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Hospitals that make profits should pay taxes
- lxm 3y agoWouldn't this create an incentive for increased management bonuses in order to "tax-optimize" the profits?
- pkulak 3y agoI’m okay shifting it to income tax. As long as it’s collected.
- mminer237 3y agoAny income paid out is already taxed as income though.
- dboreham 3y agoAll corporations have this incentive. It's how the tax system is designed to operate.
- admax88qqq 3y agoThis is silly and false. Corporations that inflate management expenses will generate less profit for shareholders. I don't think any shareholders would like that idea.
- nobodyandproud 3y agoWhat’s silly is expecting anyone to believe your assertion. Trimming workforce costs and padding the executive and administrative pay is an old and successful playbook. It’s also a short-term playbook and has become a national security issue. I’d love to see retro-active clawbacks for the CEOs and their teams that have dumped the problem on the current generation.
- dgoldstein0 3y agoBonuses are subject to payroll taxes. So this seems fine.
- mminer237 3y agoCurrent salaries are subject to payroll taxes
- ysofunny 3y agoso should religions that make profits pay taxes, something tells me neither will happen
- technothrasher 3y ago> so should religions [...] pay taxes Oh, heck, let's not get into that argument here...
- ysofunny 3y agomy final answer is that any group organization should pay taxes AND no individual should have to pay taxes also, let's at least admit the resaon this is a heated argument is because religions are actually the 'legacy' and retired version of the government
- CooCooCaCha 3y agoChurches and other religious orgs should absolutely pay taxes.
- iscrewyou 3y agoThere are religious organizations that own hospitals. I was flabbergasted when I found out about this recently. My first thought was how they’ve got a perfect system to avoid all taxes. Edit: it seems like the typical derailment is happening when it comes to religion. The topic is about taxes. I mentioned taxes. Not if religious organizations should own hospitals.
- nullindividual 3y agoWhat's worse is they enforce their religious worldview at these hospitals, denying legal medical treatments based off of the largest human hoax and political control mechanism ever invented by man.
- rjzzleep 3y agoIn Germany some of the best hospitals are Christian (catholic I believe, but may be wrong). The US is a really weird place.
- jama211 3y agoWait… they don’t already? What is even going on over there?
- dboreham 3y agoCorruption?
- nradov 3y agoFor-profit hospitals that actually turn profits do pay income taxes. The concern is with non-profit hospitals. They don't distribute profits to shareholders. But some do pay high salaries to employees or have large and growing endowment funds. The author is arguing that threatening to tax some of those funds would incentivize non-profit hospitals to lower prices and give out more charity care. This isn't necessarily a bad idea but I am skeptical whether this would actually achieve results.
- lupire 3y agoIt gets into more arcane policy than clear economic effects. Why are dividends taxed, but not investments in a shell company that collects dividends? Corporations aren't natural people (spare me the inane conflation of "legal person" with "natural person", everyone who doesn't understand why those two concepts have distinct legal names), so there is no inherent reason why there's any need to tax organizations instead of the people who profit from them as owners or wage earners or vendors.
- xkcdxckd 3y agoThe dividend deduction avoids double-taxation, that should be obvious. The dividend-issuing organization pays taxes on its income; that income is then distributed effectively post-tax (although the exact % dividend deduction depends on ownership percentage). Why should a parent corporation have to pay taxes twice just because of its corporate structure?
- samus 3y ago
- sieabahlpark 3y ago[dead]
- jeffbee 3y agoAnd virtually every other non-profit org should also pay taxes, including churches. This is not just a federal income tax thing. The variety of local property tax abatements for supposed community benefit organizations is incredible.
- Zigurd 3y agoI'm not an expert on the rules for charities, but there are rules that specify some ratios for genuine charitable spending, overhead, management pay, and rules re nondiscrimination, etc. As long as these regulations are strict enough to prevent gross abuse, requiring nonprofit orgs that accumulate endowments to adhere to those rules should be sufficient. But evidently those rules and the way they are enforced are not preventing gross abuses. More transparency about nonprofit finances would help guide reform. And that should include religious orgs.
- forinti 3y agoThere's a huge golf course in my neighbourhood that doesn't pay property taxes, but they can't build on the land. If they had to pay property taxes, the land would probably be parceled and built upon. I don't like it that rich people don't have to pay taxes on their little game, but I think the neighbourhood is better off with this green area.
- lupire 3y agoIt would be even better if the city claimed eminent domain to create a public park.
- throwaway918274 3y ago1. I go into hospital and come out with 90k bill - I have insurance and I pay my copay of $130. 2. Insurance says "nah, we'll give you 18k" 3. Hospital goes "ok". 4. Hospital writes off as a 72k loss, which essentialy is a "tax deduction". This is good for me, but such a perverse incentive for the hospital.
- stefan_ 3y agoI don't think that's GAAP compatible, that seems far too easy.
- maxerickson 3y agoWouldn't they reasonably be limited to writing off actual expenses rather than the made up price? It seems hard to search on, but it doesn't really look like there are tax benefits from contractual adjustments.
