• Rising Health Costs + Tax Disparity = Uninsured Self-Employed
• House Small Business Committee Chairman Applauds Bush’s Budget Proposal, SBA
• Senate Committee OKs Small Business Insurance Bill
• Member Poll: A Taxing Time for Micro-Businesses

Rising Health Costs + Tax Disparity = Uninsured Self-Employed

As if rising health care costs aren’t enough. Now, with the April 15th tax deadline less than a month away, sole proprietors are reminded of the burden of a tax inequity aimed only at them, and that pushes their health costs even higher. Last week, Members of Congress took strides to level the playing field by introducing legislation that would eliminate a discrepancy 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 NASE, H.R. 4961, the Equity for Our Nation's Self Employed Act, would end a significant disparity that has contributed to the nation's health care crisis by removing strong cost penalties on health insurance faced by the self-employed. "Each year health care costs continue to increase at a rapid rate for small business. This legislation represents a simple solution to an inequity faced by the self-employed that can mean the difference between affording health insurance or not,” said Robert Hughes, president of the NASE and a certified public accountant. Introduced by Reps. Melissa Hart (R-PA) and Donald Manzullo (R-IL), this bill would eliminate the self-employment tax on health insurance costs. Under current law, the self-employed cannot consider health insurance deductions as ordinary and necessary business expenses, while corporations can. The self-employed, filers of Schedule C or Schedule E, must pay self-employment (FICA) taxes on the amount of the health insurance premium at a rate of 15.3 percent. Adding to the already skyrocketing cost of health premiums, this 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. President Bush has laid out a number of health care reform proposals for this year including the option of health savings accounts used in conjunction with high-deductible health insurance plans and tax credits to promote such use. The Equity for Our Nation's Self Employed Act would make health insurance more affordable for sole proprietors and should be included in broader reforms. “There will be much discussion this year of the direction of health care for this country,” said Kristie Darien, executive director of the NASE legislative offices. “Some of this discussion may be heated, partisan, and even controversial. However, there is nothing partisan about putting this critical segment of the business economy on equal footing with counterparts. It is a simple solution to stop an inequity.” The self-employed are already plagued with higher health insurance costs because they buy insurance on the individual market and do not have the negotiating power of large corporations. According to the Kaiser Foundation, sole proprietors pay $10,880 per year for health coverage of a family of four. This amount is approximately 18 percent higher than corporate plans. During tax season, those self-employed must pay an additional $1,664 to the federal government in payroll tax on these health premiums. “I applaud Representatives Hart and Manzullo for introducing this bill, which is a major step in leveling the playing field for the self-employed, helping to ensure that they can afford health coverage and freeing up money that can be used to help their enterprises succeed,” said Hughes. For more information about the payment of self-employment tax on health insurance premiums, visit the NASE online Legislative Action Center at http://advocacy.NASE.org. House Small Business Committee Chairman Applauds Bush’s Budget Proposal, SBA Donald Manzullo (R-IL) Last week, the House Small Business Committee held a hearing on the president’s proposed budget for fiscal year 2007. Chairman Donald Manzullo (R-IL) praised President Bush for addressing top small business issues like high taxes and increasing health care costs. “Huge job-killing tax increases loom on the horizon for our small employers if we fail to make the tax cuts permanent,” Manzullo said. “I stand with the President and join his efforts to provide continued tax relief for our entrepreneurs as well as options for more affordable health care options for our small business owners and their employees.” Manzullo thanked Small Business Administration (SBA) Administrator Hector Barreto, who testified at the hearing, for his efforts to “do more with less” at the agency. Despite shedding hundreds of millions of dollars in expenses since 2001, the SBA is providing better service to more small employers today, Manzullo said. Democratic members of Congress at the hearing were not convinced. “This nation's small businesses have been forced to bear the burden of the Bush administration's budget cuts for the past four years now - but this year's request is truly the worst yet,” Congresswoman Velazquez said in a statement earlier this month. For more on the NASE’s coverage of the 2007 budget, look at the February 15, 2006 Washington Watch. Tell your legislators how you feel about the budget proposal by visiting the NASE Legislative Action Center at http://advocacy.NASE.org. Senate Committee OKs Small Business Insurance Bill Last week, the Senate Health, Education, Labor and Pensions (HELP) Committee approved a bill that would allow small business owners to band together regionally and nationally to receive better health insurance rates by bypassing state coverage mandates. S. 1955, the Health Insurance Marketplace Modernization and Affordability Act of 2005, was introduced by HELP Committee Chairman Michael Enzi (R-WY) and passed through the committee on an 11-9 party-line vote. The NASE supports the proposal of small business health plans (formerly referred to as association health pans) to improve access and choice for the self-employed and micro-businesses with regards to medical coverage for themselves and their employees. Small business health plans (SBHPs) would assist the self-employed and micro-business owners in receiving cost effective and comprehensive health care coverage by allowing them to purchase health insurance in large pools. In an attempt to appease Democrats, Enzi included a provision that would only allow insurers to bypass state mandates if they sell a plan that matches a plan offered to state employees in one of the five most populous states (California, Texas, New York, Florida, or Illinois). But even with one Democratic cosponsor, Sen. Ben Nelson (D-NE), no committee Democrats voted for the bill. President Bush reaffirmed his support for the SBHPs, saying he hoped it would pass through the Senate this year. The idea “makes a lot of sense,” said Bush. “I believe small business ought to be able to pool risk across jurisdictional boundaries so they can get the same benefits from larger risk pools that big companies get.” While this is a big step forward for SBHPs, it will still be difficult for the bill to make headway in the Senate, which has been reluctant to pursue such policy in the past. The NASE will continue to follow the progress of SBHPs. For more information on the NASE position on SBHPs or to contact your senators to encourage them to support this bill, visit the NASE Legislative Action Center at http://advocacy.NASE.org. Member Poll: A Taxing Time for Micro-Businesses Taxes are a source of frustration for the self-employed. The NASE has long supported tax simplification and tax fairness for micro-businesses. Please take this short member survey regarding your opinions on federal tax reform. 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 March.