Tax fairness and health insurance affordability for the self-employed

Dick Durbin

When it comes to taxes, self-employed Americans are being put at a competitive disadvantage that threatens their financial and physical health.

While the federal government allows corporations a 100 percent tax deduction for the cost of their health insurance premiums, self-employed workers pay deduct only 40 percent of their premiums. For more than 400,000 Illinoisans and their families, this disparity requires them to pay hundreds of dollars extra for health insurance premiums each year simply because they work for themselves.

In some cases, this inequity in our tax code may even put health insurance further out of reach for workers who have none at all. Of the over 21 million self-employed workers, more than five million, or 23 percent, lack health insurance. But among salaried and waged workers, only 16.8 percent are uninsured.

Clearly, farmers, small businesses and working families who have contributed so significantly to our nation's economic growth and prosperity shouldn't be treated as second-class citizens under our tax laws. That's why making health insurance premiums for the self-employed 100 percent tax deductible is one of my priorities in this Congress.

This summer, I offered a bipartisan amendment to the Senate version of the tax bill to make health insurance premiums for the self-employed fully deductible. While the amendment was defeated, the Senate subsequently passed a provision to make such premiums 100 percent deductible by 2007. While this is a slight improvement on the schedule's increase of deductibility to 80 percent by 2006, it's not enough.

The current, limited deductibility greatly reduces the affordability of health insurance for the self-employed. In addition, self-employed persons generally pay higher premium rates because they don't have access to group insurance plans.

These disadvantages adversely affect a variety of workers, from women who own a growing number of small businesses, to farmers who face significant occupational safety hazards. In fact, a recent study by the National Institute for Occupational Safety and Health noted that over the last 50 years, agriculture has consistently been ranked among the four most hazardous industries in the U.S.

Making health insurance premiums for the self-employed 100 percent tax deductible could reduce the net cost of health insurance for a farm family or a small business owner by $500 to $1,000 each year.

Four years after Congress debated extending health coverage to all Americans, the number of uninsured people has risen to 40 million, including the more than five million self-employed workers. We must do more to reduce these dismal figures. I'll continue to push legislation to make health insurance premiums for the self-employed 100 percent tax deductible sooner rather than later. It's time to bring a measure of fairness to the millions of Americans who work for themselves.

Dick Durbin, a Democrat from Springfield, is the 47th U.S. Senator from the State of Illinois. Elected to the U.S. Senate on Nov. 5, 1996, Durbin fills the seat left vacant by the retirement of his longtime friend, U.S. Senator Paul Simon. Durbin sits on the Senate Judiciary, Governmental Affairs and Budget Committees in the 105th. Congress. Durbin, 52, was first elected to represent the 20th Congressional District in the U.S. House of Representatives in 1982. Durbin and his wife, Loretta, have three children and one grandchild.

4 ILLINOIS COUNTRY LIVING SEPTEMBER 1997