- kstrauser 3y agoThat’s correct. The post you replied to has the common misunderstanding of how write offs work. They’re not a magic way to make money. They’re a way to not pay taxes on money that want actually made.
- m3kw9 3y agoYou can’t do that because then every contractor can pay zero tax if they charge 100k an hour but have them pay 100$, and you got 99k loss.
- missedthecue 3y ago99% sure that's now how accounting works. A loss is when expenses are more than revenue, not when you earn less than you wanted to. Roofing and construction contractors would be all over this if they could avoid taxes simply by negotiating down an invoice.
- deleted 3y ago[deleted]
- gumby 3y agoThe hike idea of a “nonprofit” is dumb and ripe with abuse. Nonprofits still have to pay payroll, the phone bill etc. Why have someone deciding that they don’t have to pay taxes? They can certainly just show a loss for year after year.
- Almondsetat 3y agoBecause a non profit cannot keep the profits (duh), thus all the extra money has to go back into the economy. Since every purchase has VAT they are effectively already paying a tax on their profits and shouldn't be further taxed
- pessimizer 3y agoThe point is that they can make sure that they don't have any extra money by giving themselves raises, or overspending with friendly vendors.
- gumby 3y agoWhey shouldn’t they be further taxed? And if they lose money, as most do, they won’t owe any tax anyway. The special category doesn’t add anything to a legit charity but does help out fraudsters.
- Almondsetat 3y agoDo I need to repeat verbatim my reply to you?
- gumby 3y agoYou simply asserted that they "shouldn't be further taxed" and my question was why you think so. Repeating your comment verbatim would not answer my question.
- Almondsetat 3y ago>You simply asserted that they "shouldn't be further taxed" That assertion sits in the same sentence that provides the justification
- jraph 3y agoThey should be a well funded public service that don't make a profit in the first place.
- Mountain_Skies 3y agoLike universities?
- Zigurd 3y agoThere should be more public university capacity to compete with private university tuition rates. Some things, like health care, may be so shot through with perverse incentives in both for-profit and nonprofit configurations it should just become a public good.
- sega_sai 3y agoAt least with universities there is a semblance of a free market/competition/choice. I.e. you can compare universities etc. While with healthcare, nobody goes checking for yelp reviews of ambulance companies when they break their leg.
- iraqmtpizza 3y ago[flagged]
- bugbuddy 3y agoBut the government broke the university pricing model by guaranteeing all student loans are practically non-dischargeable through bankruptcy and then double down on their stupidity with forgiving those student loans. The government when led by naive, busy body do-gooders almost always reach the lowest optimal point.
- FireBeyond 3y ago> While with healthcare, nobody goes checking for yelp reviews of ambulance companies when they break their leg. In most progressive states, ambulance rates have to be set and approved by the Department of Health, at least. While not free market, as you suggest, this is also done for consumer protection (though I'll grant that many will argue that more could be done).
- brevitea 3y ago[dead]
- ec109685 3y agoIsn’t the distinction that non-profit hospitals have to plow surplus’s revenue back into the hospital versus distributing profit to investors / owners? If so, the tax exempt status seems aligned with how for profit businesses are taxed?
- INTPenis 3y agoThey can just create their own medical equipment supplier and funnel money that way. Bottom line is that when you let privat businesses decide they will always choose profit over people.
- lupire 3y agoWhere is the funnel? The for profit supplier pays taxes, and the expenses are deductible.
- INTPenis 3y agoThey can charge whatever they want, sort of like they already do for medicine.
- nobodyandproud 3y agoNot to mention that NP doesn’t prevent certain administrative and executive employees from getting excessive salaries.
- AnthonyMouse 3y agoBut then they pay personal income tax on the salaries. Which is the same thing that would happen to the equipment supplier. You're in no way avoiding the tax, you're just having the equipment supplier pay it on their profits.
- nobodyandproud 3y ago
- KennyBlanken 3y agoAnd hospitals regardless of profits should not be exempt from labor laws of any kind. In my state, hospitals have a specific exemption from overtime in our labor laws.
- Aurornis 3y agoA lot of knee-jerk comments from people who didn’t read the article are missing the point it’s making and misunderstand the situation: Hospitals can be for-profit or non-profit organizations, and either role requires them to follow the law about what they must do with their profits and taxes. The piece argues that hospitals should not be allowed to take nonprofit status. The article isn’t saying that hospitals are unique tax-free businesses (as many of the comments are suggesting at the time of writing this comment). A more accurate title would be “Hospitals should not be allowed to operate as non-profits” but that wouldn’t incite the same reactions or generate as many clicks, of course.
- hnburnsy 3y agoDitto private colleges and univeristies and their endowments.
