The Indy Explains: Question 4, a ballot measure to exempt medical devices from the sales tax
Nevada voters will weigh in on six statewide ballot measures this November. This is part of a series aimed at demystifying the questions and explaining their origins.
Question 4: Medical device tax exemption
Formal name: Medical Patient Tax Relief Act
Type of measure: Initiative petition to amend the Nevada Constitution
Group sponsoring: A PAC called “The Alliance to Stop Taxes on the Sick and Dying”
Group opposing: No formal opposition
Summary of what it does: The measure would exempt so-called durable medical equipment — things such as oxygen tanks, ventilators and wheelchairs — from taxation. Prosthetics, orthotics and some other medical supplies are already exempt from taxation under Nevada law.
An analysis from the Guinn Center for Policy Priorities estimates that in 2013, at least 7 percent of Nevada’s population was prescribed a product that would be eligible for the tax exemption proposed by Question 4.
What have other states done? 23 other states have tax exemptions for medical equipment, although not all include the same products in the exemption, according to the Guinn Center.
Argument for passing Question 4: In their formal arguments for the ballot measure, supporters say it helps sick, injured and dying patients by preventing the state from imposing “unnecessary” sales taxes on equipment prescribed by doctors.
Supporters point out that people need oxygen tanks to live, machines to prevent Sudden Infant Death Syndrome and home ventilators to deal with cystic fibrosis. They also note that Nevada law already exempts medicine and prosthetics from the sales tax “because we have recognized how vital this relief is for our most vulnerable populations,” and argues Question 4 will simply extend it to additional medical equipment.
Supporters say the burden of the sales tax is another cost driver for insurance premiums, and for the uninsured, it must be paid out of pocket and could force people to forego the equipment altogether.
“This is taxation at its worst, targeting the most vulnerable Nevadans,” supporters wrote. “These aren’t wealthy people paying sales tax for new cars. These are sick people required to pay taxes on the machines that keep them alive.”
Arguments against passing Question 4: Opponents of the ballot measure point out that it will create more of a budget hole and force lawmakers to look elsewhere to fund schools, police and other government services.
“On the surface, this exemption seems like a good thing, providing tax relief to those in need,” reads the official opposing argument. “However, this exemption is really a wolf in sheep’s clothing.”
Opponents cite a 2013-2014 report from the Nevada Department of Taxation that says the state has 243 different tax subsidies, abatements and incentives that cost nearly $4 billion a biennium. And they note that the state gave away more than $1 billion in incentives to Tesla and other companies relocating to Nevada.
“Who is footing the bill for all those exemptions? You, the local taxpayer,” the argument says, before pointing to two instances in which the Legislature passed tax hikes. “The question also needs to be asked, isn’t this just another burden on Nevada taxpayers? If it isn’t, why in 2003 and again in 2015 did our governors go after a BILLION-plus dollars in tax increases?”
How did Question 4 qualify for the ballot: A similar measure was proposed in the 2015 legislative session, where it passed the Senate but didn’t get a vote in the Assembly. The bill had also exempted hearing aids, contact lenses and glasses from the sales tax, which were the primary reason why the state estimated the bill would reduce state revenue by $25 million over the next decade.
After removing eye products and hearing aids from the measure, a group of medical equipment suppliers submitted more than 100,000 signatures in 2016 to qualify it for the ballot.
Primary funders: The PAC supporting the initiative received roughly $391,000 from medical equipment seller Bennett Medical Services and its owner Doug Bennett, who spearheaded the effort to get the measure on the ballot. It also received $10,000 from home respiratory services provider Apria.
Financial impact: The current state sales and use tax rate is 6.85 percent. If passed, the types of medical equipment outlined in the initiative petition would be exempt from taxation, reducing the amount of revenue collected by the state and local governments, including school districts. The Legislative Counsel Bureau’s Fiscal Analysis Division said it was unable to determine the amount of sales that would be subject to exemption because the Legislature still has discretion on how to define the medical equipment that would be eligible for the exemption.
However, an analysis from the bill in the 2015 legislative session estimated that exempting durable medical and mobility enhancing equipment would reduce revenue to the state by $3.7 million over ten years.
Status: The measure passed by 72 to 28 percent in the 2016 election and needs to be approved by voters once more to amend the constitution. After that, the Legislature needs to move to enact the specific sales and use tax exemption.