[Congressional Record Volume 151, Number 33 (Thursday, March 17, 2005)]
[Senate]
[Pages S3031-S3032]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Mr. Thomas, Mr. Isakson, and Mr. 
        Burns):
  S. 663. A bill to amend the Internal Revenue Code of 1986 to allow 
self-employed individuals to deduct health insurance costs in computing 
self-employment taxes; to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, today my colleague, Senator Thomas, and 
I along with Senator Isakson are re-introducing the ``Equity for Our 
Nation's Self-Employed Act of 2005.'' This important legislation 
corrects an inequity that currently exists in our tax code that forces 
self-employed workers to pay payroll taxes on the funds used to pay for 
their health insurance while larger businesses do not. Because of this 
inequity, health insurance is more expensive for the self-employed. At 
a time when the uninsured are growing at an alarming rate, we need to 
find ways to reduce the cost of health insurance. This legislation is a 
first logical step.
  Under current law, the self-employed are allowed an income tax 
deduction for the amount they pay for health insurance, but must still 
calculate their payroll taxes as if they were not allowed this income 
tax deduction. The result is that the self-employed are paying payroll 
taxes on the amount they pay for health insurance. As previously 
stated, larger businesses do not include pay payroll taxes on the 
amount they pay for health insurance. The legislation we are 
introducing today would stop this inequitable tax treatment and allow 
the self-employed to deduct the amount they pay for health insurance 
from their calculation of payroll taxes.
  This problem affects all self-employed who provide health insurance 
to their families. According to the Census Bureau, there are almost 
74,000 self-employed workers in New Mexico. While we have no idea how 
many of these people in New Mexico have health insurance, we do know 
that roughly 3.6 million working families in the United States paid 
self-employment tax on their health insurance premiums. Estimates 
indicate that roughly 60 percent of our Nation's uninsured are either 
self-employed or work for a small business. According to the Kaiser 
Family Foundation, self-employed workers spend more than $9,000 per 
year to provide health insurance for their family. Because they cannot 
deduct this as an ordinary business expense, those that spend this 
amount will pay a 15.3 percent tax on their premiums resulting in 
almost $1,400 of taxes annually.
  This problem was identified by the National Taxpayer Advocate in 
several of her annual reports to Congress and our legislation to 
correct it is supported by a variety of groups including the National 
Association for the Self-Employed, the National Small Business 
Association, the National Federation of Independent Businesses, the 
U.S. Chamber of Commerce, the U.S. Hispanic Chamber of Commerce, and 
the Small Business Legislative Council.
  I look forward to working with my colleagues to get this important 
legislation passed.
  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:

[[Page S3032]]

                                 S. 663

       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 ``Equity for Our Nation's Self 
     Employed Act of 2005''.

     SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS IN COMPUTING 
                   SELF-EMPLOYMENT TAXES.

       (a) In General.--Section 162(l) of the Internal Revenue 
     Code of 1986 (relating to special rules for health insurance 
     costs of self-employed individuals) is amended by striking 
     paragraph (4) and by redesignating paragraph (5) as paragraph 
     (4).
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.
                                 ______