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|
SPONSOR: |
Komadina |
DATE TYPED: |
|
HB |
|
||
|
SHORT TITLE: |
Health
Practitioners Gross Receipts Deduction
|
SB |
63 |
||||
|
|
ANALYST: |
Smith |
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REVENUE
|
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
|
FY03 |
FY04 |
|
|
|
|
|
|
|
|
Gross Receipts Tax Deduction: |
|
|
(18,200.0) |
(19,900.0) |
Recurring |
General Fund |
|
|
(13,700.0) |
(14,900.0) |
Recurring |
Municipalities |
|
|
(2,200.0) |
(2,400.0) |
Recurring |
Counties |
|
|
(34,100.0) |
(37,200.0) |
|
Total |
|
|
|
|
|
Distribution Increase: |
|
|
(4,900.0) |
(5,300.0) |
Recurring |
General Fund |
|
|
4,900.0 |
5,300.0 |
Recurring |
Municipalities |
|
|
|
|
|
|
|
|
(23,100.0) |
(25,200.0) |
Recurring |
Net General Fund |
|
|
(8,800.0) |
(9,600.0) |
Recurring |
Net Municipalities |
|
|
(2,200.0) |
(2,400.0) |
Recurring |
Net Counties |
|
|
(34,100.0) |
(37,200.0) |
|
Total |
(Parenthesis ( ) Indicate Revenue Decreases)
Responses
Received From
TRD
SUMMARY
Synopsis
of Bill
Senate Bill 63 provides
a gross receipts tax deduction for receipts of licensed health practitioners
from services performed pursuant to a contract with managed health care
providers. The deduction is limited to
the “commercial portion of contract services”, or services performed other than
for Medicare and Medicaid patients. The state-shared gross receipts
distribution to municipalities is increased from the current 1.225% to
1.24%. The increase is intended to generate
additional revenues for municipalities in order to offset the new gross receipts
tax deduction.
FISCAL
IMPLICATIONS
TRD reports that the fiscal
impact was derived from 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. TRD makes the following observations:
·
First, the
increase in the state-shared portion of gross receipts tax from 1.225% to 1.24%
is not sufficient to completely offset removing the contracted services from
the gross receipts tax base. In fact,
municipalities are collectively compensated for less than half of the effect of
removing contracted services from the base.
The state-shared rate for fiscal year 2004 would need to be close to
1.28% in order to approximate revenue neutrality for the municipalities.
·
Additionally,
taxable gross receipts attributable to the health-care industry are expected to
grow at a higher rate than the overall gross receipts base. As a result, although the increase in rate
will partially compensate municipalities in the short-term, the revenue gap
will widen over time. The gross receipts revenue derived from a relatively
slow-growing base will not keep pace with the foregone revenue.
·
Finally, most
receipts from health care services are concentrated in larger
municipalities. However, cities in
which physicians’ receipts are a greater share of total receipts than the
municipal average will suffer a proportionally greater loss of revenue because
the base on which the 1.24% share is calculated would be reduced by a greater
percentage than for average municipalities.
In this regard, provisions contained in this bill result in net transfers
from some cities (primarily
·
The increase in
the state-shared distribution to municipalities is not accompanied by a
corresponding increase in the overall state gross receipts tax rate, thus
municipal compensation is financed with foregone state general fund revenue.
Further, county governments will have a smaller tax base on which to generate
revenue, and there are no provisions to compensate counties contained in the proposal.
OTHER SUBSTANTIVE ISSUES
TRD makes notes the
following tax policy issues:
·
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.
·
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.
·
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.
·
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
“elasticity” of the gross receipts tax over time.