At-Home Businesses Get a Sympathetic Ear on Capitol Hill

WHEN Pat Choate begins work each morning, he doesn't have to contend with traffic snarls in the nation's capital. And picking out which tie to wear is no longer a difficult decision. The reason: The prominent economist does all his high-priced consulting for his corporate clients out of his spacious apartment.

''I have found that more work gets done out of my home than when I used to head into an office everyday in downtown D.C.,'' says Mr. Choate. ''I think my work situation is ideal and it's probably the wave of the future for the American workforce.''

The number of individuals working out of their homes has grown tremendously in the past decade. The US Commerce Department estimates that 50 million Americans work from home as ''telecommuters,'' up from 20 million in the mid-1980s.

The Republican-controlled Congress would like to see those numbers go even higher.

''This Congress is certainly more sympathetic to home-business owners than others in the past,'' says Angela Jones of the National Federation of Independent Business in Washington. ''Part of the reason behind that is the importance that [House Speaker] Newt Gingrich has attached to telecommuting. He sees this increasingly as the mode of work in the future.''

In an effort to help small-business business owners, several proposals have been introduced this past legislative term. Among the most significant is the capital-gains tax cut, which is a part of the budget bill still being debated by the White House and congressional leaders. The budget bill would cut taxes on profits from the sale of stock, property, or other assets by $35.7 billion.

Also part of the budget bill is a proposal to cut estate taxes and a provision to allow small-business business owners to make tax-deductible contributions to a medical savings account.

Despite these potential gains for small-business business owners - if the budget bill is passed - Congress failed to include an expanded home-office deduction in the final version of the measure. The Home Office Deduction Act of 1995, sponsored by Rep. Nancy Johnson (R) of Connecticut, would have reversed a 1993 Supreme Court decision known as I.R.S. v. Soliman. That ruling concluded that an anesthesiologist who saw his patients in a hospital and merely used his office to do paperwork couldn't deduct the office because he didn't perform his trade there. That sharply curtailed the number of taxpayers who could claim a home office.

''Claiming the home-office deduction now raises red flags all over your 1040, and invites a sure audit,'' says Choate. ''That's just one reason I don't take it - even though I certainly could.''

Many home-business owners appear to agree with Choate. Of 15 million sole-proprietorship filers in 1994, only 1.6 million took the deduction.

''The fact that I can't take the deduction is unfair and it's killing me financially,'' says Max Carson, a recently established computer consultant in Arlington, Va., who does his paperwork out of his home office.

Representative Johnson expects to bring up the ''Soliman problem'' once again next year. For its part, the Clinton administration is trying to encourage more people to work from home. Under the ''Flexiplace program,'' some federal employees can now work from their homes using a computer and a modem to communicate with the home office. ''Not everyone qualifies for this program, though,'' says Everett Ehrlich, the undersecretary of commerce for economic affairs. ''Most federal jobs still require an individual to be in the workplace every day.''

Still, Robert Moskowitz, the president of the National Telecommuting Association, calls Flexiplace ''one of the strongest ways government can encourage more telecommuting.''

Whatever the budget bill's outcome in Washington, both Republicans and Democrats agree that balancing the budget will have a positive effect on the economy and small-business business. According to the Joint Economic Committee, a balanced budget will lead to the creation of 6.1 million more jobs in 10 years, and will boost real per-capita income 16.1 percent.

''This Congress has done so much already to help home business owners and hopefully their work is not done yet,'' says Karen Kerrigan of the 40,000-member Small Business Survival Committee. ''The next legislative session is just around the corner, and we plan to push for less restrictive regulations to help make entrepreneurs more productive and successful.''