[Congressional Record (Bound Edition), Volume 153 (2007), Part 18]
[Extensions of Remarks]
[Page 25550]
[From the U.S. Government Publishing Office, www.gpo.gov]




           EQUITY FOR OUR NATION'S SELF-EMPLOYED ACT OF 2007

                                 ______
                                 

                           HON. WALLY HERGER

                             of california

                    in the house of representatives

                      Tuesday, September 25, 2007

  Mr. HERGER. Madam Speaker, with nearly 47 million uninsured in 
America, rising health care costs, and a federal health entitlement 
system that is simply unsustainable in the long run, America is truly 
on the verge of a health crisis. Yet despite the looming fiscal 
insolvency of Medicare and other challenges facing U.S. health care, 
Congress is preparing now to approve one of the largest expansions of 
government health care in decades. Mr. Speaker, we must change course 
in today's debate, and address the root problems facing our health 
system. And true change can be achieved only through working together 
on a bipartisan level.
  It is for this very reason that I am pleased to join with my 
colleague from the other side of the aisle, Representative Ron Kind of 
Wisconsin, in introducing truly collaborative, bipartisan legislation 
that would help expand health coverage to millions of currently 
uninsured American taxpayers. Our legislation, the ``Equity for Our 
Nation's Self-Employed Act of 2007,'' would correct an inequity that 
currently exists in our tax laws to help make quality health care more 
affordable for millions of Americans. It achieves this by allowing the 
self-employed to fully deduct their health insurance premiums for the 
purposes of both income tax and self-employment tax.
  Although many consider themselves ``self-employed,'' only the owners 
of businesses that are organized as sole proprietorships pay the self-
employment tax or SET. Across the U.S. there are more than 21 million 
sole proprietors who could be subject to some level of self-employment 
tax. In my own home State of California, there are more self-employed 
individuals than anywhere else in the country, with roughly 13 percent 
of the Nation's sole proprietorships, or more than 2.8 million self-
employed individuals. The vast majority of the businesses owned by 
self-employed sole proprietors are small and micro-businesses with 10 
or fewer employees. Despite their size, however, these businesses 
generate more than $800 billion in economic activity in the U.S.
  The self-employment tax serves as a proxy for Federal FICA payroll 
taxes, which other business combinations like C-corporations, limited 
liability partnerships and S-corporations withhold and pay on behalf of 
their employees. The SET tax rate is 15.3 percent, representing both 
the traditionally withheld employee share of 7.65 percent of wages (for 
Social Security and Medicare) plus the employer's matching share of 
7.65 percent. Unlike other businesses, however, the SET applies to all 
income generated from the sole proprietorship.
  At the crux of the current disparity is that all businesses apart 
from sole proprietorships can deduct employee health care premiums as 
normal business expenses before taxes. While self-employed taxpayers 
may deduct 100 percent of their health premiums for regular income tax 
purposes, sole proprietorships frequently pay more for insurance simply 
because these expenses are then subjected to the SET of 15.3 percent. 
One of my constituents, a micro-business owner named Gloria, who lives 
in Redding, California, reported that she pays about $1,300 more on 
health insurance each year because of the SET. Another constituent, 
Tom, from Anderson, pays $900 more for health care each year because of 
this increased payroll tax. By extending the health deduction to the 
self-employment tax, we would level the playing field for sole 
proprietors like Gloria, Tom and the more than 2.8 million self-
employed Californians who cannot currently deduct their health coverage 
costs as a business expense.
  Several of my sole proprietor constituents have commented on the 
rising costs of health care, and how the SET prohibits them from 
putting this extra amount they pay in taxes to better use expanding 
their business or purchasing more health coverage for themselves and 
their employees. Nationwide, more than half of all sole proprietors 
report that they are unable to purchase health insurance at all, citing 
affordability as a chief concern. Of these small business owners, more 
than 80 percent stated they would be more likely to purchase health 
insurance if it was deductible from payroll taxes through SET 
deductibility.
  Owning and operating a small business in the United States has always 
been and continues to be extremely risky, with many small businesses 
not surviving the first 5 years of operation. However, despite great 
challenges, small businesses provide nearly two-thirds of all new job 
creation in our country, employing tens of millions of workers and 
providing a higher standard of living for millions of American 
families. The difference between low or high taxes can make or break a 
firm, and mean the difference between profitability and continued 
entrepreneurial investment to survive, or going out of business. A 
recent report by the Small Business Administration's Office of Advocacy 
confirms this about the SET in particular, finding that extending the 
health insurance deduction for the SET actually increases the 
probability that a micro-business will remain in the market.
  Madam Speaker, around 60 percent of America's uninsured individuals 
work for small businesses that cannot afford to provide coverage. Our 
simple, bipartisan legislation would help millions of sole proprietors 
and their employees better afford coverage by allowing a tax deduction 
for 100 percent of health insurance expenses from payroll taxes, just 
like other businesses in the U.S. I thank my colleague from Wisconsin 
for his leadership on this legislation, and look forward to working to 
enact it.

                          ____________________