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Senate Deadlock Passes; Conferees on Tax Bill, Health Insurance Bill Named

Friday, July 26, 1996

OnLine

The deadlock preventing the Senate from passing the health insurance reform bill (S 1028) and the small business tax bill (HR 3448) at least temporarily came to an end as Democrats and Republicans agreed to appoint conferees to work out the bill’s differences with House members.

The two bills were linked legislatively so once conferees were named on the health bill, the Senate was able to name conferees on the small business tax bill, which also would raise the minimum wage by 90 cents.

Naming conferees does not necessarily mean that the measures will be enacted, but it does mean that progress is being made and that the chances of legislation passing have increased greatly.

The breakthrough came after a successful negotiating session between House Ways and Means Committee Chairman Bill Archer, R-Texas, and Sen. Ted Kennedy, D-Mass., over the size of the medical savings account provision in the health bill. Opponents of MSAs argue that they will undermine the health insurance system, while proponents point out that they give employees the opportunity to save more money to pay for their health care needs.

Under the compromise, self-employed individuals and businesses with fewer than 50 workers would be eligible to open MSAs until the cap of 750,000 policies nationwide is reached. Additional details are expected to be released today.

Clinton Urges Quick Conference

President Clinton released a statement praising the appointment of conferees. Legislators by the end of next week should wrap up their differences over "two of my highest priorities to help working families--health care and the minimum wage," he said.

The Senate’s version of the small business tax bill is about twice as large as the House’s version, mainly because the Senate chose to extend various expired tax provisions on which the House did not act, such as the research and experimentation tax credit, and because the Senate included additional revenue offsets, such as an extension of the airline ticket tax.

The Senate version, but not the House, also includes language simplifying various pension provisions and reforming the rules used to determine whether a worker should be classified as an employee or independent contractor for tax purposes.

Both versions, however, phase out the possessions tax credit and increase expensing limitations for small businesses, as well as increase the minimum wage.

The conferees on the small business tax bill are as follows: Senate Finance Committee Chairman Bill Roth, R-Del.; ranking Finance Committee Democrat Sen. Daniel Patrick Moynihan, D-N.Y.; Sen. John Chafee, R-R.I.; Sen. Charles Grassley, R-Iowa; Sen. Orrin Hatch, R-Utah; Sen. Alan Simpson, R-Wyo.; Sen. Larry Pressler, R-S.D.; Sen. Max Baucus, D-Mont.; Sen. David Pryor, D-Ark.; Sen. Jay Rockefeller, D-W.Va.; Sen. Nancy Kassebaum, R-Kan.; Sen. Jim Jeffords, R-Vt.; and Kennedy.

Health Insurance Bill’s Details

One significant difference between the House- and Senate-passed bills is the inclusion, in the Senate version, of language phasing out interest deductibility for loans against corporate-owned life insurance plans. The House has no such provision.

Another offset in the Senate’s version, but not in the House’s, would repeal the bad debt reserve method, the favorable rule employed by thrifts to account for bad debt.

Other differences include the Senate’s reliance on language expanding compliance and reporting rules for foreign trusts, and the House’s language stepping up earned-income tax credit compliance. Another offset included in both versions would tighten the tax on individuals who give up their citizenship to avoid U.S. income taxes.

The provisions in both bills designed to reduce health care costs would increase the tax deductibility of health insurance purchased by the self-employed, establish tax deductibility of long-term care insurance and expenses, clarify the tax-free treatment of life insurance proceeds to help with the cost of chronic or terminal illness, and grant tax-exemption for state-sponsored high-risk insurance pools.

The conferees on the health care reform bill are as follows: Senate Majority Leader Trent Lott, R-Miss., Roth, Moynihan, Kassebaum, and Kennedy.