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Sen. Chance, Rep. Ramsey key players in tax bill

Two local Republican legislators were major players in the passage last week of a controversial new tax on all hospitals.

House Bill 307, cosponsored by Republican Rep. Matt Ramsey of Peachtree City, was approved with modifications by the Georgia Senate last week, where Republican Senator Ronnie Chance of Tyrone voted in favor of the bill.

Chance is chairman of the Senate Finance Committee. Ramsey is one of Gov. Sonny Perdue's floor leaders in the House of Representatives. Perdue strongly favored the original hospital tax bill, but has objected to the Senate changes.

The modifications resulted in the amended bill going back to the House.

Several Republicans voted against the tax bill, including Sen. Mitch Seabaugh of Coweta County, the majority whip in the Senate.

The bill — pushed by Gov. Perdue — creates a new “hospital tax” of 1.45 percent of net patient revenue at all Georgia hospitals whether they are for-profit or non-profit.

The revenue is needed to address a more than $300 million shortfall in the state’s Medicaid program for the upcoming fiscal year, according to a Senate spokesperson.

A portion of the hospital tax revenues will be used as matching funds for federal Medicaid funding, officials said. Another portion will be deposited into the state’s indigent care trust fund; yet another portion will be used to fund a Medicaid reimbursement rate increase of more than 12 percent for hospitals, officials said.

The bill is not yet headed to Gov. Perdue for his signature because the Senate changes to the bill must either be approved by the House or some sort of agreement must be reached between the two chambers.

The Senate change to the bill added language that would allow insurers to have an exemption from state premium taxes, but not local insurance premium taxes. That exemption would only kick in the year after the state’s revenue shortfall reserve reaches $500 million or more.

House leaders have objected to the Senate changes in the bill, so it remains to be seen if a version of the legislation will gain approval from both chambers required before it can be signed into law.

The tax would be applied to both for-profit and non-profit hospitals, officials said.

While one speaker on the Senate floor claimed the hospital tax was not a tax, the net affect of the bill is likely to result in increased hospital costs for Georgians.

The Senate also passed a separate House bill with several tax cuts and job creation incentives that will be going to Gov. Perdue for his signature.

One facet of HB 1023 creates a tax credit of between $25 and $125 per person for up to four consecutive quarters for employers who hire someone from Georgia’s ranks of unemployed residents. The tax credit would apply towards a company’s unemployment tax and could only be used for four consecutive quarters by any given company.

Chance, a sponsor of the bill, said in a news release that the incentives “have a proven track record.”

“We must utilize free-market solutions and incentives to grow the private sector and lead Georgia to economic recovery,” Chance said. “Taxation and regulation only work against economic growth.”

Other tax credits and incentives offered through the legislation are:

• “Angel Investor” tax credit: An income tax credit for investment made in small or start up Georgia businesses with 20 or fewer employees. The income tax credits would be available after two years of investment. The total “Angel Investor” tax credit pool would be limited to $3 million per year (adjusted for inflation).

• Elimination of the Net Worth tax: The net worth or intangible tax is a hold over from a 1930’s law that taxes wealth accumulation. Georgia is one of a handful of states that still retain it.

• A triggered 25 and 50 percent reduction of the Capital Gains tax for all Georgia taxpayers: Georgia currently has the second highest Capital Gains tax in the southeast, with two of our neighboring states at zero percent, according to a Senate news release. The corporate and individual capital gains tax rate will be reduced by 25 percent for the first year the revenue shortfall reserve reaches $1 billion; the rate reduction will be 50 percent for the next year.

Claude Y Paquin (not verified)
Claude Y Paquin's picture
Helping Bonkers understand Georgia taxes

Bonkers, I understand the hospital tax to be the result of a little ploy to extract more money from the federal government for Medicaid in a way that benefits the hospitals. The idea seems to be to get the federal government to provide more money to the state for Medicaid, so the state may have more Medicaid funds to pay to the hospitals. Then the hospitals kick back some of the extra Medicaid money they couldn't have had otherwise, but it is called a tax to make it look better.

Look at it this way. Suppose you are prepared to sell me a widget for $950, but the widget manufacturer offers a plan that gives me a 10 percent rebate for any widget purchase of $1000 or more. So you agree to let me pay you $50 extra so I can collect my $100. You're $50 better off, I'm $50 better off, and the widget manufacturer is $100 worse off. Similar story for the hospitals, except the kickback had to be called a tax. Perhaps you called your extra $50 a service fee.

Calling the kickback by the hospitals a tax makes Republicans look bad and stirs up the public a little. But hey, when the money is tight, a politician's gotta do what a politician's gotta do.

Now about the net worth tax. It's also called the intangibles tax. It now only applies to corporations, but it used to apply to individuals up until about 15 years ago. Florida used to rely on that quite a bit to extract money from retirees. You had to file an annual return with the state showing the balance in every bank account you had, every stock you had in brokerage accounts, etc., and the state would send you a tax bill based on the value.

Finally, about the capital gains tax. Before Ronald Reagan reformed the federal income tax, about 1981, you calculated your net long-term capital gains and put half that figure as income on your 1040 form. That made you pay the 6 percent Georgia income tax on only half, so the net result was you paid only 3 percent.

Reagan changed all that. He lowered the overall federal income tax rates but made the tax the same on capital gains as on ordinary income. That doubled the capital gains figure shown on your federal form 1040. Since you start with your federal income to compute your Georgia income, this doubled the Georgia income tax on capital gains. Nobody in Georgia said a word. The state government was only too happy to pick up the extra income tax. Which goes to show how easy it is to fool Georgia taxpayers.

Reducing the capital gains tax on Georgia taxpayers might not be a bad idea. It shouldn't have been doubled to start with, 28 or so years ago.

Bonkers
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Paquin

Thank you for the information. However I wasn't concerned about "little ploy" as you called it what Reagan might have done many years ago. That also sounds like a little ploy----lower taxes one place, raise in another!

What I do know is that when the hospitals pay an additional tax to the state, I am surely going to have a higher hospital bill, or I will have to pay more taxes to the feds or the state!
I don't know how Georgia gets more money from the feds by taxing local hospitals more?

Like I say, most do not have capital gains, only the better off!

Bonkers
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Inexperienced republicans

increasing taxes on hospitals to be able to pay hospitals more subsidy!
Why didn't they just raise my taxes directly?

I understand the part about dropping down the tax on capital gains.....wish the average guy like me owned a significant amount of those!

No one has paid a dime on accumulated wealth taxes for many years. Ask Sonny if he has ever paid any. Have you?

PTC Observer
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Hospital Taxes

These two guys have a difficult job, it's going to be even more difficult as Federal mandates for our new health care system are pushed down the states. No way it will ever be funded and the state will go deeper in debt as it sells its future to a utopian vision.

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