TBT Editorial: County Failed to Make Case on Half-Penny Sales Tax

On Tuesday, Manatee County voters will decide on two important referendums that will have significant impacts on the tax base. The first is a measure to implement an additional half-cent sales tax which would replace current funding for indigent healthcare from a different source, soon to expire. While the measure would benefit certain interests, we find several aspects very troubling and do not feel that it would make for good policy.

We feel that there has been a lack of honest conversation and debate regarding indigent healthcare funding. In accordance with state law, Manatee County established a corpus fund of over $40 million from the proceeds of the 1984 sale of its community hospital to pay for indigent care services. That agreement specifically stipulated that doing so would in no way obligate the county to pay for such services if and when that corpus expired. However, the county has consistently portrayed this funding as an obligation, rather than a fork in the road, arrived at because of a change in policy.

Originally, only the interest earned on the fund was spent, which protected the funding source indefinitely. But the county decided to increase spending – and continues to do so through periods of lower interest and diminished returns – ensuring that the considerable principal in the fund would eventually be spent down to zero, as it says will be the case by FY 2015. Given this history, taxpayers are justified in their skepticism as to whether the county will be able to control growth of spending, or give taxpayers the best bang for their buck with the $23 million in revenue it says the new tax will produce.

The county has suggested that excess revenue generated could be used to lower millage rates on property taxes, but there is no guarantee that this will happen, or that future boards will not increase millage rates to pay for vital services, while the sales tax is still in place. Also, the county's own estimates suggest that the amount paid by typical homeowners in additional sales tax will offset any savings in property taxes.

Meanwhile, low-income workers who disproportionately rent rather than own, will see an increase in sales tax that is not off-set by a property tax reduction. The small number of our wealthiest citizens will likely fare much better. The property tax on the highest-valued homes will see the greatest total savings, likely to be much more than the additional sales tax they will incur, especially considering that the $5,000 transactional cap on the tax stands to most benefit those who can afford big-ticket items.

At the same time, large businesses who don't pay much in the way of sales taxes, but are among the largest property tax payers on the rolls, would see significant savings. For these reasons, it seems to be a very regressive policy in which any promise of “tax relief” would not apply to most citizens, while many of the most vulnerable would in fact pay more.

When the policy is considered on its healthcare merits alone, we find it even more troubling. The county has framed the debate on this issue as being something we have to pay for anyway, with the only question being in regard to how we do so – even suggesting that our only alternative, should the initiative fail, would be to raise property taxes. As we've noted, that is simply not true.

The difference between the amount of money spent on non-hospital services and total healthcare spending is nearly the exact amount that would be available if the county were to spend the exact same portion of the general fund revenue as it does now, once the corpus funding expires. It seems that this question is really about whether we are going to continue to fork over millions and millions of dollars to very profitable hospitals each year, even once we no longer have to.

Hospital-based treatment, while highly profitable, is the least cost-effective method of treating the vast majority of these patients. Given that there is currently a curiously small amount of spending going to the walk-in clinics and other facilities where they can be treated much more efficiently, this too creates deep concerns.

Both the county and the hospitals have paid lip service to improving such inefficiency and directing more patients to lower-cost facilities, but not only have they failed to do so in advance of depleting the corpus, they have failed to detail how that will be accomplished in any meaningful way going forward. Because the referendum would create an enormous revenue stream that would ensure funding to maintain the status quo, one has to wonder what incentive exists for for-profit entities to do anything other than continue current practices, knowing they will continue to be well-compensated.

Hospitals only have to treat the indigents who show up in their emergency rooms if they participate in Medicare, which virtually all of them do. So as far as for-profit hospitals go, this is simply a cost-of-doing business that such a tax would subsidize via average taxpayers. It would stand to reason that the best way to get all providers serious about directing indigents to more cost-efficient facilities would be to end the current practice of subsidizing those costs, once we are no longer obligated to.

We find the fact that so much of this debate has been avoided to be very telling. As the county admits that it has anticipated this moment for many years, we are also troubled by the fact that it did not put the referendum to voters at the last scheduled election – a presidential one, in which turnout would have been higher at no additional costs. Spending hundreds of thousands of dollars to conduct a special election in June of an off-cycle year seems designed to ensure a lower turnout that might be more easily controlled by the hundreds of thousands of dollars in misleading special-interest campaigning that has served only to confuse this issue.

The reason may well have been that the powers that be correctly felt that a vote to expand healthcare funding locally, just as we were to embark on the greatest federal expansion in history, was not likely to have gone well – especially considering that healthcare was the most divisive issue of that election. Opponents have correctly pointed out that the Affordable Care Act already includes new taxes to fund expanded coverage, and it is fair to ask whether this is not a form of double taxation.

Those hundreds of thousands of dollars in election costs could have been saved, or used to obtain outside consulting and auditing in order to determine how the county might best spend available funding without raising taxes beginning in 2015. The fact that the county did neither does not make a good case in asking voters to tax themselves and then entrust the county with the $23 million in additional funding that would result.

Why does the county seem to be going to such great lengths to avoid being up front about it? Good policy doesn't need to be cloaked in disinformation and false promises; Trojan horses do.

Check out The Bradenton Times' Exclusive Election Guide for the June 18 Referendum