Letter: Health care tax increase bad for state economy

Employers and individuals buying health care in Michigan will experience a wrenching increase in costs if the Legislature passes the proposed $2 billion health care tax increase in 2016. The state House of Representatives passed an eight-year extension of the job-killing Health Insurance Claims Act tax in December to prolong the life of the uncompetitive, Michigan-only tax designed to help fund the state’s Medicaid program. We call on the Senate and Snyder administration to find a Medicaid funding solution that won’t risk our economic recovery or the ability of individuals and employers to purchase health care.

Michigan’s current Medicaid funding mechanism does not risk the state’s future, nor will it make us less competitive in the current jobs market. In 2014, Michigan passed legislation to eliminate the HICA tax by 2018 and reinstated a Use Tax on Medicaid managed-care organizations. Rather than stay the course on this reasonable solution, the House passed an eight-year, $2 billion extension of the HICA tax to respond to unfounded and premature concerns raised by the federal government. We believe the Use Tax approach clearly meets the letter of federal law and keeps Michigan competitive. Our state leaders should work with the federal government to secure fair funding options for Medicaid, rather than place a greater financial burden on citizens.

The last Legislature made the right choice to eliminate the ill-conceived, uncompetitive HICA tax and return to the more effective Use Tax approach. The current leadership should continue that strategy. We appreciate that the Michigan Senate did not rush to extend the HICA health care tax in 2015 after House passage. Michigan needs the Senate to continue that reasoned strategy when the HICA debate starts up this year.

The Senate and administration should block any effort to further extend a failed solution. There are better methods for funding Medicaid that do not hinder Michigan’s jobs-based economic recovery. Resorting to multibillion-dollar tax increases on individuals and job-providers is rarely the right course of action. We stand ready to work with all parties on viable options to fund Medicaid.

Chuck Hadden

Michigan Manufacturers Association