Tacoma Urbanist

Nov. 20, 2012 at 10:36am

Letter: Permanently Removing Tacoma's B&O Tax Loopholes for Hospitals Makes Sense

Mayor Strickland and Tacoma City Council Members,

Taxes are never an easy issue to deal with.

However, after examining a number of factors, I find that it makes sense for the City of Tacoma to PERMANENTLY remove the non-profit B&O tax loopholes for the following reasons:

1) Comparable cities: Tacoma would join other cities which tax non-profits at a tax rate which is not higher than other cities.  

2) Entity Changes: health organizations are moving and changing to "non-profit" entities which is eroding Tacoma's tax base.  Better to keep a wider lower tax rate across the board than having it spike in one area.

3) Use of Services: the non-profit hospitals use a huge proportion of fire and police services and benefit more than any entity from them.

4) Unlikely to move: imposing this tax would not likely cause the non-profits to move as they need to be in big cities and would be taxed most places they went at comparable rates.

5) Political issues: having a sunset clause would cause the hospitals to try to continually influence Tacoma's politics over the next two years when the City of Tacoma knows it will need the money.  Punting on this issue does nothing good but creates chaos and uncertainty.

6) Bond rating: a sunset clause could negatively effect Tacoma's already damaged bond rating.

7) Financial need: The City of Tacoma has financial needs. More layoffs will unnecessarily occur if the loophole is not removed.

Thank you for your attention to this issue.

comments [22]  |  posted under tacoma


by Erik on 11/20/2012 @ 10:45am

Tacoma’s nonprofit hospitals have enjoyed full and partial breaks from paying city business and occupation taxes for decades, but such exemptions soon would vanish under a proposal that aims to help plug part of a gaping city budget hole.

As part of his 2013-14 budget plan, City Manager T.C. Broadnax has pitched the idea of restoring the city’s full B&O tax rate on Tacoma’s two largest health care nonprofits – the MultiCare and Franciscan health systems.

But while hospital officials contend that eliminating the tax breaks is the wrong approach to solving the city’s budget woes, the question for the City Council no longer seems to be whether it will happen, but for how long.The council is set to debate competing positions about the health care tax exemption today, before a formal measure to eliminate it is introduced at tonight’s regular council meeting. A final vote is expected next week.Neither stance would seek to thwart the city from fully collecting taxes from the hospitals for at least the next two years.

But Councilman Joe Lonergan said Monday that he intends to float an amendment with a sunset provision that would reinstate at least part of the current health care tax break on Jan. 1, 2015 – after the next city budget cycle ends.

Read more here: www.thenewstribune.com/2012/11/20/237408...

by NineInchNachos on 11/20/2012 @ 1:47pm

by Erik on 11/20/2012 @ 8:33pm
A win!

There are certainly two sides to the issue, but I think the better position won out. A sunset provision for two years just punts the issue and would have created two years of hospital lobbying.

Tacoma’s City Council on Tuesday narrowly voted down an amendment to include a sunset provision in a measure that calls to end a business tax break for the MultiCare and Franciscan health systems.

The council voted 5 to 4 against the amendment introduced by
Councilman Joe Lonergan. Instead, the council will consider the original measure as proposed in City Manager T.C. Broadnax’s 2013-14 budget plan.  A final vote is expected next week.


If an overwhelming case presents itself in the next two years, the council can always put back in the loophole.

by cisserosmiley on 11/21/2012 @ 7:35am
It is extremely amateurish on the part of the 4 supporters of this tax break.  Nearly every political body in WA has focussed on eliminating tax loopholes in preparation for tax increases on the horizon. Now, these 4 will institute a $20 car tab tax on citizens...but they vote against a multi million $$$ organization paying their share. ELIMINATE LOOPHOLES then RAISE TAXES

by fredo on 11/21/2012 @ 7:52am
As long as we are in the spirit of closing loopholes what do you say we close the loophole that allows people to buy food at the grocery store and farmers market without paying any sales tax?

This is because of a long standing loophole in the Washington State RCW.


by NineInchNachos on 11/21/2012 @ 7:55am
hyper-agree with comrade cissero.   

disappointed with my friends Boe and Marty. 

by cisserosmiley on 11/21/2012 @ 8:10am
@fredo I agree in principal, but food tax exemption is equally sipported by both left & right...what can we do ???  Since the left is in control, I suggest closing loopholes the right supports. That way the majority, left voting citizens, will have their will done.

by NineInchNachos on 11/21/2012 @ 8:12am
food should be taxed on the way out, not the way in. 

by fredo on 11/21/2012 @ 8:24am
OK lots of other loopholes to look at too!

How about the loophole that allows retailers to pay a lower b&o tax then service businesses?

