January 13, 2013

Letter: The hospital bed tax: Solution or Band-Aid?

The hospital bed tax which helps pay for Medicaid patient care is up for renewal this legislative session. When passed in 2010 it was touted as a three-year stopgap measure to address state tax collection shortfalls resulting from the recession. At that time Georgia also chartered a Special Council on Tax Reform and Fairness. Their charge: retool the state’s tax code to help Georgia regain her ability to compete economically.

The members of this blue ribbon tax council spent huge amounts of uncompensated time gathering data and formulating their proposal — a proposal on which Georgians had been promised an up or down legislative vote. But that vote never happened, so three years later we are without comprehensive tax reform and ranked 49th in per capita income growth. A Census Bureau poverty measure ranks Georgia 47th. If we do not effect a turnaround soon our rapidly growing poor population is going to overwhelm our state’s resources.

Georgians need to understand that hospitals do not pay this bed tax. Paying patients fund this tax either directly or through their insurance premiums. Medicare is exempted. This tax burden falls hardest on small businesses because they have much less negotiating clout than large businesses. Clearly we must pay for Medicaid patients’ care. But this hospital bed tax simply nibbles around the edges of the bold tax policy changes we require to reverse our economic decline, and should not be considered in isolation.  

The tax council’s recommendations hinge on a reduction in the state income tax. This tax is the most onerous for small businesses because many business owners pay taxes on their profits at the personal tax rate. States bordering us to the north and the south have no income tax. Since small businesses generate 65 percent of the net new jobs in America, it is not surprising that Georgia’s economic recovery lacks momentum.

Yes, comprehensive tax reform will step on some politically sensitive toes but we cannot afford to temporize. A competitive tax structure is a prerequisite to resuscitating our economy; and economic growth is the only way to reduce our Medicaid population and the associated costs. Inertia keeps us in our comfort zone, but inertia is our enemy. We require bold policy changes.


David Pennington

Mayor, city of Dalton


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