Tax Loopholes, Medicaid Fraud Cost State Taxpayers Billions; Action Looms
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Loopholes & Fraud Undercut Michigan Tax Collections.
Tax loopholes, Medicaid fraud, outmoded tax structure: that's what's wrong with Michigan's budget, according to several authoritative sources.
One issue being discussed is an increase in beer taxes that have not been raised since the 1960s.
Another is multi-millions in tax loopholes, including vending machine sales and international phone calls.
One private agency is recommending expanding Michigan's sales tax base by adding taxes on services, an action taken two years ago and then immediately reversed.
. A more progressive income tax would provide more growth than the current flat tax, said the Michigan League for Human Services.
Corrections spending in Michigan is among the highest in the nation. Michigan has the highest incarceration rate among the Great Lakes states and is now one of four states that spends more on corrections than on higher education.
Michigan Attorney General Mike Cox is among officials acting to try to solve a recently revealed Medicaid fraud problem, announcing today he will seek passage of bills to set up an independent auditor system.
Last week the Detroit News revealed a $50 million Medicare fraud case unveiled Wednesday that netted arrests as far away as Miami and Denver.
"In all, 53 defendants, including four doctors, either appeared Wednesday in federal court in Detroit or are expected to do so in the coming days. Six other defendants are fugitives believed to have fled the country," officials quoted by the News said.
The state's top Democrat, party chair Mark Brewer, immediately responded to Cox, stating the attorney general has been responsible for prosecution of Medicaid cases.
The alleged Medicaid fraud involves physical therapy and injection or infusion therapy clinics. Patients reportedly received kickbacks for use of their Medicare numbers; the federal health care program for the aged and disabled was billed for services never provided; and the fraudulent payment were shared among a group of clinic owners, doctors, recruiters and other co-conspirators, according to grand jury indictments handed down Wednesday.
Michigan spends about $10 billion a year for Medicaid, the health care insurance program for the poor and disabled. Creating the new office would be virtually cost free, Cox said.
The Medicaid fraud allegations spotlighted Michigan's fiscal problems and led the CEO of one human service agency to comment about other aspects of the state fiscal dilemma.
Sharon Parks, president of the Michigan League for Human Services, said she is worried about the state's future that affects all its citizens.
"Michigan's fiscal crisis has reached a magnitude that demands significantly more in both thought and process, than the botched "solutions" crafted in the middle of the night two years ago," she said recently.
"The federal stimulus money will go away in 2011. The temporary income tax increase enacted in 2007 will begin to decrease in 2011. The cost of running the existing programs of state government (heating buildings, buying supplies, and delivering services) will increase with the cost of living.
"As a state, we have been limping along year to year while policymakers are tone-deaf to the many alarms sounded about our long-term structural problems. Thanks to Rep. Kate Ebli, the House Tax Policy Committee members are getting a full tutorial on putting Michigan's fiscal house in order."
The League was one of many groups invited to testify before the committee. In our testimony the League outlined seven options to address the structural deficit. These options were presented to committee members.
"The bottom line is this -- Michigan's policymakers must step up to the plate and do more than balance the FY2010 budget. They must assume responsibility for ensuring a revenue structure that will make it possible to provide the public services that residents and business need, beyond their term in office."
Medicaid takes up more than a quarter of the state's general fund budget, sources said. State funds match federal funds to total some $9 billion a year to cover the health care for some 1.5 million poor Michigan residents. Michigan's Medicaid share of the general fund is more than three times larger than it was in 1980.
Last summer the Michigan Auditor General found more than $200 million in improper and fraudulent child care payments for Michigan families on social assistance, said a writer for the Center for Michigan.
Michigan also allows some $32 billion in tax breaks, a practice the Center for Michigan is attacking.
A new coalition of some 20 organizations is calling for an end to some loopholes and an overall examination of our network of tax breaks.
Two former state legislators, Democrat Lynn Jondahl and Republican Don Gilmer, in a recent Detroit Free Press column, commented: "Closing loopholes makes good sense as we watch the layoffs of state troopers and local law enforcement officers and firefighters, the slashing of prevention programs for at-risk families and children, and the reduction of needed mental health and health care services."
Loopholes Jondahl and Gilmer cited:
"An exemption on food sold from vending machines. Cold pop and candy are not taxed, even though food sold for immediate consumption is taxed elsewhere. Ending this exemption would generate $25 million in revenue."
Tobacco wholesalers are excused from paying taxes on goods sold to retailers who go out of business or otherwise do not pay the wholesaler. Closing that loophole would save an additional $17.7 million, the former legislators said.
Michigan also exempts international phone calls from sales tax. Taxing international calls the same as other long-distance calls would yield an additional $22 million a year.
"There's much more we can do to spread taxpayer burden more fairly by closely examining loopholes," wrote the former legislators.
The last time Michigan adjusted beer taxes they were lowered during the Lyndon Johnson administration. Said the commentators: "Simply indexing beer taxes to inflation would have, by now, resulted in a quarter-billion dollars per year in added revenue. As we've said before, it's very hard to imagine industries leaving, or refusing to locate here, because the beer taxes are too high."
They summarized:
"The real answer is a fundamental debate about the public purse -- how much do we need to properly invest in the kind of 21st century services that will attract and retain prosperous business and employees? And what are the most equitable and sustainable ways of funding those services?
Ms. Parks said state spending priorities have shifted in such a way that there has been a significant disinvestment in health and humans services, higher education and revenue sharing with local municipalities.
Tax cuts enacted in 2007 are temporary, she said, and new tax cuts will further erode revenues; public safety and the overall quality of life may be harmed by these cuts, she said.
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"The BUZZ" - Read Feedback From Readers! |
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ytaratuta Says:
On July 19, 2009
at 04:56 PM
Ah... sure... taxes in Michigan are too low.
Perhaps it's time for Michigan government to back off. One reason Lansing needs so much more money is because it gives so much away: Hollyweird - Film subsidy Wall St. - DOW, GE, GM and hundreds of others Energy efficiency - to out-state vendors All of this money adds up. By taking the money out of local communities, the end result in more unemployment. So instead of Lansing's asking for more and more money in a shrinking economy, how about living within a budget like the rest of us have to do??? |
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