Nevada Medical Equipment Sales Tax Exemption, Question 4 (2016)

FINANCIAL IMPACT OF THE MEDICAL PATIENT TAX RELIEF ACT INITIATIVE

FINANCIAL IMPACT – CANNOT BE DETERMINED

OVERVIEW

The Medical Patient Tax Relief Act Initiative (Initiative) proposes to amend Article 10 of the Nevada Constitution by adding a new section, designated Section 7, that would require the Legislature to provide by law for an exemption from the sales and use tax for durable medical equipment, oxygen delivery equipment and mobility enhancing equipment prescribed for human use by a licensed provider of health care acting within his or her scope of practice.

FINANCIAL IMPACT OF THE INITIATIVE

Pursuant to Article 19, Section 4 of the Nevada Constitution, an initiative proposing to amend the Nevada Constitution must be approved by the voters at two successive general elections in order to become a part of the Constitution. If this Initiative is approved by voters at the November 2016 and November 2018 General Elections, the provisions of the Initiative would become effective on the fourth Thursday of November 2018 (November 27, 2018), when the votes are canvassed by the Supreme Court pursuant to NRS 293.395.

Under current law, the statewide sales and use tax rate is 6.85 percent. Four separate tax rates make up this combined rate:

• The State rate (2 percent), which is deposited in the State General Fund;

• The Local School Support Tax rate (2.6 percent), which is distributed among the state’s school districts and to the State Distributive School Account;

• The Basic City-County Relief Tax rate (0.5 percent), which is distributed among counties, cities, and other local government entities through the Consolidated Tax Distribution (CTX) mechanism; and

• The Supplemental City-County Relief Tax rate (1.75 percent), which is distributed among counties, cities, and other local government entities through the CTX mechanism.

In addition, in twelve of Nevada’s seventeen counties (Carson City, Churchill, Clark, Douglas, Lander, Lincoln, Lyon, Nye, Pershing, Storey, Washoe, and White Pine), additional local sales and use tax rates are levied for specific purposes through legislative authority or by voter approval. The revenue from these tax rates is distributed to the entity or for the purpose for which the rate is levied.

If voters approve the Initiative at the November 2016 and November 2018 General Elections, the Legislature and Governor would need to approve legislation to implement the sales and use tax exemptions specified within the Initiative before these exemptions could become effective. The legislation providing an exemption from the sales and use tax for durable medical equipment, oxygen delivery equipment and mobility enhancing equipment prescribed for human use by a licensed provider of health care acting within his or her scope of practice will reduce the amount of sales and use tax revenue that is received by the state and local governments, including school districts, currently entitled to receive sales and use tax revenue from any of the rates imposed, beginning on the effective date of the legislation.

However, the Fiscal Analysis Division cannot determine when the Legislature and Governor will approve the legislation necessary to enact these exemptions or the effective date of the legislation that is approved. Additionally, the Fiscal Analysis Division cannot determine how the terms specified within the Initiative would be defined in the legislation, nor can it estimate the amount of sales that would be subject to the exemption. Thus, the revenue loss to the affected state and local governments cannot be determined by the Fiscal Analysis Division with any reasonable degree of certainty.

The Department of Taxation has indicated that the implementation and administration of the exemptions specified within the Initiative can be performed using current resources, resulting in no additional financial impact upon state government.

Prepared by the Fiscal Analysis Division of the Legislative Counsel Bureau – September 29, 2015

A YES vote on Question 4 helps sick, injured, and dying patients and their families. It stops the Department of Taxation from imposing unnecessary sales taxes on medical equipment prescribed by physicians, such as wheelchairs, infant apnea monitors, and oxygen delivery devices. It will bring Nevada in line with the vast majority of states which do not tax this type of equipment for home use.

A YES vote would relieve the sales tax burden on medical equipment used by patients who require oxygen devices to live, such as those with cancer, asthma, and cardiac disease; babies who need protection from Sudden Infant Death Syndrome; children with cystic fibrosis on home ventilators; and hospice patients in their last weeks of life. Current Nevada law already exempts medicine and prosthetics because we have recognized how vital this relief is for our most vulnerable populations. Question 4 simply seeks to extend this protection to critical medical equipment.

For insured Nevadans, this tax is contributing to the increasing copays, deductibles, and premium costs that are crippling family finances across the state. For uninsured Nevadans the impact is even worse: Sales tax on medical equipment can reach thousands of dollars for severely disabled patients, and it forces people to forego essential equipment prescribed by their doctors because they simply cannot afford to pay.

Fortunately, while this would have a significant impact on the patients and their families, there would be very little impact to state tax revenue. The Department of Taxation, itself, has estimated that a tax exemption on this medical equipment represents approximately 0.025% of the annual state budget.

Almost all people will need some sort of medical equipment in their lifetimes. Voting YES on Question 4 is the compassionate, and eventually prudent, thing to do. Join over 100,000 Nevadans who signed the petition calling for the end to this tax. It will help hundreds of families today and may help yours tomorrow.

VOTE NO ON QUESTION 4!

Basic budget principles state that when expenses exceed revenues, debt is created. When the law requires state or local government agencies such as schools to be funded, the law expects a set amount of revenue to fund that agency. When a tax exemption reduces the amount of revenue expected, the agency has no choice but to request a replacement of the lost funding. To do that the agency must depend on the Governor and the Legislature to include the lost funding in the budget.

Sales taxes pay for a myriad of services Nevadans rely on including schools, police, fire departments, libraries, and parks, to name a few.

Question 4 seeks to exempt durable medical equipment from sales tax. On the surface, this exemption seems like a good thing, providing tax relief to those in need. However, this exemption is really a wolf in sheep’s clothing:

1. It is vaguely worded without clear definitions of what specific devices will be exempt and who will benefit, leaving such determination to the Legislature;

2. It decreases an unknown amount of revenue from an already strained budget, creating the need for higher taxes in the future; and

3. It uses the law to provide special privileges to a special-interest group at the expense of everyday taxpayers.

Tax exemptions have consequences for the taxpayer; the same consequences as tax subsidies, tax breaks, tax abatements, and tax incentives. The Nevada Department of Taxation’s 2013-2014 Tax Expenditure Report states that Nevada has 243 such tax expenditures that cost taxpayers over $3.7 BILLION a biennium.

Who is footing the bill for all those exemptions? You, the local taxpayer.

You should be mindful of the most recent government “giveaways,” such as the approval of $1.3 BILLION in subsidies to Tesla, $215 MILLION in tax incentives to Faraday, and $7.8 Million in tax abatements to six different companies relocating to Nevada.

Ask yourself, is Question 4 just another “giveaway,” and is there any follow-up to see if promises made for these “giveaways” are promises kept?

The question also needs to be asked, isn’t this just another burden on Nevada taxpayers? If it isn’t, why in 2003 and again in 2015 did our governors go after a BILLION-plus dollars in tax increases?

When the wolf comes huffing and puffing at your door, reject it. Vote NO on Question 4!