Jim Gerlach, current congressman for the 6th congressional district and candidate for governor twitters. Late last week he tweeted a link to an oped he wrote in the Pottstown Mercury on health care. Being a curious soul I read it. Here is an excerpt:
One option that I have been working on with Wisconsin Democratic Rep. Ron Kind would give the self-employed and small business owners — groups that often struggle to maintain coverage due to rapidly rising premiums — two ways to lower insurance costs.
Employers would receive tax credits of up to $1,800 per year for each employee they cover under the Small Business Health Options Program (SHOP) Act that Congressman Kind and I support.
In addition to tax credits, the legislation would allow small businesses to form statewide, and eventually, national pools to use their buying power the same way larger corporations do to get better rates on premiums.
Gerlach later writes:
Republicans in Congress have introduced at least a dozen bills to address health care reform. Most, including the bill I have sponsored along with Rep. Kind, have not even received a hearing.
That is an interesting proposal. The bill is HR 1470. It was introduced in March and was referred to the Ways and Means Committee. So far a number of other PA congressional representatives have signed on as co-sponsors, including Altmire, Dent, Pitts, Platts, and Allyson Schwartz, who is on the Ways and Means committee. Here is the entire text of the bill:
To amend the Internal Revenue Code of 1986 to provide that the deduction for the health insurance costs of self-employed individuals be allowed in determining self-employment tax.
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 2009'.
SEC. 2. SECA TAX DEDUCTION FOR HEALTH INSURANCE COSTS.
(a) In General- Subsection (l) of section 162 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 amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
That's it. Replacing paragraph 4 with paragraph 5. Now how is the average person supposed to be able to tell if that gives tax credits of up to $1800 a year?
So, on to the tax code. Here is subsection L of section 162 of the 1986 tax code:
(l) Special rules for health insurance costs of self-employed individuals
(1) Allowance of deduction
(A) In general
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 an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and dependents.
(B) Applicable percentage
For purposes of subparagraph (A), the applicable percentage shall be determined under the following table:
For taxable years beginning in calendar year— The applicable percentage is—
1999 through 2001 60
2003 and thereafter 100.
(A) Dollar amount
No deduction shall be allowed under paragraph (1) to the extent that the amount of such deduction exceeds the taxpayer’s earned income (within the meaning of section 401 (c)) derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established.
(B) Other coverage
Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer. The preceding sentence shall be applied separately with respect to—
(i) plans which include coverage for qualified long-term care services (as defined in section 7702B (c)) or are qualified long-term care insurance contracts (as defined in section 7702B (b)), and
(ii) plans which do not include such coverage and are not such contracts.
(C) Long-term care premiums
In the case of a qualified long-term care insurance contract (as defined in section 7702B (b)), only eligible long-term care premiums (as defined in section 213 (d)(10)) shall be taken into account under paragraph (1).
(3) Coordination with medical deduction
Any amount paid by a taxpayer for insurance to which paragraph (1) applies shall not be taken into account in computing the amount allowable to the taxpayer as a deduction under section 213 (a).
(4) Deduction not allowed for self-employment tax purposes
The deduction allowable by reason of this subsection shall not be taken into account in determining an individual’s net earnings from self-employment (within the meaning of section 1402 (a)) for purposes of chapter 2.
(5) Treatment of certain S corporation shareholders
This subsection shall apply in the case of any individual treated as a partner under section 1372 (a), except that—
(A) for purposes of this subsection, such individual’s wages (as defined in section 3121) from the S corporation shall be treated as such individual’s earned income (within the meaning of section 401 (c)(1)), and
(B) there shall be such adjustments in the application of this subsection as the Secretary may by regulations prescribe.
Unless you specialize in a certain type of law or accountancy I don't think that makes any sense.
How are people supposed to keep track of all this stuff and understand it, and how does it get boiled down to "Employers would receive tax credits of up to $1,800 per year for each employee they cover"? [sigh]