• NASE Leary Over Several Treasury Proposals To Reduce Tax Gap
• Outdated Laws For Women Workers And Families
• Congress Reviews Health Savings Accounts
• House Passes SBA Extension
• Update: Self-Employed Health Care Affordability Act

NASE Leary Over Several Treasury Proposals To Reduce Tax Gap

The U.S. Department of the Treasury estimates a $345 billion discrepancy between what they are owed in tax revenue, and what they actually receive each year. They put the blame for 32 percent—or $109 billion —directly on the self-employed. As a leading advocate for sole proprietors and micro-business owners, the NASE takes issue with several assumptions and recommendations of the Treasury’s recently released plan to narrow the tax gap. By the Treasury Department’s own account, the tax gap is a statistical estimate and that makes it very difficult to tell the difference between the taxpayers who make honest mistakes in misreporting and those who are intentionally evading the IRS. Unfortunately, too much of the Treasury’s plan to close the tax gap assumes that the self-employed intentionally underreport their income. “It has never been a question as to whether or not taxpayers should comply,” said Kristie Darien, executive director of the NASE’s legislative office. “The NASE stands with the Treasury, insofar as wanting all taxpayers to pay the taxes they owe. However, it’s important for Treasury and the I.R.S. to examine all of the factors that might be causing the gap, particularly the complexity of the tax code and the difficulty of compliance faced by the self-employed community. The focus should be on education versus increased, excessive enforcement.” In a recent NASE online poll, 34 percent of respondents said that the complexity of tax code and forms was the most burdensome aspect of filing federal taxes, and one quarter spend more than ten hours preparing their taxes each year. Many more elect to turn to outside help. Over half (57%) hire a tax practitioner to help them wade through the process. The NASE supports increased education on existing tax regulations in order to reduce unintentional errors, and a focus on increased levels of customer service. However, the NASE cautions against recommendation to expand regulatory compliance measures such as additional withholding and the Treasury’s singling out of the self-employed as the group responsible for the tax gap. In the meantime, the NASE will continue working with Congress, the Treasury and the I.R. S. to ensure that the legislative priorities of the self-employed and micro-businesses remain a priority and fighting for a nondiscriminatory tax policy. For more about the NASE’s position on the tax gap, read testimony presented to Congress this year at http://advocacy.nase.org/advocacy_efforts.asp. Outdated Laws For Women Workers And Families A panel of influential women authors, columnists, and government officials met last week at the National Press Club to discuss current legislation that brings new challenges to women already in or looking to re-enter the labor market. Critics have argued for decades that current laws lag far behind cultural practices and put the squeeze on working couples. Arguing that it was not a gender problem, but a family problem, panelists urged government leaders to update tax and labor laws to level the playing field for full-time working moms. Kim Strassel, who has co-authored a book on the entrance of women into the workforce, pointed out that the nation is still being governed by laws that were made in the 1940s and 1950s. For example, two-thirds of the nation’s households are supported by dual earners, but current laws were constructed during a time when two-thirds of houses were supported by one wage earner and a spouse who stayed at home. “Many women tend to bear the emotional and financial burden of serving as caregivers for older parents, relatives, or friends,” said Kristie Darien, executive director for the Legislative office at the NASE. “This can be especially hard for the self-employed, who often take time away from work and will lose an average of $67,202 in pension benefits.” The forum was presented by the National Center for Policy Analysis (NCPA) and the National Press Club Newsmaker Program. The panelists also discussed the increasing number of stay-at-home dads, how businesses might make more family-friendly policies for working parents, such as the availability of affordable, quality childcare choices. They urged lawmakers to examine a flexible employee benefit system, health and retirement funds that accrue, giving employees more flexibility over changing jobs, and a revamping of Social Security Benefits that spouses receive. Tools to help women micro-business owners get involved, as well as up-to-date legislative information, are available to NASE Members at the online Women’s Resource Center at http://women.NASE.org. Congress Reviews Health Savings Accounts Health savings accounts (HSAs) were a hot topic last week in Washington, with the House Ways and Means Committee reviewing the progress of HSAs and ultimately approving a bill that would increase their use. HSAs drive down health care costs by putting the consumer in charge of his or her medical expenses, which are funded through a tax-free savings account. The Health Opportunity Patient Empowerment Act of 2006 (H.R. 6134) would allow transfers from existing health reimbursement arrangements and health flexible spending arrangements into HSAs. The bill would offer a one-time waive of the early withdrawal penalty for those wishing to transfer funds from an individual retirement account (IRA) to their HSA. It also would push to raise the HSA contribution limit. With health care costs skyrocketing, HSAs continue to be a popular choice for those looking for affordable health care. A recent survey conducted by the American Benefits Council—an employee benefits association—found that enrollment in the health plans that are used in conjunction with HSAs tripled over ten months, to 3.2 million. Furthermore, more than 30 percent of the Americans who signed up for the program had formerly been without health insurance. John Goodman is the president and CEO of the National Center for Policy Analysis, a public policy research organization. While addressing the committee, he cited analysts’ predictions that health care spending will balloon to one-third of the Gross Domestic Product in the near future. He also countered the argument that high out-of-pocket expenses lead many people to delay or forgo treatment by saying that studies have not shown that patients will cut down on preventative care. The NASE supports health savings accounts in conjunction with high-deductible health plans as an option for the self-employed looking for affordable insurance. To learn more about HSAs, and other tips on reducing health costs, visit the NASE-sponsored information Web site http://www.MicroBusinessHealth.com. House Passes SBA Extension Congress passed the extension to extend the U.S. Small Business Association (SBA) programs through February 2007. Government officials said H.R. 6159 was necessary to keep programs like the Small Business Investment Company (SBIC) afloat. “The SBA is a valuable resource to business owners looking to start, maintain, or expand their business,” said Kristie Darien, executive director for the Legislative office at the NASE. “We’ll continue to work with them to make sure that the needs of the self-employed are heard.” The NASE continues to promote the importance of sole proprietors and small employers to the nation’s economy, and has worked to encourage the growth of micro-business. Read more about H.R. 6159 at http://thomas.loc.gov/. Update: Self-Employed Health Care Affordability Act Representative Melissa Hart, R-Penn., testified to her colleagues about the importance of allowing the self-employed to deduct the cost of their health insurance from their self-employment tax. This would reduce overall health care costs, as well as allow business owners to reinvest more funds into the growth of the company. Rep. Hart made her comments in support of the Self-Employed Health Care Affordability Act (H.R. 4961), the number one legislative priority of the NASE. You can show your support for the Self-Employed Health Care Affordability by visiting http://www.NASE.org and going to the “Contact Congress” section. To read more about H.R. 4961, visit the Library of Congress.