February 21, 2013
Proposals to tax veterinary services draw fire
Veterinarians mobilize against tax reforms in Minn., Ohio
By: Jennifer Fiala
For The VIN News Service
Dr. Gary Thompson owns three practices — two in Michigan and one in Sylvania, Ohio, roughly four miles from the Wolverine State border. It’s an area of the country impacted by the economic rusting of Detroit’s automobile industry and declining manufacturing sectors.
Photo courtesy of West Suburban Veterinary Hospital
Dr. Gary Thompson in Ohio believes that taxing sales of veterinary services will hurt the businesses of veterinarians and the ability of owners to afford pet health care.
When Thompson hears that Ohio Gov. John Kasich wants to tack a 5 percent tax on sales of veterinary services as part of a budget proposal to raise an additional $1.8 billion in state revenues, he cringes. Taxing veterinary services, Thompson says, would raise the price of medical care for pet owners already struggling to afford it. He predicts the tax also will hurt small animal veterinarians, especially those who own specialty referral hospitals and anyone practicing veterinary medicine in border regions of the state.
“This is a big deal for most Ohio veterinarians,” Thompson said. He predicts that imposing a sales tax will drive more owners to forgo medical care for their pets or seek it in neighboring states where veterinary services aren’t taxed.
“What’s to stop a pet owner from traveling across the state line when faced with their dog’s $5,000 back surgery? Nothing,” Thompson said. “They could go see a neurology group in Ann Arbor instead of specialists at Ohio State or MedVet in Columbus.”
Just three states in the country — Hawaii, New Mexico and South Dakota — impose a sales tax on veterinary services. However, efforts to tax veterinary care crop up in various state legislatures nearly every year. Lawmakers often view broadening the scope of sales tax as a way to drum up revenues and patch budget deficits. Most recently, legislative attempts in California, Michigan and Georgia tried — and failed — to brand veterinary services as tax revenue generators, according to the American Veterinary Medical Association.
Kasich’s plan for Ohio involves a tax code overhaul, reducing income taxes by as much as 20 percent and lowering the state’s base sales tax from 5.5 percent to 5 percent. But with all the added taxable items — tickets to amusement parks and sporting events; legal, consulting, veterinary and accounting services; funerals; downloaded music and books; hair salon services, etc. — proponents say the change will be a boon for state coffers.
Human health care is one of the few service industries that remains tax-exempt under Kasich’s budget.
The plan looks a lot like the budget laid out in January by Mark Dayton, governor of Minnesota. His ideas for alleviating a $1 billion budget deficit involve lowering the sales tax base from 6.8 percent to 5.5 percent but expanding its scope to include everything from real estate deals and clothing to legal and accounting services.
Veterinary care also is rolled into Dayton’s tax plan, though there’s a caveat: Veterinary services for livestock remain tax-exempt, as does human health care. Right now, veterinary medicine for companion animals is the only health care-related professional group to be taxed in the governor’s budget for Minnesota.
“Why are small animal veterinarians being singled out?” asked Dan Tjornehoj, executive director of the Minnesota Veterinary Medical Association. “How is this going to impact those who are least able to afford an increase in veterinary care?”
Roughly 30 Minnesota veterinarians posed such questions to lawmakers on Wednesday during a group visit to the state capitol. Tjornehoj notes that the association has sent out action alerts and encouraged letter-writing campaigns, though it’s impossible to gauge what impact the efforts will have on lawmakers as they haggle during the budgeting process.
The governor’s budget bills, HF 677 and its companion SB 552, were introduced Monday.
“We plan to meet with the chairs of the Senate and House tax committees,” Tjornehoj said. “We’ve already had a meeting with Speaker of the House Paul Thissen, and he anticipates that the whole tax issue will change a lot over the course of the legislative session.”
Jack Advent, executive director of the Ohio Veterinary Medical Association, is hopeful the same thing will occur at the statehouse in Columbus. The veterinary group hopes to testify before lawmakers as the budget bill, introduced Feb. 12, is debated.
“Dozens and dozens of businesses, if not hundreds, will be affected by the governor’s plan to change the tax code,” he said. “Our concern is that this is going to change consumers’ buying patterns, and (given the state’s soft economy) this isn’t the time to be doing that type of thing.”
Advent points out that implications of broadening the state’s sales tax go beyond higher costs for veterinary care. Given the breadth of the services the governor proposes taxing, veterinarians face paying more for legal, accounting and architectural services — professions necessary to the health and growth of most veterinary practices.
"We’re laying the groundwork to make a case why this will cause negative economic ramifications,” Advent said. “The budget will pass in some form or fashion, and I’m hopeful the sales tax portion will come out. Right now, I’d call it a coin flip.”
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