SBA Releases Study Confirming that Tax Deductions for Health Insurance is Related to Small Business Success

From a press release issued today(April 4, 2006) by the SBA Office of Advocacy:

Deducting the cost of health insurance premiums may keep self-employed entrepreneurs in business, according to a study ... by the Office of Advocacy of the U.S. Small Business Administration. The study shows that the health insurance deduction for the self-employed has decreased the likelihood of entrepreneurial exit by 10.8 percent for single filers and 64.9 percent for married filers.

“Access to healthcare continues to be he top issue for small business,” said Thomas M. Sullivan, Chief Counsel for Advocacy. “This study will help Congress and the administration as they consider policies that help small business and strengthen the economy.”

Dr. Tami Gurley-Calvez wrote the study, Health Insurance Deductibility and Entrepreneurial Survival, with funding from the Office of Advocacy. It examines how the introduction of tax deductibility for self-employed health insurance premiums affects the chances of entrepreneurial exit. Among the study’s findings:

- The presence of the health insurance deduction decreases the probability that a self-employed entrepreneur will choose to exit the entrepreneurial sector by 10.8 percent for single filers.

- For married filers, the presence of the health insurance deduction decreases the rate of exit from entrepreneurship by 64.9 percent.

- The absolute dollar amount of the health insurance premium deduction also influences the probability of exit from entrepreneurial activities.

For single filers a 10 percent increase in the dollar amount of the deduction reduces the probability of exit by 10.6 percent. For married filers the probably of exit is only reduced by 1.2 percent.

For more information and a copy of the complete report, visit the Office of Advocacy website