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'Tax cut' bill includes new hospital tax

Legislation passed by the Georgia General Assembly last week lumped a number of tax credits cuts and incentives along with a significant new source of revenue for the state: a hospital tax.

House Bill 1023 includes a new “hospital tax” of 1.45 percent of net patient revenue. The figure is lowered to 1.38 percent for hospitals which have a designated trauma center.

The tax would be applied to both for-profit and non-profit hospitals, a Senate spokesperson confirmed Monday.

HB 1023 has been approved by both the House and the Senate but must first be signed into law by Gov. Sonny Perdue.

The reasoning for passing the bill was to address a more than $300 million shortfall in the state’s Medicaid program for the upcoming fiscal year, officials said.
A portion of the tax revenues will be used as matching funds for federal Medicaid funds, officials said. Another portion will be deposited into the state’s indigent care trust fund, and yet another portion will be used to fund a Medicaid reimbursement rate increase of more than 12 percent for hospitals, officials said.

While one speaker on the Senate floor claimed the hospital tax was not a tax, the net affect of the bill is likely to result in increased hospital costs for Georgians.

One facet of the bill creates a tax credit of between $25 and $125 per person for up to four consecutive quarters for employers who hire someone from Georgia’s ranks of unemployed residents. The tax credit would apply towards a company’s unemployment tax and could only be used for four consecutive quarters by any given company.

Sen. Ronnie Chance (R-Tyrone), a sponsor of the bill, said the incentives “have a proven track record.”

“We must utilize free-market solutions and incentives to grow the private sector and lead Georgia to economic recovery,” Chance said in a news release. “Taxation and regulation only work against economic growth.”

Other tax credits and incentives offered through the legislation are:
• “Angel Investor” tax credit: An income tax credit for investment made in small or start up Georgia businesses with 20 or fewer employees. The income tax credits would be available after two years of investment. The total “Angel Investor” tax credit pool would be limited to $3 million per year (adjusted for inflation).

• Elimination of the Net Worth tax: The net worth or intangible tax is a hold over from a 1930’s law that taxes wealth accumulation. Georgia is one of a handful of states that still retain it.

• A triggered 25 and 50 percent reduction of the Capital Gains tax for all Georgia taxpayers: Georgia currently has the second highest Capital Gains tax in the southeast, with two of our neighboring states at zero percent, according to a Senate news release. The corporate and individual capital gains tax rate will be reduced by 25 percent for the first year the revenue shortfall reserve reaches $1 billion; the rate reduction will be 50 percent for the next year.

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