NOTE: As provided in LFC policy, this report is
intended only for use by the standing finance committees of the
legislature. The Legislative Finance Committee does not assume
responsibility for the accuracy of the information in this report when used for
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SPONSOR: |
Youngberg |
DATE TYPED: |
3/3/03 |
HB |
869 |
||
SHORT TITLE: |
Physician Services Gross Receipts |
SB |
|
||||
|
ANALYST: |
Neel |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY
2004 |
FY
2005
|
FY 2006 |
|
|
($2,300.0) |
($5,200.0) |
($8,500.0) |
Recurring |
General
Fund |
($2,000.0) |
($4,600.0) |
($7,400.0) |
Recurring |
Local
Governments |
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
Relates to:
SB35 Healthcare Practitioners Gross Receipts
SB63 Healthcare Practitioners Gross Receipts
Deduction
SB158 Food and Health Provider Gross Receipts
Deduction.
HB361 Health Practitioners Gross Receipts
Deduction
HB410 Gross Receipts Tax Credit for
LFC files
Responses
Received From
Taxation
and Revenue Department (TRD)
Health
Policy Commission (HPC)
Department
of Health (DOH)
Human
Services Department (HSD)
SUMMARY
Synopsis
of Bill
House
Bill 869 (HB 869) would increase, by percentile increments over 5 years, the deductibility
for certain payments received by licensed health care practitioners from gross
receipts tax. Deductible receipts would
be limited to the payments made by managed health care providers for the
commercial portion of contract services provided by a physician with eligible
practitioners.
Managed health care provider is
defined as a person that provides for the delivery of comprehensive basic
health care services and medically necessary services to individuals enrolled
in a plan through its own employed health care providers or by contracting with
selected or participating health care providers. The commercial portion of
contract services is defined as services performed pursuant to a contract
with a managed health care provider other than those provided for medicare
patients pursuant to Title 18 of the federal Social Security Act or for
medicaid patients pursuant to Title 19 of the same Act.
Physician
is defined as a physician, physician assistant, osteopathic physician or osteopathic
physician’s assistant as appropriately licensed in New Mexico.
Eligible
practitioners would be able to deduct 20% of covered payments received from
July 1, 2003 through June 30, 2004; 40% of covered payments received from July
1, 2004 through June 30, 2005; 60% of covered payments received from July 1,
2005 through June 30, 2006; 80% of covered payments received from July 1, 2006
through June 30, 2007; and 100% of covered payments received after June 30,
2007.
FISCAL IMPLICATIONS
TRD used the following information in determining the fiscal impact: the 1997 Census of Healthcare Services in New Mexico, the Department’s “Analysis of Gross Receipts by Standard Industrial Classification” (Report-80), “Combined Reporting System-Warrant Distribution Summary” (Report 490B), state Medicare and Medicaid expenditure data from the Centers for Medicare and Medicaid Services (CMMS), and financial statements from selected managed care providers filed with the Public Regulation Commission.
ADMINISTRATIVE IMPLICATIONS
TRD notes a moderate administrative impact including systems coding and troubleshooting must be performed; forms and instructions must be revised; taxpayer seminar materials and technical advice memoranda must be prepared; and department personnel must be trained on the new provisions. These changes can be implemented with existing resources.
OTHER SUBSTANTIVE ISSUES
TRD notes the
following substantive issues:
1. Targeting preferential tax treatment to specific industries is not necessarily good tax policy. It raises questions of equity and increases the pressure to extend relief to others by setting a precedent that they may use to justify similar tax breaks.
2. This
bill proposes a tax deduction for a “merit good”. However, the Gross Receipts
and Compensating Tax Act taxes many otherwise meritorious goods and services,
and exempts other meritorious goods and services. The Gross Receipts and
Compensating Tax Act treats some medical services as meritorious, and certainly
provides extensive tax relief for most charitable organizations. The state has traditionally had a very broad
transaction tax base with a fairly low tax rate. Narrowing the base eventually leads to increasing rates in order
to maintain revenue, or reduced public services.
3. This continues a trend over the last decade of removing medical and hospital services from the gross receipts base. A broad base helps to limit the tax rate, thus cutting the base by an industry this large may shift a noticeable amount of tax burden to remaining taxpayers.
4. In addition to adding an element of stability to the gross receipts tax, receipts of health practitioners grow more quickly than general revenue. Exempting this sector reduces the state’s ability to generate adequate revenue from the gross receipts tax.
5. The availability of a gross receipts tax deduction conditioned on who receives healthcare service could be considered discriminatory.
6. Some of the impetus behind proposals to provide deductions or exemptions to healthcare practitioners stems from the fact that some health plans are said to be refusing to pay the passed-on tax.
SN/sb