Bill Would End FICA Tax On Health Insurance Premiums, Reducing Cost Of Health
Care for Self-Employed
Washington, D.C., March 18, 2009 -- Recently introduced federal legislation would level the playing field for 21
million self-employed Americans by ending a significant double-digit disparity
in taxes paid on health insurance that has contributed to the growing health
care crisis. The Equity for Our Nation's Self-Employed Act (H.R. 1470),
introduced in the House of Representatives by Reps. Wally Herger (R-CA),
Ron Kind (D-WI), Suzanne M. Kosmas (D-Fla.) and David G.
Reichert (R-WA) would eliminate an inequity in the tax code that inhibits
the self-employed from receiving a full deduction for health insurance
"We ought to be encouraging sole proprietors, not penalizing them.
Yet the tax code currently does just that," said R. Michael Beene, Senior
Health Policy Expert and General Counsel for the NASE. "This bill puts the
self-employed on equal footing with other American businesses, addresses an area
that has too many uninsured individuals and families and rights a wrong at a
time when we most need it. On behalf of the NASE and its 200,000 members we
offer our full support."
In addition to leveling the playing field for
our nation's smallest businesses, this legislation would assist in making health
care more affordable for millions of self-employed Americans who currently make
up a substantial number of the working uninsured. Today, more than 60 percent of
the 47 million uninsured Americans are from families working for a small
business or headed by a self-employed individual. In a 2008 NASE study, more
than 65% of micro-businesses cite cost as the single most significant barrier to
offering health insurance to employees.
Payment of Self-Employment Tax
The tax code technicality resulting in the health-care
cost inequality lies in the payment of self-employment tax on health insurance
premiums. While corporations are able to deduct health insurance premiums as a
business expense and to forego FICA (Social Security and Medicare) taxes on
these expenses, sole proprietors are unable to deduct premiums and are required
to pay an additional 15.3 percent self-employment tax on these costs.
Studies have indicated that on average in the United States a
self-employed individual pays $12,106 annually in health insurance premiums for
family coverage. Since owners are unable to deduct their premiums as a business
expense, as larger businesses do, they have a higher self-employment (FICA) tax
liability. In this case a sole proprietor would be paying an additional
$1,852.22 (15.3 percent) in taxes.
NASE Member John Rutledge is from
Ruther Glen, Virginia and owns a real estate title research company. He pays an
additional $1,652.00 in taxes annually on his health costs and can think of many
other uses for the money. He remarks, "I could hire an office assistant to
assist with some of the day-to-day administrative functions of the business or
an IT professional to guide our expansion. We could easily double our outcome
with this help."
About the NASE
The National Association for the Self-Employed (NASE) is the nation's leading resource for the self-employed and micro-businesses, bringing a broad range of benefits to help entrepreneurs succeed and to drive the continued growth of this vital segment of the American economy. The NASE is a 501(c) (6) nonprofit organization and provides big-business advantages to hundreds of thousands of micro-businesses across the United States. For more information, visit the association's Web site at www.nase.org.