stated that their health insurance premiums had increased in the past 12 months. The NASE continues to support developments in health care IT and ways for individuals to acquire affordable health coverage. For more information on the NASE’s health care position or to see the full results of the NASE health care survey, visit http://advocacy.NASE.org. November Member Poll: Finding Financing – What’s Your Opinion? Whether it be financing for a new business or existing business, the self-employed and micro-businesses have a very difficult time gaining access to capital from traditional lending resources such as banking. Tell us how you have handled the financing of your business. Let the NASE know your opinions 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 survey during the month of November.