House OKs Tax Break for Self-Employed : Legislation: Provision allowing deduction of 25% of cost of health insurance premiums is reinstated. But debate on funding it takes on racial overtones.

The House approved legislation Tuesday to help the nation’s self-employed buy health insurance but the proposal’s strong bipartisan support was overshadowed by a racially charged debate over how to pay for it.

By a vote of 381 to 44, the House agreed to reinstate an expired provision in the tax code that allows the self-employed to deduct 25% of the cost of their health insurance premiums from their taxes.

But in what Democrats charged was the opening salvo in a broader GOP assault on the nation’s affirmative action policies, the Republicans sought to compensate for revenue lost to the Treasury because of the deduction by eliminating other tax breaks designed to encourage minority ownership of radio and television stations.

“You want to set aside the hopes and dreams of minorities. . . ? Go ahead and do it. You’ve got the votes,” Rep. Charles B. Rangel (D-N.Y.) said bitterly.

In the end, the Republican version prevailed. A Democratic alternative, which would have expanded the deduction and financed it with higher taxes aimed at the wealthy, was defeated on a largely party line vote of 234 to 191.

The measure now moves to the Senate, where the debate over minority preferences is expected to stir a similar controversy. Because it is retroactive to 1994, Republicans hope to push through the tax provision by April 15 so that there will be no lapse in the health insurance deduction for the 3.2 million self-employed.

The health insurance deduction expired in 1993 and was not renewed because its extension died with President Clinton’s health reform package last year.

The legislation approved by the House would make the extension permanent, a move supported by both parties and the White House. The extension had seemed unlikely to stir controversy, until Republicans on the House Ways and Means Committee sought to combine it with an effort to eliminate another tax break benefiting companies that sell broadcast properties to minority investors.

Administered by the Federal Communications Commission, the 17-year-old tax preference program is meant to encourage minority ownership of radio and television stations by allowing broadcasters who sell properties to minority investors to defer their taxes on gains from the sales.

Noting that less than a third of the minority investors who have purchased radio stations since 1979 still own them, the Republicans argued that the provisions had been used by large companies to evade taxes by having minority companies front for them.

Tempers flared and voices rose.

“The only time blacks really get affirmative action is when it’s time to go into combat and then you look and see who’s in the infantry,” shouted Rangel, a senior member of the Congressional Black Caucus.