[Congressional Record Volume 141, Number 57 (Tuesday, March 28, 1995)]
[Senate]
[Pages S4684-S4685]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


             SELF-EMPLOYED HEALTH INSURANCE COSTS DEDUCTION

  Mr. HATCH. Mr. President, I rise today to express my support for H.R. 
831, a bill that will finally provide long-promised relief for farmers 
and other self-employed taxpayers who must pay for their own health 
insurance expenses. I am very pleased that this measure passed the 
Senate on Friday. And, I congratulate my colleagues on both sides of 
the aisle for acting promptly on this legislation.
  The 25-percent deduction for the health insurance costs for the self-
employed and farmers expired on December 31, 1993. All during the long 
debate on health care reform last year, both Congress and the Clinton 
administration in effect promised these taxpayers that, as part of the 
final bill, their deductions for health insurance costs would be 
reinstated and made permanent. When our efforts to forge a workable 
health care reform package broke down last year, so did our promise to 
extend the health insurance deduction.
  Unfortunately, this congressional inaction has left over 3 million 
taxpayers in a tight spot with respect to their 1994 tax returns. Over 
60,000 of these taxpayers are in my home State of Utah. Because of our 
repeated promises to extend the deduction to cover 1994, many of these 
taxpayers have held off the filing of their 1994 tax returns. This is 
because if the extension is enacted, they can deduct a portion of their 
1994 health insurance costs and thus lower their tax bill for the year. 
However, if the bill is not enacted until after the due date for filing 
1994 tax returns, April 17, 1995, all of these taxpayers will have to 
file amended tax returns.
  Each day that passes without final action on this bill means 
thousands of taxpayers will be subject to the extra time, expense, and 
bother of filing an amended return. This is because many self-employed 
taxpayers do not want to wait for the last minute to file their tax 
return. Sometimes it seems that only Congress waits until the last 
minute to do important things.
  Many taxpayers have already had to file their returns. We have 
already missed the deadline for those taxpayers who are engaged in the 
business of farming or ranching. Because of the estimated payment 
rules, those taxpayers face a practical deadline of March 1 for their 
tax returns. Therefore, many thousands of taxpayers are already facing 
the prospect of filing an amended tax return, because of slow 
congressional action.
  In case some of our colleagues mistakenly believe that filing an 
amended tax return is merely a minor inconvenience, Mr. President, let 
me mention a couple of facts that may clarify this. First off, we need 
to recognize that filing an amended tax return is no simple 
[[Page S4685]]  affair for the those who are intimidated by IRS tax
 forms, and who is not? There is a special form, called Form 1040X, 
which comes with its own special instructions, that is used for making 
corrections to a previously filed tax return. Getting one of these 
forms usually requires a trip to the post office or library. This form 
is much different than the normal Form 1040. Filling it out requires 
time and effort in reading and understanding the instructions. In 
essence, the taxpayer must recompute his or her tax after including the 
deduction for the health care insurance. This can be complicated and 
confusing.

  As all of my colleagues know, many taxpayers do not even bother to 
fill out their own tax returns. They have concluded that our tax system 
is so complex and intimidating that they pay professionals to prepare 
their returns for them. These taxpayers face an additional burden 
beyond the hassle of having to go find a Form 1040X and learning how to 
fill it in. They must go back to their tax preparer and have him or her 
file the amended return. This means additional cost.
  And, frankly, the processing of amended returns is not free for the 
IRS either. It just seems sensible to me that Congress get this 
legislation passed in a timely fashion.
  Not only does H.R. 831 take care of the deduction for 1994, it also 
makes the deduction permanent at 30 percent. This is an important 
feature of the bill and positive move toward better tax policy. I have 
long been troubled by Congress' tendency toward making certain tax 
provisions temporary. Temporary tax provisions make for poor tax 
policy, plain and simple. They also increase taxpayer cynicism for 
Congress. By making the deduction permanent, H.R. 831 will increase 
taxpayers' confidence in our tax system and assist them in planning.
  I am also glad to see that the Finance Committee was able to increase 
the percentage of the deduction from 25 to 30 percent. However, we must 
not forget that our ultimate goal for this deduction should be to 
increase it to 100 percent. This is a matter of fairness, Mr. 
President. The fact of the matter is that our tax system discriminates 
against the self-employed, in that individuals who work for 
corporations as employees are allowed to totally exclude 100 percent of 
their employer-provided health insurance. This is equivalent to a 100-
percent deduction. Why should a worker who takes risks by creating a 
business and working for himself or herself be penalized by only being 
able to deduct a portion of his or her health care expenses? Our tax 
code should encourage entrepreneurship, not discourage it. So, I hope 
we can increase the percentage of deductibility up to 100 percent later 
this year.
  Mr. President, I am most pleased that the majority leader was able to 
gain a unanimous-consent agreement to consider this bill in an 
expedited manner and to keep it clean of all amendments. This shows 
that my colleagues agree that, in the midst of many important issues, 
enacting this bill as soon as possible to avoid extra time,
 hassle, and expense for these taxpayers, stands out as the most 
important priority today. I congratulate Senator Dole for his 
leadership and all of my colleagues for their bipartisanship and 
forbearance in attempting to amend this bill.

  I especially want to thank those Senators who have expressed major 
reservations with the revenue offsets contained in the bill for 
agreeing to the unanimous-consent agreement. Like most bills considered 
by Congress, this one is far from perfect. H.R. 831 includes some 
particularly interesting, though controversial, provisions that have 
been included to offset the revenue loss associated with extending and 
making permanent the deduction for health insurance expenses.
  Indeed, I have my own concerns about two of these provisions. First, 
I am not pleased with the portion of the bill that retroactively 
repeals section 1071 of the Internal Revenue Code, dealing with 
minority tax certificates for the sale of broadcast or cable 
facilities. I recognize that many of our colleagues believe that this 
provision represented an unwarranted tax benefit, or even a huge 
loophole, that needed to be retroactively closed. However, by setting 
the effective date of the repeal of section 1071 to a date prior to the 
date of enactment of this bill, we will cause a handful of taxpayers 
who had consummated or nearly consummated transactions in full reliance 
on the law to suffer financial setbacks. I do not believe that this is 
fair. Nevertheless, Mr. President, because the greater need of 
immediately taking care of the long-promised health insurance deduction 
for millions of self-employed taxpayers outweighs the fairness concern 
for a handful of taxpayers, I did not attempt to change this bill in 
the Finance Committee.
  I am also less than satisfied that the provisions dealing with taxing 
those who renounce their U.S. citizenship are the best that we could 
do. The Finance Subcommittee on Taxation held a hearing on this issue 
this week, and we heard a great deal of concern from the witnesses that 
this provision should be changed to ensure fairness and consistency 
with sound tax policy. Again, because of the necessity of moving this 
bill toward final passage in the fastest possible manner, I have 
withheld from offering any amendments to improve this provision. As 
this bill goes to conference with the House, I would urge the conferees 
to see if improvements can be made, so long as those improvements do 
not delay enactment of the bill.
  In conclusion, Mr. President, I again want to thank the leaders and 
our colleagues for showing a great deal of leadership and restraint in 
bringing this matter to the floor under an agreement that lets us move 
this bill quickly. This is what our constituents want and this is what 
makes the most sense from a tax policy point of view.


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