Legislative Brief: Taxes

The Texas Supreme Court directed Texas lawmakers to rewrite the state’s public school finance system in 2005 because it imposed an unconstitutional statewide property tax. In 2006, the Texas Legislature enacted a new plan, based on the recommendations of Gov. Rick Perry’s Texas Tax Reform Commission. Legislators drastically cut local property taxes and passed a broad-based business activity tax on most Texas businesses, including some physician practices.

Recognizing the unique nature of health care, legislators included tax deductions for the free and under-reimbursed care physicians provide to Medicaid, Medicare, Children’s Health Insurance Program, workers’ compensation, military, and charity care patients.  Because physicians have contractual and ethical obligations to care for patients, often without regard to their own financial interests, their losses on unpaid and underpaid services are unavoidable and substantial. Those losses merit recognition. 

Physicians also pay additional state taxes. Every two years, they are required to pay a licensing fee, an occupational tax, a patient-protection fee, a website fee, and an additional license surcharge imposed by the legislature. These fees are in addition to the sales taxes physicians pay on the supplies and equipment they use to care for patients, and the property taxes they pay on all business property and equipment.  

Economists agree that taxes on businesses ultimately are paid for by the people who purchase the goods or services. Further taxes on physicians only will increase the cost of health care for patients, particularly those who are the sickest.

Increasing the cost of providing medical services, while simultaneously cutting payments for Medicaid services, is bound to exacerbate current problems in access to care for patients. It only serves to push more care into costly emergency room settings, which affect local taxpayers.

As lawmakers return to the state capitol they have multiple challenges ahead. One is balancing the state budget with a $25 billion-plus deficit. As additional revenue sources are sought to help the state offset its budget woes, TMA believes health care should not be taxed.

Medicine’s 2011 Agenda

  • Support tax law provisions that acknowledge physicians’ unique roles in caring for all patients — this includes physicians who provide charity care.
  • Ensure that any tax clean-up legislation that affects health care does not harm patient care or access.

Medicine’s Message

  • Saving lives should not be taxed like other services. Health care is not a traditional business activity and should not be subject to a traditional business activity tax.
  • No other profession is required by law to give away its products or services for free. Texas physicians pay almost $2 billion per year in a hidden tax via unpaid charity care.
  • Medicaid and CHIP payments to Texas physicians cover less than half the cost of providing care. Texas physicians provide more than $61,000 a year each in undercompensated care to Medicaid patients, even more in rural Texas and on the border.  Tax increases add to the cost of caring for these patients, forcing more physicians to find ways to limit participation in these government programs. 

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