Tax credits

THE ISSUE

Gov. Bob Riley is proposing offering tax credits to small businesses and their employees as a way of providing health insurance to workers currently not covered by group plans.

Tax cuts and budget cuts are shaping up as the predominant themes of this year's session of the Alabama Legislature, and both are sure to end in difficult decisions.

The tax cuts are being pushed by Gov. Bob Riley, who wants the threshold at which the working poor must pay state income taxes raised to a level near the poverty line. He also is asking the Legislature to provide tax breaks to small businesses that offer health insurance to their employees. This one could meet serious opposition as lawmakers struggle with education budget cuts and pressure from the powerful Alabama Education Association to maintain school budgets.

What Riley proposes for small businesses is a deduction of twice the amount they pay for health insurance premiums for employees. He also is asking that employees of those businesses, whose incomes are under $50,000, be allowed to deduct twice the amount they pay for health insurance.

The Business Council of Alabama, which is backing the governor's plan, estimates the health insurance deductions will cost $13 million. But William Canary, president and CEO of the council, said that amount pales in comparison to the more than $5 billion businesses contribute to state and local governments.

The incentives would be available to businesses that employ 25 or fewer people - a category that Riley says represents 90 percent of all businesses in Alabama, and a category that creates the majority of jobs in the state.

The governor's tax incentive has merit, though it won't make much of a dent in the health-care cost crisis that will drive the nation to a single-payer system much like those in Europe. But Riley is at least exploring ways to make affordable health care more widely available in the private market for small employers and their workers, and that is commendable.

The impact of the tax incentives on state budgets will be minimal, and could create savings in the troubled Medicaid budget if employers and workers buy into the incentive plan.

There are an extimated 600,000 Alabamians who do not have private health insurance. Riley's plan won't reduce that number significantly, but it at least addresses the problem in a way that encourages free enterprise.