How about the loophole that allows newspaper publishers to pay a lower b&o then retail businesses?

How about the loopholes in state law that encourage employers to open up businesses in the State of Washington?

How about the loopholes in Property tax law that allow Mayor Strickland and other people to live in fancy condominiums downtown and avoid paying property tax?

by NineInchNachos on 11/21/2012 @ 8:27am
I think the newspaper-hiring-local-cartoonist tax break is one that both the right and left agree should stay.

by cisserosmiley on 11/21/2012 @ 8:36am
Retail/service difference had purpose because there often is no sales tax charged for services, but now many services are paying sales tax on their duties (attorneys, lobbyists are newest in this category).                                                       Newspapers should have no loophole.                  Condo tax bs is a larger contributing factor to tacoma's ills than "leaders" will admit yet. Stop it NOW !!!                                                                  I like a new business getting a break in year (1) but after that they should pay. Close loopholes, then raise revenue. It's linear & simple.

by fredo on 11/21/2012 @ 8:52am
Businesses don't pay sales tax.

Businesses COLLECT sales taxes from the customers and forward it to the taxing authority.

Businesses DO pay b&o tax directly out of their pockets and retailers have been enjoying a loophole on these gross revenues (at least here in Tacoma) for a long time.

by cisserosmiley on 11/21/2012 @ 9:05am
As a sole proprietor, having to charge/collect sales tax is tantamount to income tax.

by fredo on 11/21/2012 @ 9:07am
Income tax comes out of YOUR pocket, sales tax comes out of YOUR CUSTOMERS pocket. I think that's an important distinction.

by fredo on 11/21/2012 @ 9:13am
If the council REALLY wanted to make a tax change that would enhance the prosperity of Tacoma and lead to some real long term beneficial results it would ELIMINATE THE B&O TAX in it's entirety.

Those vacant commercial spaces you see everywhere around town would begin filling up with new businesses, hiring out of work Tacoma people and collecting much more sales tax then we are currently collecting.

Let's face it, vacant spaces DON"T pay b&o taxes already and vacant spaces DON'T collect sales taxes either. What the council is advocating is an institutionalized and perpetual commercial wasteland for Tacoma.

Sad really. This place could really be a wonderful small city.

by cisserosmiley on 11/21/2012 @ 10:04am
I disagree, Tacoma can not be a wonderful small city. It is a bedroom community. 

by Jesse on 11/21/2012 @ 11:25am
@cissero:  Seriously?  Then why are you always commenting about how to make things better here?

by low bar on 11/21/2012 @ 12:06pm

by cisserosmiley on 11/21/2012 @ 12:30pm
I feel I am "the Tacoma suburbanist" My desires for this town are: 1) a hep progressive pt along the 6th ave corridor where density & symbolic urban culture exist.  2) transition downtown support to develop "uptown" projects like  A) Walmart,  B) commuter garage @ proctor,  C) single family home construction &  D) a ferry from Tacoma to Seattle.  3) redraw city limits. ***The suburbanists macro goals: to increase average income; increase yrs of education; increase home ownership rates.***     

by Erik on 11/27/2012 @ 10:03pm

The City Council agreed unanimously Tuesday to cancel a tax break for
Tacoma’s nonprofit hospitals and charge drivers a $20 license-tab fee
to help the financially strapped city government.“We have made
cuts across the entire organization,” Mayor Marilyn Strickland said
before the 9-0 vote to charge MultiCare and Franciscan health systems
the full 0.4 percent business-and-occupation tax rate. “No one takes joy
in raising taxes on anyone. It’s always a lot harder to rescind a tax
break than it is to give one. But this is where we are right now as a
city.”The city expects to raise about $5.5 million in 2013-14 by
eliminating the tax exemption, which the council already had scaled back
in February from a total to a partial break. Smaller health care
nonprofits will remain fully exempt, but nonprofits with annual gross
income of at least $30 million will pay the full rate, four times what
they pay now.An additional $4.1 million over two years would come from the vehicle license-tab fee, which takes effect in six months.Read more here: www.thenewstribune.com/2012/11/27/238240...

by fredo on 11/27/2012 @ 10:18pm
.“We have made cuts across the entire organization,” Mayor Marilyn Strickland

That's either a half-truth or a lie. Approximately 3000 city employees have NOT recieved pay cuts. Unnecessary pet projects are still being green-lighted, folks are getting raises, folks are travelling on the city dime. Money is being spent like drunken sailors or given away to non-profit organizations. All of Stricklands talk of austerity is just posturing for the media.

by NineInchNachos on 11/27/2012 @ 11:50pm
I laugh at your concern for austerity from a great height.