What's New

Zack Hutchins
Director of Communications

January 13, 2004

Report: Powerful hospital interests propose huge new business taxes, state borrowing to increase spending on hospitals, Medicaid

Two powerful health-care spending groups have proposed a new tax on businesses of up to $3,000 per employee and $1 to $2 billion in new taxpayer-funded public debt to send new taxpayer dollars to hospitals and increase state spending on Medicaid and other government health insurance programs.

The plan, which was described in a January 13 story in the New York Times, is being advanced by the powerful hospital workers' union, 1199/SEIU, and the Greater New York Hospital Association. The union is headed by the politically influential Dennis Rivera.

The proposal would tax employers that do not currently provide employee health insurance benefits as much as $3,000 per employee. In the 1980s, Massachusetts passed legislation imposing a similar tax, but the "Dukakis tax" was never implemented after concerns about its economic effects mounted.

The plan also calls for the sale of $1 to $2 billion in state bonds to boost the state's financially troubled hospitals, the newspaper said.

Business Council President Daniel B. Walsh strongly criticized the proposal.

"State lawmakers gave Dennis Rivera the PIN number to the state ATM a couple of years ago, and that's one of the reasons our expenditures on Medicaid are so far out of control," Walsh said. "That was a mistake, a big one, and this would be even worse.

"New York State already spends more on Medicaid than any other state, and more than 40 other states spend in their entire state budgets. We already subsidize hospitals by collecting more than $1 billion a year in taxes that no other state imposes at all.

"New York State doesn't need to support even more spending with a new tax that even Massachusetts under Governor Dukakis rejected. It doesn't need policies that merely shift this burden around. New York needs policies that reduce Medicaid spending, period."

Walsh noted that the proposal flies in the face of two key priorities for the 2004 legislative session repeatedly identified by Governor George Pataki and Senate Majority Leader Joseph Bruno: restraining state spending on Medicaid and avoiding tax increases.

"Our tax burden is too high and I think it was a mistake to raise taxes last year," Governor Pataki said at a Dec. 9 press conference. "And we certainly are not going to propose any new taxes this year."

Both Senate Majority Leader Joseph Bruno and Assembly Speaker Sheldon Silver have said they do not see a need for tax increases this year. State Comptroller Alan Hevesi has also rejected the idea of new taxes. In a December 5 issue of the New York Post, Hevesi said lawmakers should reject both tax increases and new borrowing as resolutions to the state's budget gap.

Speaker Silver said he has not seen details of the proposal but the Assembly will "take a good look" at the plan.

"There is merit to the idea of leveling the playing field among competitors," he said in an interview on WROW-AM in Albany. "There is merit to the idea of incentivizing employers to provide health insurance to their employees."

Under the health interests' proposal, the state would relieve counties of their contribution to the Family Health Plus program. The Times also said, with no additional specifics, that the proposal calls for subsidies and tax incentives to businesses that already insure their employees.

The $3,000 per employee tax would shrink for smaller businesses that pay low wages, the Times reported.

The hospital group and union plan a new ad campaign to promote the plan, the Times reported.

The sale of up to $2 billion in state bonds would provide low-cost loans to New York's financially troubled hospitals. New York State already has the nation's second highest level of public debt per capita, behind only Alaska, research by The Public Policy Institute of New York State has shown.