02/ 11/ 2008
by Reps. Ron Kind (Wis.) and Wally Herger (Calif.), and Sens. Jeff Bingaman (N.M.) and Orrin Hatch (Utah)
With approximately 47 million Americans lacking health insurance, it's clear our nation's health care system is facing serious challenges. One of the primary reasons for this staggering statistic is the rapidly escalating cost of health care. While these high costs, together with the widespread lack of coverage, are a burden on health care providers today, over time they threaten to further strain our already cash-strapped entitlement programs such as Medicare and Medicaid.
It is imperative that we act soon to address the systemic problems that lead to rising health prices and the cost of health insurance. One way is to encourage greater participation in the private health-insurance market by removing barriers like the self-employed health care tax penalty.
The problem is this: While large corporations can deduct the health premiums they pay for their employees as a business expense for payroll tax purposes, most self-employed small and micro businesses cannot. As a result, sole proprietors and many partnerships and S corporations end up paying the 15.3 percent self-employment tax on their health-insurance premiums. Small-business entrepreneurs shouldn't be punished simply because they can't purchase health insurance through a larger corporation.
The Equity for Our Nation's Self-Employed Act (H.R. 3660/S. 2239) would do away with this inequity and allow millions of small businesses across the country to deduct their health premiums against the payroll tax, making insurance more affordable. The benefits of such a pro-small-business health and tax policy would be great. The previously uninsured would be able to purchase health insurance for themselves and their families. Those who had paid the extra tax would now be able to put that money toward purchasing new equipment, hiring a new employee or otherwise expanding their business. In fact, according to the Small Business Administration's Office of Advocacy, leveling the playing field for small-business owners in this way would encourage greater entrepreneurship and would help self-employed firms stay open for business.
Such a policy is ultimately a win-win for American workers, small businesses and our economy. The Equity for Our Nation's Self-Employed Act would relieve some stress on our already overburdened entitlement system and would create important and affordable health options for our country's job creators.
