I was expecting to enter an upside-down room, but it turns out I walked into Bizarro World.
What’s Bizarro World? A world in which a lobbyist argues with a straight face that, to encourage doctors to stay in practice in rural areas, the State of Oregon should be spending precious tax dollars on a hefty tax subsidy for a doctor who is married to a lawyer and who owns a vineyard and receives additional income from investments, and whose household annual income is in excess of a half-a-million bucks.
I swear, I’m not making this up. Listen (.mp3) for yourself.
Last week I blogged about how the Joint Committee on Tax Credits would be hearing a proposal this week to re-authorize (extend the sunset) a generous tax credit for rural medical providers. This week OCPP pointed out in testimony (PDF) that the tax credit currently makes the first $60,000 of a rural medical provider’s taxable income (roughly the first $83,000 of adjusted gross income) tax free regardless of the medical provider’s total income. These amounts of tax free household income almost double if a spouse is also a rural medical provider.
Why did I expect that to turn the room upside down? Because the Tax Credits committee last week heard once again the harsh fact that if you are at the poverty level in Oregon — you earn $15,130 for a two-person family — you pay Oregon income taxes (PDF), even after getting the Oregon Earned Income Tax Credit.
But back to how we got to Bizzaro World. The legislation before the Tax Credits committee to extend the Rural Medical Provider Tax Credit, Senate Bill 325A, was amended by the Health Committee in a number of ways earlier in the session. One of the most important amendments was to “means test” who qualifies for the $5,000 a year tax credit.
Since instituted in 1990, the Rural Medical Provider Tax Credit has had no income cap. Today, a health provider can make a million bucks or more and still qualify for the subsidy. If the legislature lets the credit sunset, the millionaire doctor could still get the credit for the next 10 years under the subsidy program’s unique glide path attached to the sunset.
The amendments in SB 325A would institute an income cap — it’s high, but a cap nonetheless — that would still leave in place a charitable tax credit for very well-off medical professionals. A medical professional could still get the $5,000 credit if his/her income is below $250,000 for single filers and below $500,000 for joint filers. The generous income cap saves the state some money and stops subsidizing the most extremely well-off medical professionals.
Yet, the Oregon Office of Rural Health and the Oregon Rural Health Association oppose the income cap. Part of their argument for opposing the income cap is that they think the subsidy should go to the individual, not the taxpaying unit, and that it’s too hard to manage an income cap on an individual with complicated income streams such as those medical professionals can have. Never mind that tax credits are credits against taxes of the taxpaying unit.
At the Tax Credits committee hearing, Sen. Diane Rosenbaum, who supports the income cap, asked Office of Rural Health Policy executive director Scott Ekblad and Oregon Rural Health Association’s Doug Barber why they think it makes sense get rid of the income cap on eligibility.
That’s when the world changed from upside down to bizarre.
In response to Sen. Rosenbaum’s question, Barber complained that the cap would unjustly deny the tax credit to a physician earning $150,000 who is married to an attorney and jointly owns a winery and other investments that put household income above $500,000.
Ignore that perhaps the spouse’s ability to have a good income as an attorney plus life as a winery owner and owner of other investments are what’s really making the medical professional choose to practice in the rural area, not the $5,000 tax credit.
Only in Bizarro World might elected representatives think it is good public policy to spend limited tax dollars on a subsidy for a physician married to a well-to-do attorney and who owns a winery and other investments, and whose combined income tops half-a-million dollars a year.
Only in such an altered universe would lawmakers grant such a subsidy to the well-off while continuing to tax the work effort of a poor family with children.
Let’s hope this legislative session doesn’t see us get stuck in Bizarro World.
This post was originally published on www.blueoregon.com on June 1, 2013. The original post can be found at http://www.blueoregon.com/2013/06/bizarro-world-rural-medical-tax-credits/.