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SPONSOR: |
HBIC |
DATE
TYPED: |
|
HB |
361/HBICS |
||
SHORT
TITLE: |
Health
Practitioner Gross Receipts Deduction |
SB |
|
||||
|
ANALYST: |
Smith |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
(31,900.0) |
(34,800.0) |
Recurring |
General Fund |
|
(2,200.0) |
(2,400.0) |
Recurring |
Counties |
|
(See Technical Issues)
|
|
Recurring |
Municipalities |
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
Responses
Received From
Taxation
and Revenue Department (TRD)
SUMMARY
Synopsis
of Bill
The House Business and
Industry Substitute for House Bill 361 provide a gross receipts tax deduction
for licensed health practitioners for 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.
This proposal also makes
adjustments to municipal gross receipts tax distributions that are intended to
generate additional revenues to offset the new deduction. Specifically, municipal distributions are
calculated on a base that includes the value of the proposed health care deductions
claimed for each municipality.
FISCAL IMPLICATIONS
TRD’s 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.
Under
this proposal, municipal distributions are calculated on a base that includes
the value of the proposed health care deductions. This change 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.
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.
TECHNICAL ISSUES
Amendments to municipal
distributions are made which are intended to maintain municipal gross receipts
tax revenue at the same level as under current law. However, for the amendments to work, it
is critical that health practitioners report the exact amount of all deductions
attributable to each location.
If all health practitioners report correctly, the provisions contained
in this bill will accomplish their purpose.
However, as with most changes in tax law, reporting behavior can be
irregular. For example, some taxpayers may treat deductions (which are required
to be reported) as exemptions that are not subject to reporting
requirements. The actual impact on a
specific municipality’s gross receipts tax revenue is unpredictable.
OTHER SUBSTANTIVE ISSUES
TRD makes the
following policy arguments:
·
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 state’s
ability to generate adequate revenue from the gross receipts tax.
SS/sb:yr