Yael T. Abouhalkah

Guess who won’t pay medical research tax? Hint: They want you to pay it

Updated: 2013-08-29T00:30:27Z

By Yael T. Abouhalkah

The Kansas City Star

The three groups that would benefit the most from an $800 million tax increase in Jackson County won a big victory this week when lawmakers placed the plan on the Nov. 5 ballot.

Now the University of Missouri-Kansas City, Children’s Mercy Hospital and St. Luke’s Hospital can actively promote a new half-cent sales tax, which would raise $40 million annually for 20 years.

However, as these financially large organizations help roll out a $1 million ad campaign for the new tax, here’s one issue they won’t highlight:

None of them will pay the higher medical research sales tax on future purchases.

The groups will save tens of thousands of dollars a year by not paying the tax when they buy millions of dollars worth of medical equipment for proposed new laboratories, for example.

Ordinary Jackson Countians, however, will pay the sales tax, which is regressive and hardest on low-income residents. (That’s one reason the League of Women Voters of Kansas City/Jackson/Platte/Clay counties said in today’s Star Letter sections it will oppose the tax.)

On Tuesday, through a spokesman for the pro-tax campaign, officials with Children’s Mercy, UMKC and St. Luke’s all confirmed they don’t pay sales taxes right now on their purchases.

• Children’s Mercy is a charitable, nonprofit institution. It would get about $20 million a year from the new sales tax.

• St. Luke’s is part of a faith-based, not-for-profit group of medical institutions.

• And UMKC is a public institution that “does not pay sales tax on any purchases,” according to a university spokesman.

Both St. Luke’s and UMKC would receive about $8 million annually in medical research tax receipts.

The current total general sales tax rate is 8.35 percent in Kansas City in Jackson County; it would rise to 8.85 percent if voters approve the medical research plan.

Here’s an example of what the tax savings could mean for the institutions.

If they cumulatively purchase $10 million of lab equipment, they won’t have to pay $50,000 in the new medical research sales tax. (Of course, they would save a lot more than that — close to a total of $900,000 on $10 million worth of equipment — by not paying any sales taxes at all on it.)

Tax supporters estimate the average cost of the medical research tax could be from $50 to $60 a year per household.

Using those figures, it would take from 800 to 1,000 ordinary taxpayers to make up for the medical research tax revenue that the three institutions won’t have to pay.

On Tuesday, supporters of both St. Luke’s and Children’s Mercy hospitals said they provide charitable care that they value in the tens of millions of dollars to the community.

That is part of their mission, and a good service to the Kansas City area.

However, by not paying sales tax dollars every year, these institutions along with UMKC are not directly supporting the state services, police and fire protection, local transit routes, and the roads, bridges and other public infrastructure that they and their employees benefit from.

It’s a tradeoff allowed under the law.

The fact that the three groups won’t pay the new medical research sales tax they want others to shell out for is an example of how this election is shaping up to be quite unusual.

It’s one where the public is being asked to financially support three large organizations that already get public assistance in foregone sales tax dollars.

To reach Yael T. Abouhalkah, call 816-234-4887 or send email to abouhalkah@kcstar.com. Follow him at Twitter.com/YaelTAbouhalkah.

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