Smallest companies say nation's tax policies unhealthy for Main Street |
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Written by U.S. Insurance News
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Sunday, 13 July 2003 |
A new study among the nation's smallest businesses shows that optimism about the economy has slipped significantly over the past year and that owners strongly disapprove of tax laws they believe favor large corporations over Main Street businesses. The study — conducted by the National Association for the Self-Employed — cites deep dissatisfaction with the federal self-employment tax on health insurance and calls for further economic reforms aimed at removing penalties for the nation's 16 million smallest enterprises.
WASHINGTON — A new study among the nation's smallest businesses shows that optimism about the economy has slipped significantly over the past year and that owners strongly disapprove of tax laws they believe favor large corporations over Main Street businesses.
The study — conducted by the National Association for the Self-Employed — cites deep dissatisfaction with the federal self-employment tax on health insurance and calls for further economic reforms aimed at removing penalties for the nation's 16 million smallest enterprises.
"The businesses that can least afford it are paying disproportionately more for taxes in key areas," said Robert Hughes, president of NASE. "In an increasingly entrepreneurial society, finding solutions that provide a fairer shake for these enterprises is in the best interests of the nation."
According to the "Self-Employed and the Economy" survey, the number of micro-business owners who say they feel optimistic about conditions for their business has fallen from nearly half (49 percent) in 2002 to less than a third (31.1 percent) in late May 2003. Uncertainty about the future of their enterprise has nearly doubled among micro owners in the same period.
Driving these attitudes is deep disapproval toward tax policies that most agree favor large corporations at the expense of small enterprises. Eighty- one percent of survey respondents believe the self-employed and micro- businesses are not treated on par with larger corporations by the government when it comes to tax other financial growth incentives. Nearly 90 percent (89.2 percent) agree current tax laws unfairly penalize the self-employed and that reforms are needed to help businesses like theirs succeed and grow.
At the core of owner dissatisfaction are laws requiring sole proprietors to pay a 15.3 percent self-employment tax on all health insurance premiums. Larger corporations are able to deduct health-care expenses.
For business owners like Christine Krupinski, such reforms are critical to survival in a cash-strapped economy. The Fairfax, Va., graphic designer pays approximately $4,800 a year for health insurance coverage.
"At tax time, I can't deduct that $4,800 as a business expense because I'm a sole proprietor, while every other business can deduct the expense," says Krupinski. "Instead, I pay 15.3 percent self-employment tax on my premiums -- an extra $734.00 that could be reinvested in my business to buy design tools and make other capital investments."
Taxation of health insurance figures heavily in rising concerns about health-care costs among small businesses. Access to affordable health care was cited in the study as the most important issue faced by owners, ahead of the general state of the economy, world unrest and customer demand.
On average, self-employed workers pay 20 percent more for health-care than do individuals at larger corporations, with taxes comprising a significant portion of these additional costs. Of the nation's 41 million uninsured, more than 60 percent are from families headed by a small business owner.
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