Legislation Would Exempt Small Businesses' Health Insurance Coverage Premiums

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Reps. Ron Kind (D-Wis.) and Wally Herger (R-Calif.) have introduced legislation (HR 3660) that would allow self-employed individuals to deduct the cost of health insurance premiums from their payroll taxes, the Washington Post reports (McLoone, Washington Post, 9/26). Under current law, sole proprietorships cannot exclude health insurance premiums from payroll taxes of 15.3%, while corporations can deduct premiums as a business expense and exclude the cost of premiums from payroll taxes (Boulton, Milwaukee Journal Sentinel, 10/4).

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According to the Post, small businesses are the "only sector of the U.S. economy that experiences such a substantial tax penalty on the cost of their employer-provided health coverage" (Washington Post, 9/26). The additional tax can reach several thousand dollars per year, according to the Journal Sentinel. The bill would cost an estimated $9.8 billion over five years.

Although this is the third time such legislation has been introduced, Kind believes lawmakers' consensus on the need for health care reform will result in additional support for the measure. Kind said, "If you want to get serious about addressing the 46 million or 47 million uninsured, we can no longer afford to ignore the 60% of them who are working for small businesses. And this is one of the areas where they are being discriminated against" (Milwaukee Journal Sentinel, 10/4).

By Kaisernetwork.org

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