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Don’t Pass Up Your Last Chance to Stop the Destructive Tax on Health Care!
An Open Letter to the Oklahoma House

May 26, 2010
By Pete Sepp

Dear Representative:

     On behalf of the National Taxpayers Union's (NTU's) 362,000 members nationwide and our more than 4,700 members in Oklahoma, I reiterate our opposition to any proposal for a tax increase on health care services. Yesterday's close margin of defeat for an "emergency" punitive government fee aimed at health care claims should be viewed as an opportunity to reexamine the flawed concepts of this approach and reject it altogether (whether it is given "emergency" status or not).

     Although we agree with Senator Brogdon's assertion that attempting to impose this tax hike in the final five days of the legislative session violates the State's Constitution, the proposal ought to fail on its lack of merit alone.

     As we warned nearly two months ago in a letter expressing opposition to SB 1616, a tax on health carriers will lead to several undesirable outcomes. The "compromise" now before you is far worse than the Senate's original legislation, which would have imposed a seemingly innocuous but in reality quite destructive 0.5 percent charge. Now, the effects will only be more painful. Hundreds of thousands of insurance policyholders would pay this tax in the form of higher premiums or out-of-pocket costs as providers would be forced to cut back on benefits or lay off employees to remain in business. Insurance market innovators, such as mail-order pharmacies, would also be penalized for delivering convenient and cost-effective options for customers.

     In the waning days of a grueling legislative session, it is tempting to "call it a day" and take the state further down the road to high-tax status. This would be a tremendous mistake on its own, given that Oklahoma is neighbor to a state with no income tax and borders other states with competitive tax policies. Yet, even if it were surrounded by high-tax jurisdictions, enacting tax increases would not serve Oklahoma well. A study of economic data from 1990-2008 that University of Central Arkansas Professor Noel Campbell conducted for the Oklahoma Council of Public Affairs showed that social services spending in the state grew by over 101 percent. This is higher than four of Oklahoma's neighbors as well as the average for all 50 states. Yet, over that same period total tax revenue in Oklahoma rose faster than the U.S. average; in some specific categories such as corporation income taxes, Oklahoma also beat all or some of its neighbors. As a result, Campbell concluded, the Sooner State often experienced lagging performance in important economic indicators such as private-sector output and job creation. This was especially true relative to Texas.

     Meanwhile, the true cost-drivers of health care in Oklahoma – stagnant, one-size-fits-all public programs – would remain virtually unreformed, while supporters of the higher tax claim it holds the hope of more federal matching funds to fill out program budgets. This is ultimately a self-defeating solution, as additional federal mandates as well as more subtle policies of federal control flow from Washington and strain state budgets ever more heavily.

     NTU reminds lawmakers that even at this late date, they could choose many reform paths that have greater promise than the current tax hike. For example, the Georgia House of Representatives recently voted to open its individual health insurance market to plans offered in other states, provided that Georgia's insurance commissioner licenses the plans and describes all of the benefits they will provide. This option would give individuals better choices, especially if they are not able to get health insurance from their employer. Other states, ranging from Indiana to West Virginia to Minnesota, have pursued changes to their health programs that tackle wasteful expenditures, empower consumers, and help to expand the net of coverage to the uninsured.

     We hope you will take this opportunity to change course and steer the state's balance sheet toward spending discipline. It is not too late.


Pete Sepp
Executive Vice President