Strapped for cash, states look to squeeze veterinary practices

Plagued by a sluggish economy and rising costs, state lawmakers charged with plugging nearly $26 billion in nationwide debt are desperate for new revenue. And for some, taxing professional services including veterinary care could freeze the financial meltdown.

Veterinarians traditionally are shielded from charging tax because moststates exempt professional services, which usually covers all healthcareworkers. But in an anemic economic climate, many governments, especiallythose devoid of income tax and reliant upon sales tax, are desperate fornew ways to fill the coffers. As legislative sessions begin in states suchas Florida, Ohio and Nevada, the race is on to uncover a fresh revenue source,and the veterinary profession is a target.

"Professional services is the golden goose that's out there,"says Donald Schaefer, Florida Veterinary Medical Association's executivedirector. "The sales tax is 6 or 7 percent in Florida, depending onwhere you live. So if you start taxing DVM services, for the practitioner,that means charging up to $35,000 on a gross revenue of $500,000 a year.

"The real question is would veterinarians pass those taxes on tothe consumer or would they bear it themselves?"

Sneaking it in

That's the same question Jack Advent has for his membership in Ohio,where Gov. Bob Taft recently reported a $4 billion deficit by year's endand veterinary leaders suspect a rather significant professional sales taxin the new budget package. The only problem is the document is so big, thegovernment stopped issuing it on paper, says Advent, the Ohio VeterinaryMedical Association's executive director.

"It's clearly going to take some time to get through this thing,"he says, "but virtually everything is going to be considered, includingtaxing veterinary services. There is a lot of opposition to imposing a professionalsales tax around here, and we'll be doing what we can to keep it out ofthe budget. But they're talking about putting a tax on everything. It'sa long, long laundry list."

Patrolling the gates

For Fred Hillerby, Nevada Veterinary Medical Association lobbyist, deterringproposals to create a business measure that amounts to taxing veterinaryservices remained high on his agenda as legislators met Feb. 3 for the 2003session. But the state's projected $750 million deficit is a staunch antagonist,he says.

"I'm positive the issue will be talked about it; I already knowsome lawmakers who are looking at it very closely," Hillerby says."Last year, the ultimate recommendation by legislators was a grossreceipts tax on all small business. What they'll likely consider if thatdoesn't fly is a gross receipts tax on professional services."

Constitutional roadblock

But even if the idea of a professional services tax gains support, statessuch as Florida might forbid their implementation legally. The state definesincome taxes as unconstitutional, to which a professional sales tax essentiallyamounts, Schaefer says.

Even so, lawmakers in states outlawing the income tax have found loopholes.In Washington, for example, legislators implemented the Business and OccupationTax, commonly known as the B&O Tax, which currently tacks 1.5 percentonto the gross revenue of professional services. That percentage could beraised in the near future, says Greg Hanon, legislative lobbyist for theWashington Veterinary Medical Association.

"We're dealing with a $2.5 billion deficit; at this point, everything'son the table," Hanon says. "I suspect when the legislature startsto look to increase revenue, they'll focus on business. They're lookingfor all kinds of new ways to raise money."

In the meantime, Schaefer says he's staying proactive, employing effortsto curb professional sales tax talks as the economy continues to dip.

"Around the country, this issue is going to be contentious, a realbruhaha," Schaefer says. "We have to stay in this game. As a profession,we don't want to be left out in the cold."