BILL AIMS TO LOWER TAX ON INSURANCE : TAX RELIEF SOUGHT FOR HEALTH COVERAGE.

Byline: Charles F. Bostwick Daily News Staff Writer

Aiming to encourage small businesses to provide medical coverage for their workers, Assemblyman George Runner has introduced a bill that would boost the state income tax deduction for health insurance costs.

Runner proposed the bill - which covers self-employed individuals and small businesses with 100 or fewer employees - after talking with small-business owners about the problems they face, his chief of staff said. The Palmdale Republican's district covers the Antelope and Santa Clarita valleys.

``One of the biggest points made was . . . `I can't generate enough money to provide health insurance,' '' said Runner chief of staff Rick Van Nieuwberg.

The measure, Assembly Bill 230, would make state tax law conform with federal tax law, which over the next several years is increasing the amount of health insurance costs that can be deducted from a business's taxable income.

At present, California law allows self-employed individuals and businesses to deduct 25 percent of the cost of health insurance premiums. Federal law allows them to deduct 40 percent, and increases the deduction to 45 percent in 1998 and 80 percent in 2006.

Runner's bill would match those increases for state income taxes, capping the deduction like federal law at 80 percent in 2006.

``This bill allows those that are self-employed to afford health insurance and also provides an incentive for small-business owners to offer health insurance to their employees,'' Runner said.

Introduced Thursday, Runner's bill is expected to go first to the Assembly Revenue and Taxation Committee. Staffers there said they had not yet been assigned the measure and had done no analysis on what it might cost the state treasury.

Small businesses are at a disadvantage compared to larger ones in buying health insurance because the cost for each employee is greater when there are fewer workers, Van Nieuwberg said.

``Large corporations either self-insure or they are able to get a lot of discounts because of the amount of members,'' said Shirley Knight, assistant state director for the National Federation of Independent Business.

A survey done by the federation three or four years ago of its 48,000 California members found that 32 percent did not offer health insurance, Knight said.

``The primary reason they did not offer it, and we've done several surveys on this issue, is basically the cost,'' she said.

In 1993, the organization supported legislation that created a health-insurance pool so that businesses with 50 or fewer employees could get the same discounts as larger ones, she said.

The federation plans another survey to get an updated report on how many of its members offer health insurance.

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Photo: (color in AV and SAC editions only) George Runner

Seeks relief for small business