Ending hospitals’ B&O break is shortsighted

The News TribuneNovember 29, 2012 

It’s hard to fault Tacoma officials for looking in every possible nook and cranny for revenue. They have an enormous budget hole to fill, and every dollar in revenue or cost-savings they can find means a little less they have to cut in the way of services and personnel.

But permanently doing away with a tax break given to the city’s nonprofit hospitals – an action one council member described as a “money grab” – is not a good way to plug a short-term gap. But that’s exactly what the Tacoma City Council did on Tuesday.

We hope it doesn’t happen, but forcing the MultiCare and Franciscan Health System to pay the full business and occupation (B&O) tax could have the unintended consequence of persuading them to move their corporate headquarters to a city that doesn’t charge the tax.

In the South Sound, cities without a B&O tax include Lakewood, Puyallup and Federal Way. Those cities are the sites, respectively, of Franciscan’s St. Clare Hospital, MultiCare’s Good Samaritan Hospital and Franciscan’s St. Francis Hospital. Any of those cities likely would love to have the prestige associated with being either health system’s new corporate HQ.

Tacoma has already lost Russell Investments and the Weyerhaeuser Co.’s corporate headquarters. Does it really want to tempt two large and fast-growing health care companies to follow them out the door?

MultiCare and Franciscan were completely exempt from Tacoma’s 0.4 percent B&O tax until February, when the City Council began requiring them to pay 0.1 percent – still a 75 percent tax break. City Manager T.C. Broadnax recommended doing away with the break completely to raise an estimated $5.5 million over the 2013-2014 biennium.

A better path would have been some sort of temporary measure. But an amendment proposed by City Councilman Joe Lonergan that would have rolled the full tax back after two years to 0.2 percent was narrowly defeated.

That’s unfortunate. MultiCare and Franciscan provide thousands of jobs in Tacoma and millions of dollars in free health care. Making them pay full freight on a tax many other cities don’t even charge smacks of killing the goose that lays the golden eggs.

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