LePage touts trickle-down for the homeless shelters, hospitals he would tax

BDN photo by Gabor Degre

BDN photo by Gabor Degre

What’s to become of the homeless shelters and other nonprofits that would be taxed under Gov. LePage’s plan?

Towns and cities are promised those new revenues to make up for LePage slashing revenue sharing. In Bangor, 54 nonprofits would be taxed.

Manna, a Bangor faith-based group that serves meals and provides groceries to the hungry and does much more to help needy people, including teaching job search skills, would have to pay thousands in new taxes. (Disclosure: I have served holiday meals for and donated to this group.)

Manna is exactly the sort of group conservatives often tout as better for helping poor people than government. It would be expected to come up with funds to fill a gap in municipal spending arising from the governor’s plan, as would housing programs and other nonprofits. Such groups fill gaps in existing government programs, some of which have been cut by the governor, and employ many.

Moreover, most Maine towns can’t use those funds to make up for the cuts in revenue sharing because they don’t have nonprofits worth $500,000 or more. Property taxpayers in those towns in particular would see their property taxes soar.

Putting those consequences to towns and property taxpayers aside, the nonprofits that would be taxed would likely face new problems. To pay those taxes, they’d need to raise new revenues or else reduce jobs or cut services.

LePage says they’ll be fine, helped by a kind of trickle down.

In fact, Gov. LePage says that the nonprofits will benefit from a “flood” of new giving.

His logic goes like this: Mainers will get income tax cuts and then they’ll give more to nonprofits.

So, no problem, nonprofits! The magic of trickle-down will save you!

The trouble with this theory is that this dynamic hasn’t shown up elsewhere. Moreover, another part of LePage’s plan would pose additional problems for nonprofits.

As reporter Steve Mistler notes:

[N]ational data on charitable giving shows no proven correlation between the most generous states and low income tax rates.

Also, LePage’s plan to eliminate itemized deductions for charitable giving could actually discourage donations to nonprofits in Maine, the second stingiest state in the country when gifts to religious institutions are included in the data. [source]

The evidence for LePage’s trickle down for nonprofits is just not there.

As Mistler also notes:

Six states with no income tax are not among the top 10 in charitable donations, even counting religious donations.

LePage has also suggested that hospitals will be fine because they can reduce what top administrators pay. LePage’s policies would lead to those highly paid administrators getting a tidy income tax break. But wages are set by market forces in capitalist economies.

Moreover, Maine hospitals are facing financial pressures for other reasons related to LePage policies.

Healthy hospitals are important to many Maine communities, both because of the services they provide and their place in localities’ economies.

Maine hospitals have been undermined by Gov. LePage’s refusal to expand Medicaid.

Medicaid expansion is part of the Affordable Care Act but the Supreme Court made it optional for states.

According to MPBN:

Maine hospitals are seeing bad debt and charity care costs skyrocket. . . Maine is one of 22 states that opted not to expand Medicaid under the ACA. And that decision, some hospital leaders say, is one of the primary drivers behind the rise in uncompensated care. [source]

Moreover, LePage’s cuts to MaineCare also play a role in undermining Maine hospital’s fiscal position.

As MPBN shows via interviews with top administrators in various Maine hospitals, hospitals face more uncompensated care and this has led to both cuts in programs and increased costs.

St. Mary’s Hospital in Lewiston “has had to absorb about $2 million extra in uncompensated care. To help make up for the extra costs, the hospital closed a behavioral intensive care unit and started charging free care patients a down payment to enroll in its outpatient substance abuse program.”

When the ACA was being negotiated, hospitals accepted reimbursement cuts in Medicare because they were to cut new funds via Medicaid expansion. But then Maine didn’t expand Medicaid.

The result:

Jeff Austin, [the head of the Maine Hospital Assocation] says, currently, charity care at Maine hospitals amounts to about $130 million in costs.

“Our free care and bad debt has tripled over the last five years – it was $13.6 million in 2014,” says Lois Skillins, the CEO at Mid Coast Hospital in Brunswick.

Across the nation, the hospitals in Medicaid expansion states are doing much better than those that opted out.

Rural hospitals are being hurt and are pushing their states to expand Medicaid. In the city of Baton Rouge, Louisiana, Gov. Jindal’s refusal to expand is causing a vital emergency room to close.

Anyone who has studied health policy knows that not expanding Medicaid is highly problematic for Maine’s hospitals.

Taxing them will hit them even more, and will hit many other Maine nonprofits.

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Amy Fried

About Amy Fried

Amy Fried loves Maine's sense of community and the wonderful mix of culture and outdoor recreation. She loves politics in three ways: as an analytical political scientist, a devoted political junkie and a citizen who believes politics matters for people's lives. Fried is Professor of Political Science at the University of Maine. Her views do not reflect those of her employer or any group to which she belongs.