Study: Margin tax will raise health care costs

By Kyle Roerink

Thursday, Sept. 18, 2014 | 1:53 p.m.

A new study says the cost of health care will increase if Nevada voters approve ballot question three, the margin tax.

The study is the latest in what’s been a spree of privately-funded research that’s offered Nevadans a variety of views on the initiative's merits.

The tax, officially called the Education Initiative, aims to provide a new source of funding for education in Nevada, a state that ranks among the worst K-12 public school systems in the country.

Businesses earning more than $1 million in revenue per year would be subject to a 2 percent tax hike proposed in the initiative.

Payments made to doctors, hospitals, clinics and insurance companies would be subject to the tax if voters approve it on Nov. 4. Nonprofits are exempt.

The study’s findings say health care providers would pay $80 million more in 2015 — a 203 percent increase — and that the costs would be passed on to consumers.

Economic analyst Jeremy Aguero, who conducted the study, cited research that said consumer demand for health insurance is “price inelastic,” meaning that Nevadans will be more likely to pay higher insurance rates than drop their coverage.

“It is nearly impossible to determine the extent to which the burden created by the proposed margin tax would translate into higher cost of health care,” Aguero wrote. “That said, the belief that there would be no impact to the consumer stands contrary to both common sense and empirical studies.”

The Coalition to Defeat the Margin Tax, an outside group campaigning to defeat question three, paid for the new study.

This analysis is the first to explore the initiative’s effect on health care. At least three other studies have been done on the initiative, with varying conclusions. Some show the effects of the tax won’t be known unless it is implemented.

The coalition’s new study follows a disagreement last month between UNLV and its Center for Business and Economic Research.

The center conducted a study that said the initiative would earn the state up to $862 million for Nevada’s K-12 education system while creating more than 13,000 jobs in 2016.

Don Snyder, UNLV’s acting president, assailed the study. He said it “does not represent the position or views of the university.”

After his public attack, the center revised its report, saying the tax would instead earn Nevada up to $362 million and create 11,500 jobs by 2016.

Other research falls in line with the studies paid for by the coalition.

The Nevada Policy Research Institute said the tax will raise $862 million per year while costing the state 1,640 jobs and cutting investment by $7.1 million a year.

The coalition paid Aguero to do an earlier study that said the state would lose nearly 9,000 private sector jobs and $413 million in employee wages.

Read the study below.