- mdasen 3y agoThis strikes at an issue we haven't really addressed enough in non-profits: how much community benefit do they need to offer? A non-profit simply means that there are no investors who can profit from the business. However, I think we haven't really thought enough about how much community benefit they need to offer to justify being tax exempt - and it's a hard problem. For example, let's say I run a non-profit hospital. We start getting a lot more revenue than costs. At a for-profit company, that's profits, but we don't have any investors. I decide "No, we shouldn't lower prices or forgive medical debt. I want to use that excess money to create a fancy new medical building with my name on it and to create a medical research unit that will bring prestige to the hospital (and hopefully useful medical research that will help people in the future)." Right now, that's an allowable non-profit use of that money. Universities do things like this all the time: a fancy new student center takes precedence over lower tuition. How do we deal with this? It's hard. New buildings aren't simply unjustified costs. My city wants to build a new elementary school because the current one is crumbling. A hospital or university will likewise need to invest in its facilities, but at some point it potentially crosses a threshold from necessary and useful spending toward vanity and serving the institution more than it serves the mission. Universities spend money on research-only professors who don't teach and things like that drive up tuition costs, but is that a reasonable expense for a university? It can depend on who you ask because different people will have different opinions on the purpose of a university. It's also hard because a successful non-profit will want to reinvest in itself and keep enough excess on hand in case something bad happens. Let's say I'm running a hospital and our costs are $1B in 2022 and we took in $1.2B. I use the excess $200M to rebate some of the fees to patients and forgive some medical debt. In 2023, our costs are again $1B and we took in $0.9B. Now I'm in a tough position. Do I lay off staff? Pay cuts? Take out a loan for $0.1B? What if 2024 is also a lean year? Likewise, let's say that I'm trying to run a patient-friendly facility. We take people without insurance and don't make them worry about the cost. Even if I'm able to successfully run my facility, other non-profit facilities that aren't as friendly are taking in more money. They start to pay their doctors better. Their facilities are newer and better kept. Nurses complain that I'm being stingy with their contract. The other hospitals are publishing fancy papers and their doctors are giving conference talks that attract donors away from my hospital. I think there's a survivorship thing happening here. If you have too little runway, you don't survive lean times. You run out of money and one of the less friendly hospitals "buys" your hospital (which often isn't a cash purpose since they're non-profits, but some sort of promise of keeping the mission of being a hospital alive). Should the government bail out non-profits who are serving the community better? Maybe, but it's hard to define that. The fancy non-profit hospitals will argue that they're serving the community even better. The rich and connected probably see the fancy hospitals as better and are likely their donors. The general public probably doesn't understand that one hospital might be more forgiving than another. So the general political consensus will likely be "why should the taxpayer bail out a place that's 'poorly run' when the 'well run and better' hospital is willing to bail them out with no cost to the taxpayer?" So, in order to keep my hospital, I can't run it too friendly. Plus, for my ego, I'd rather people think well of my hospital. I'd like to brag about the fancy new facility and have people think I'm doing something amazing. We give a lot more esteem to the president of Harvard than to the president of a school that's educating and helping way more people, but isn't as fancy.
- iraqmtpizza 3y ago[flagged]
- lenerdenator 3y agoThey'll just pass along the costs, because we've installed people with sociopathy as the leaders of most large businesses, and that's what sociopaths do.
- pvaldes 3y agoThat would create an incentive to accept less patients, or to reject some patients at the end of the year just to fix the tax totals.
- blackeyeblitzar 3y agoHow do you get around tricks like "Hollywood accounting"? Wouldn't we see hospitals start to mess with their numbers in the same way to avoid the threshold for regulation?
- pessimizer 3y agoShouldn't they be obligated to? You can't help but create taxes and tax dodging at the same time, but the fact that people try to get away with murder is no reason to make murder legal.
- AnthonyMouse 3y agoThe problem specifically with taxes is that the line between taxable and not has to be drawn between two behaviors that people are commonly engaged in. Charity and for-profit business are both normal activities. Then citizens will want their activity to be classified as non-profit and governments will want to classify it as for-profit and you have to establish exactly where the line is because there will be tons of people standing right on top of it. You don't want to tax charities providing cancer treatment for children, and you also don't want to cause them to waste resources paying lawyers or inefficiently structuring their activities to avoid being accused of tax evasion. Whereas for murder, you don't have to be all that concerned you're going to over-deter people from inducing fatalities.
- beryilma 3y agoNot really healthcare, but Harvard University, for example, with $30 billion endowment is a non-profit! And they don't pay property taxes even though they are the biggest land and property owners in Cambridge. Not for profit is just a lie for such institutions.
- fastaguy88 3y agoIf (non-profit) hospitals that made profits were taxed, those hospitals would simply start building, donating to their charitable foundation, or using some other accounting tricks to make that profit disappear.
- daft_pink 3y agoI don’t understand why people volunteer at hospitals. These are like the opposite of non-profits.
- JumpCrisscross 3y ago> don’t understand why people volunteer at hospitals They’re undeniably helping. Refusing to help one person because it might benefit someone else is a touch petulant.
- hackable_sand 3y agoI think the implication is that they should be compensated. I could be misinterpreting.
- Jakesben101 3y ago[flagged]
- SayerJet 3y ago[dead]