As the congressional year neared a close last week, it appeared that lawmakers wouldn't be giving small business one of the things it wanted from healthcare reform-the extension of the 25% deduction of healthcare insurance costs for the self-employed.
Small-business advocates say the loss of the deduction will give self-employed people an incentive to drop coverage. The group already has one of the nation's lowest rates of insurance coverage for the employed.
The 25% deduction provision expired Dec. 31, 1993, but Congress was expected to reauthorize the deduction and possibly raise the write-off to 100%. Nearly all the major reform plans proposed on Capitol Hill included such a provision.
But with healthcare reform dead, due in no small part to the opposition of the National Federation of Independent Business, congres sional leaders seem to be in no hurry to give small business back its tax deduction for health insurance. Extension of the measure would cost $500 million for 1994, according to the NFIB.
"There is probably some of that, but anyone who thinks they are spiting the NFIB is really spiting themselves because they are hurting the small businesses in their district," said Mark Isakowitz, healthcare policy analyst for the NFIB.
Loss of the provision would cost a family in the 28% tax bracket that paid $5,000 for health insurance during 1994 an extra $300 in taxes.
"For most self-employed people, that is a meaningful amount of money," Mr. Isakowitz said. "But besides an economic issue, it is also an issue of fairness. Big businesses can deduct 100% of the most expensive insurance plan, but the self-insured can't deduct anything."
There was some last-minute lobbying for the provision by several lawmakers. In a letter to Rep. Sam Gibbons (D-Fla.), acting chairman of the House Ways and Means Committee, Reps. Sander Levin (D-Mich.) and Fred Grandy (R-Iowa) called for a temporary extension of the measure through July 1995.
But with lawmakers looking to adjourn and get home to campaign before the November elections, "our chances of holding on to the 25% deduction are slim at best," Mr. Isakowitz said.