[Congressional Record Volume 140, Number 121 (Monday, August 22, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 22, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                HEALTH CARE REFORM--SELF-EMPLOYMENT TAX

  Mr. GRASSLEY. Mr. President, even though we are going to start work 
on the crime conference report, there is still before the Senate the 
very important issue of health care reform.
  The more that I have had a chance to look into the Mitchell-Clinton 
bill before us, the more disappointed and the more distressed I get.
  When we get back on the bill, there is an amendment that I will be 
offering to strike one--and who knows how many--hidden taxes that are 
buried within this 1,400 page bill. This is the majority leader's bill, 
the third printing of that bill. The bill has gotten longer as there 
has been more printing.
  The hidden tax that I am referring to is here in section 7203, and it 
is on page 1226. I hope that people will look at that tax so that they 
know the one I am specifically referring to.
  It is a tax that will detrimentally affect many farmers and rural 
small business people. It is a new tax on the self-employed that 
amounts to an immediate employer mandate on self-employed individuals 
who employ one or more employees. You know, for the most part, employer 
mandates in this bill are put off until they might be triggered in 
under some future period of time if 95 percent of the people do not 
have health insurance by a certain trigger date.
  What is worse about this employer mandate is that this new tax is 
hidden in a section that purports to actually increase the deduction 
for self-employed people from the expired 25 to 50 percent. Now, that 
is something that I and the Presiding Officer would very much support, 
because in our rural areas, our farmers are entitled to more than the 
25-percent deduction. I think he and I would say that they are entitled 
to the 100-percent deduction that people who were employees of 
corporations have through the corporation deduction.
  But this purports to raise the deduction. And that certainly sounds 
good, Mr. President, because in the farm areas and all of our small 
rural towns, there are ordinary self-employed people who buy individual 
insurance and pay for it out of pocket after tax dollars. 
Unfortunately, they have been discriminated against in the past by only 
being allowed to deduct that 25 percent of their health care premiums, 
and from time to time that has lapsed and had to be reauthorized. And 
it is lapsing this year.
  The Mitchell-Clinton bill appears to improve the situation somewhat 
by supposedly increasing the deduction to 50 percent. But, the 
discrimination is continued under the Mitchell-Clinton bill compared to 
corporations that can deduct at a full 100 percent of their cost.
  I have supported the 100-percent deductibility for many years. It is 
interesting to note that the American Farm Bureau Federation has 
estimated that a typical family of 4 at a 15-percent tax level, that a 
full tax deduction, meaning 100 percent, could generate over $1,200 in 
savings for that family per year.
  But, Mr. President, what you need to do on page 1226 is read just a 
little further. If you do go through paragraph (2)(B), you will find 
this stated in the bill:

       If the taxpayer has one or more employees in a trade or 
     business with respect to which such taxpayer is treated as an 
     employee within the meaning of section 401(C), the deduction 
     under paragraph (1) shall not exceed the portion of the 
     amount paid which is equivalent to the largest employer 
     contribution made on behalf of any such employee for coverage 
     under a certified standard health plan.

  After you get through this mouthful of circumventing legalese, you 
will see that the Government requires, simply put, any self-employed 
person, if they have any employees, to contribute at least 50 percent 
of the employee's health care premium or the self-employed does not get 
his or her own 50 percent deduction.
  In other words, if you are a farmer or a small business person and 
you do not provide benefits to an employee, beginning in 1996, you are 
hit with a sizable tax increase.
  That is right, Mr. President. Under the Mitchell-Clinton bill, a 50-
percent employer mandate kicks in on the self-employed at the beginning 
of 1996, and if you do not comply, the Government slaps you with a tax 
penalty.
  Now, as with other provisions of this bill, the proponents may 
attempt to say that nothing in this bill actually says the self-
employed have to pay their employees' premiums. But, again, if the 
self-employed do not provide health benefits under the Mitchell-Clinton 
bill, then they do not get their own tax deduction, which amounts to a 
tax increase or an actual tax penalty. If they provide less than 50 
percent contribution to their employees' health plan, their own 
deduction is reduced proportionately.
  Mr. President, under Mitchell-Clinton, we are told that businesses 
with under 25 employees would be exempt from any future employer 
mandate. We are told that the self-employed deduction is going to be 
increased to 50 percent. Mr. President, we are told lots of things.
  The fact is that the Mitchell-Clinton bill discriminates against 
farmers and self-employed small business people by continuing to deny a 
100-percent deduction and by denying any deduction at all unless they 
provide health benefits to their employees.
  So, Mr. President, you may have farmers who are getting a 25-percent 
deduction today. We are telling them that that is going to increase to 
50 percent. But if they have an employee and they do not pay at least 
half of their employee's health benefits, then those farmers may not 
get the 50-percent deduction. If they do not pay 25 percent of what an 
employee gets, they will not even get the present 25-percent deduction 
they get today. So, consequently, this is a hidden tax. It is an 
employer's mandate, and it should be struck from the bill. 3
  Mr. President, I want to quote two short paragraphs from the Des 
Moines Register, unrelated to what I just said about a specific 
provision in this bill, but related to the issue of health care reform.
  This is in a small section called ``Notables and Quotables.''
  It is from introductory remarks from Christopher DeMuth, president of 
the American Enterprise Institute at a health care conference in 
Washington, a short time ago.

       It is fashionable at the think tanks to wring our hands 
     over the legislative sausage factory on Capitol Hill. Yet 
     this year's health care debate has--so far--been a model of 
     serious deliberation. A great heap of terrible legislative 
     proposals has been rejected, in defiance of well-organized 
     political and media promotion, have been discovered by the 
     public and the Congress to be unsound and worse. That serious 
     threats to the vitality of American medicine have been 
     averted is genuine progress. To be sure, many positive and 
     badly needed reforms have been lost in the shuffle--but maybe 
     only postponed. The year has not been a waste of time but a 
     time of public education, which with any luck will have laid 
     the groundwork for better proposals and policies to come.

  (Mr. BYRD assumed the chair.)
  Mr. GRASSLEY. I hope this quote will fit in very well with the very 
good remarks given by the President pro tempore last Thursday, as I 
recall, in his statement, in asking us to take a reality check on the 
whole issue of health care reform.
  I am sorry I do not have the entire speech by Christopher DeMuth. But 
as president of the American Enterprise Institute, maybe anybody 
interested in that entire speech could contact him for that.
  I yield the floor.

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