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Legislature Refuses MassHealth Reforms for Now: Enacts $200M Employer Health Care Tax The Massachusetts Legislature broke for their summer recess at the end of July, but not before approving a $200 million health care tax increase on employers. Disappointingly, the state budget plan advanced by the Legislature did not include the full Medicaid (MassHealth) reform package that the Baker Administration and the business community had negotiated and agreed upon. That agreement, reached after six months of negotiations, resulted in the business community willing to support a temporary assessment contingent upon adoption of a larger package that included long-term changes to the MassHealth program and important reforms to the private insurance market. The Legislature went along with the increased health assessment but stated that they needed more time to consider a reform package and that they would bring their own cost saving reforms to the debate this fall. The budget includes a temporary increase in the Employer Medical Assistance Contribution (EMAC) for most employers, and an additional temporary assessment on employers with employees on public health assistance. The EMAC is an existing tax that most employers now pay as part of their unemployment insurance taxes. EMAC funds are used to pay for subsidized health care for low-income residents of the Commonwealth. For each non-disabled employee who receives state subsidized health insurance coverage through MassHealth or the MA Health Connector, the additional assessment would max out at $750 per employee, annually. For all employers with 6 or more employees:
Additional tax on employers with employees on state subsidized public health assistance:
The plan does include some employer friendly changes to the unemployment insurance (UI) rate schedule to partially offset the EMAC increases, and those changes are included in the budget, meaning collectively, employers will pay $334M less over the next two years than what they would have paid on the current schedule. Governor Charlie Baker signed the assessment and UI changes into law, but assured the business community that his Administration would work closely with the Legislature this fall to deliver passage of a significant reform and health care cost control package.
“Real Time” Sales Tax Collection The final budget also included language calling for the Department of Revenue (DOR) to go through a regulatory process to determine how to best effectuate accelerated sales tax remittance, or “real time” sales tax collection. The DOR is instructed to hold hearings on the topic and issue a small business impact statement, and take into consideration the following: (i) established industry practices; (ii) technological feasibility; (iii) financial impacts on consumers and businesses; (iv) the fiscal impact on the commonwealth; (v) relevant federal or state laws and regulations; and (vi) limitations on applicability to mobile telecommunications services. If the DOR finds and certifies that “real time” collection is not cost-effective to implement before June 1, 2018, then the state Comptroller is directed to essentially credit $125 million in sales tax collections from FY19 back into FY18, and no further action would be taken to implement accelerated collections. The DOR must make that determination by November 1, 2017. RAM has strongly objected to the consideration of accelerated “real time” sales tax collection and we will be engaged with the DOR in its process moving forward to prove that this is not a cost effective or workable solution. No Sales Tax Holiday in 2017 The Massachusetts House and Senate left for the summer recess without taking any action on legislation to authorize a Sales Tax Holiday for this August, marking the second year in a row without the tax free event. RAM and our members lobbied the issue aggressively in June and July, but lawmakers repeatedly pointed to disappointing state revenue collections that saw the state end the 2017 fiscal year with a revenue gap of $431 million |