[Congressional Record Volume 143, Number 44 (Tuesday, April 15, 1997)]
[Senate]
[Pages S3201-S3202]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself, Mr. Hagel, Mrs. Murray, Ms. Snowe, 
        Mr. Harkin, Mr. Allard, Mr. Johnson, Mrs. Hutchison, Mr. Reid, 
        Mr. Shelby, Mr. Roberts, Mr. Baucus, Mr. Kerrey, Mr. Jeffords, 
        Mr. Mack, Ms. Collins, and Mr. Biden):
  S. 575. A bill to amend the Internal Revenue Code of 1986 to increase 
the deduction for health insurance costs of self-employed individuals; 
to the Committee on Finance.


         The Health Insurance Tax Equity For Self-Employed Act

  Mr. DURBIN. Mr. President, I will use just 2 or 3 minutes and defer 
to my colleague. I want to say I am glad he is with me today. It is one 
of our first bills as new Members of the U.S. Senate and one that is 
very important, not only to our States but also to the Nation. I think 
it is extremely fitting that Senator Hagel and 14 of our colleagues 
have joined me in introducing a bipartisan bill to provide tax relief 
for a group of hard-working Americans, namely the self-employed. What 
we are trying to do with this bill, and I think it is appropriate to 
discuss it on April 15, is to say that people who are self-employed, 
small business people, farmers and the like, should enjoy the same tax 
benefits of deduction for health insurance premiums as corporations. 
This is only simple fairness.
  If I work for a big company, they can literally write off every penny 
of the cost of my health insurance that they pay. However, if I happen 
to be a farmer in central Illinois, or a self-employed woman in Chicago 
working at home at a computer, and I go to buy health insurance, only 
40 percent of the premiums could be deducted. That is unfair and it 
creates a real disadvantage. We should encourage people to take out 
health insurance. The best way to encourage them to do it is to make it 
more affordable by providing full deductibility. In my State of 
Illinois there are over 400,000 people who are self-employed who would 
benefit from this tax relief. In fact, over 3 million Americans who are 
self-employed do not have health insurance. That represents 25 percent 
of the self-employed. That is a high percentage compared to other 
groups.
  So, what Senator Hagel and I are trying to do with our legislation is 
to level the playing field, give them all equal treatment and fair 
treatment. I think this tax relief could be worth $500 or $1,000 for 
somebody today who could deduct only 40 percent, but in the future 
could deduct 100 percent under our legislation.
  I thank my colleague for joining me in introducing this bill. It is 
supported not only by the National Federation of Independent 
Businesses, the National Farm Bureau, the Pork Producers, the Corn 
Growers and the Farmers Union, but also by the National Association of 
Women Business Owners. Between 1987 and 1996 the number of women-owned 
businesses increased by 78 percent, and about 80 percent of these are 
individual proprietorships.
  I think this is an issue whose time has come. I have spoken to many 
of my colleagues and they believe that is the case, too. I hope we can 
work as part of any budget agreement to include this provision.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 575

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Health Insurance Tax Equity 
     for Self-Employed Act''.

     SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
                   INDIVIDUALS INCREASED.

       (a) In General.--Section 162(l)(1) of the Internal Revenue 
     Code of 1986 (relating to special rules for health insurance 
     costs of self-employed individuals) is amended to read as 
     follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section

[[Page S3202]]

     an amount equal to the amount paid during the taxable year 
     for insurance which constitutes medical care for the 
     taxpayer, the taxpayer's spouse, and dependents.''.
       (c) Effective Date.--The amendment made by this section 
     applies to taxable years beginning after December 31, 1996.

  Mr. HAGEL. Mr. President, I am pleased to join with my distinguished 
colleague from Illinois, Senator Durbin, to introduce legislation that 
will cut taxes and improve access to health insurance for millions of 
small business owners and farmers across America.
  Our legislation--the Health Insurance Tax Equity for Self-Employed 
Act--is a bill about fairness. Under current law, corporations can 
deduct from their income tax the full amount of money spent on health 
care for their employees. But the 10\1/2\ million self-employed men and 
women in America cannot fully deduct what they spend on their own 
health care. They can deduct a percentage--which is now 40 percent and 
will increase to 80 percent by 2006--but they cannot deduct the entire 
cost.
  Our bill would immediately eliminate this disadvantage--effective 
January 1, 1997--and put the self-employed on the same footing with 
their incorporated competitors. And it would make health insurance more 
affordable for the 3 million uninsured Americans who are self-employed.
  This bill will make a real difference to real people. The high cost 
of health insurance was the No. 1 problem that small businesses cited 
in a recent comprehensive study by the National Federation of 
Independent Businesses [NFIB]. Small business owners often pay 30 
percent more for the cost of their health insurance than do larger 
companies--they pay more, but they can deduct less.
  Our bill will make health insurance more affordable for small 
business owners. That is why it has been endorsed by the National 
Federation of Independent Businesses.
  It also is strongly supported by the National Farm Bureau and by the 
Nebraska Farm Bureau Federation. Both have sent me letters endorsing 
this legislation. I ask unanimous consent that the full text of these 
be submitted for the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 7.)
  Mr. HAGEL. More than 95 percent of farmers and ranchers are self-
employed and generally pay the full cost of their insurance coverage 
themselves. Our bill makes a real difference to them as well.
  I am involved in this issue because it is vitally important to my 
home State of Nebraska. There are 98,000 self-employed people in 
Nebraska, of whom more than 10,000 are uninsured. These are real 
numbers. These are real people. This legislation can make a real 
difference for them--making their health insurance more affordable and 
their businesses more profitable.
  Every State in America has hardworking, self-employed men and women 
who need the tax relief and health care assistance this bill offers. I 
hope my colleagues will support this important effort.

