Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, January 15, 1992 TAG: 9201150368
SECTION: EDITORIAL PAGE: A-8 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Long
A SECOND OPINION ON WILDER'S BED TAX
HARD TIMES produce pain. The diagnostic trick is to separate fleeting aches from the painful symptoms of an illness which, untreated, will get worse.Judging from the past week's demonstrations, packed budget hearings and the like, many Virginians are concluding that deep and continuing cutbacks in state spending have become the second kind of pain, serious enough to outweigh their aversion to higher taxes.
These Virginians are right.
By the measures that matter most, Virginia continues to be a relatively low-tax state. Some increase in taxes - not too much, but some - can be accommodated without losing that distinction. And without higher taxes, the commonwealth cannot make the investments in its human and physical capital that are necessary for its long-term health.
Not all remedies, of course, are equally indicated. Let us begin with the tax proposal of the moment, the one by Gov. Wilder in his State of the Commonwealth speech last week for a tax on hospitals, nursing homes and druggists to help pay the burgeoning costs of Medicaid.
There are better ways to raise state revenues.
Not that a hospital tax is indefensible. In favor of Wilder's plan are these points:
The medical industry is hardly being asked to sacrifice while others have it easy. The governor's budget proposal unveiled last week calls for considerable pain across the board - sharp tuition increases at state colleges, layoffs of some 900 state employees, another year without pay raises, etc. Health-care providers - nicely profitable in Virginia, thank you - are asked to share just a little discomfort.
Targeting the medical industry as a revenue source lacks neither fairness nor logic: It is Medicaid more than anything that threatens to swamp the budget. Indeed, cutbacks Wilder proposes wouldn't reduce the tax burden or afford wherewithal for new services; health care is gobbling up all the savings. Medicaid, the costs of which the state shares with the federal government, has grown threefold in the past decade. Wilder wants to take back a little from those who receive the Medicaid money.
The tax wouldn't be burdensome. It is really a minor levy, raising only $68 million within a $28 billion budget. In Virginia, health-care providers' profits are projected to surpass $750 million over the biennium. The administration calculates that hospitals could pay the tax by reducing future operating expenses by just one-half of 1 percent - not exactly applying a tourniquet, compared with the belt-tightening others have undergone.
Physicians would even get a break. Wilder wants each to chip in $200, but they'd be relieved of having to pay $250 into a neurologically-impaired-infant fund that's in good financial shape.
A victory over the powerful health-care lobby in Richmond might be worth something in its own right. So what's so bad about Wilder's medical-tax proposal?
Against it are these points:
The health-care industry would pass on the cost of the tax to consumers, thereby raising prices already prone to soar. Administration officials ask a reasonable question: Why should this healthy industry pass on the cost? Can't it save one-half of 1 percent from operating expenses? To which the real world offers this answer: Yes, it could if it had to - but who's to prevent it from passing on the cost anyway?
Hospitals couldn't pass on the cost to all their consumers. Medicaid and Medicare are exempt. Those enjoying contracts with, say, Blue Cross and Blue Shield, or who are big enough to muster bargaining clout, also would be able to insulate themselves. Thus left to feel the brunt of the passed-through tax would be smaller employers and the self-insured.
Those who can afford health care subsidize those who cannot. But what's needed is to broaden the sharing of that burden, not to push more of it onto a narrowing base of employers already dragged down by insurance costs.
The tax would raise only $68 million - not hard on the medical industry, but also not much for a state government facing a half-billion-dollar shortfall. A tax of this sort might be justified to get through an especially rough spot. But there's no assurance the levy would be lifted once good times resume. On the contrary, experience suggests the tax, once imposed, would remain.
That is its biggest fault. If an enlightened government were to legislate the ideal tax structure for Virginia, surely the plan would not include - as a permanent feature - what was derisively called the "bed tax" when the Baliles administration proposed it.
With better options available, there's little reason to complicate the state's tax code with a new, dubious source of revenue - and one that provides not much revenue at that.
The proposed health-care assessment has the look of a revenue enhancer the chief merit of which is to elude the category, and thus the political fallout, of a tax increase. Virginians ought to demand more from their government.
Instead of seeking ways to sustain the soothing mantra of no general tax increase, Gov. Wilder and the General Assembly should be seeking the best, most responsible and fairest way to raise the revenues they need to perform their job. Last we heard, that job is supposed to entail leadership.