                               Exhibit 1


                              Nebraska Farm Bureau Federation,

                                      Lincoln, NE, April 10, 1997.
     Hon. Chuck Hagel,
     U.S. Senate,
     Washington, DC.
       Dear Chuck: On behalf of Nebraska's largest farm 
     organization, I am writing to offer Nebraska Farm Bureau 
     Federation's strong support for your legislation that would 
     provide a 100 percent tax deduction of health insurance 
     premiums for the self-employed.
       Deductibility of health insurance premium costs for self-
     employed individuals has been a long standing goal of Farm 
     Bureau. More than 95 percent of farmers and ranchers are 
     self-employed and generally pay the full cost of their 
     insurance coverage themselves. In addition, many farm 
     families are forced into a situation where a spouse must get 
     an off-farm job primarily to obtain more affordable health 
     insurance coverage for their family.
       The cost of self-employed health insurance, when not 
     purchased as part of a group, can be significant and cause 
     financial hardships for some individuals and farm families. 
     In many cases, farmers and ranchers pay more than $3,000 to 
     $5,000 annually for health insurance. Farmers and ranchers 
     are looking at many avenues to cut skyrocketing health 
     insurance premiums. More farmers have moved to higher 
     deductible policies--quite often in the $2,500 to $5,000 
     range. In other cases, farmers are opting to go without 
     health insurance altogether.
       As you know, current federal tax law allows self-employed 
     people to deduct 30 percent of the cost of their health 
     insurance premiums. That will increase to 80 percent by the 
     year 2006. Current federal tax law also allows corporations 
     to deduct 100 percent of their health insurance premium 
     costs. Members of Nebraska Farm Bureau believe that fairness 
     and equity dictate that Nebraska's self-employed individuals 
     receive the same tax treatment as other employees and 
     employers.
       Nebraska Farm Bureau appreciates your work on the 
     introduction of this legislation and we wholeheartedly offer 
     our support to this effort.
           Respectively,
     Bryce P. Neidig, President.
                                                                    ____



                  National Federation of Independent Business,

                                   Washington, DC, April 10, 1997.
     Hon. Chuck Hagel,
     U.S. Senate,
     Washington, DC.
       Dear Senator Hagel: On behalf of the 600,000 small business 
     owners of the National Federation of Independent Business 
     (NFIB), I am writing to express our strong support of your 
     legislation to extend the deduction of health insurance 
     premiums for the self-employed to 100 percent, effective 
     immediately upon date of enactment.
       Current law's tax treatment of the health insurance 
     premiums for the self-employed is extremely unfair. The three 
     million self-employed Americans who are presently uninsured 
     should have access to the same 100 percent deduction that 
     CEO's and employees in Fortune 500 companies receive. The 
     Health Insurance Portability and Accountability Act of 1996 
     gave the self-employed the ability to take a 40-percent 
     deduction in 1997 and gradually phases in a permanent 
     deduction for the self-employed reaching 80 percent in 2006. 
     Enabling the self-employed to take an 100 percent deduction 
     would certainly help us to make health care more affordable 
     for this important group of employers and their employees.
       The cost of health insurance is the number one problem that 
     small businesses cited in a 1996 NFIB Education Foundation 
     study. Small Business Problems and Priorities, the most 
     comprehensive study of its kind in the country. Small 
     business owners often pay 30 percent more for the cost of 
     their health insurance than larger companies. In addition, 
     self-employed business owners face the cost that result from 
     having to pay income taxes on the majority of the amount of 
     their health insurance premiums. Instead of penalizing the 
     self-employed in this manner, Congress should be doing all it 
     can to help the self-employed, a group who plays a critical 
     role in our economy.
       NFIB appreciates your understanding of this issue and your 
     willingness to introduce this significant piece of 
     legislation.
           Sincerely,
                                                       Dan Danner,
                     Vice President, Federal Governmental Affairs.
                                 ______