Proceedings of a Workshop
Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity
Proceedings of a Workshop—in Brief
On December 7, 2017, the Roundtable on Population Health Improvement held a 1-day workshop in Oakland, California, at The California Endowment Oakland Regional Office–Healthy Communities Center. The workshop featured presentations, panel discussions, and an exercise about tax policy as both an influence on health outcomes and a possible source of financing for population health activities (ranging from diabetes prevention to universal pre-kindergarten).
Workshop participants were welcomed by Sanne Magnan of the University of Minnesota, the co-chair of the Roundtable on Population Health Improvement. Magnan provided background information about the roundtable, introduced the workshop planning committee, and provided a brief introduction to tax policy as an influence on population health. Magnan commented that the focus on tax policy reflected an interest in learning how the abundant wealth across the United States could be directed to deliver dependable sources for equitable health and well-being.
FRAMING REMARKS: KEY POINTS
Bobby Milstein of ReThink Health, a member of the roundtable and the planning committee, also welcomed participants and provided some further framing remarks. He described the need for dependable and sustainable forms of funding for population health, noting that tax policy is part of a menu of choices in the health financing landscape that he had previously shared1 at the roundtable’s fall 2016 workshop. He then outlined the workshop’s overarching goals: (1) explain how tax policies have been used to channel resources and shape economic incentives that affect population health, with attention paid to the basic features of taxes (such as on tobacco products), as well as tax breaks (such as for low-income housing); (2) examine several examples of how tax policies can be designed both to attract willing investors and to advance a range of health and economic goals, while also noting any insights about unintended consequences; and (3) equip each participant with the basic knowledge and language to further explore how to advance tax policy in favor of health and well-being across sectors (e.g., education, housing, economic development).
UNDERSTANDING THE BASICS OF TAX POLICY: TYPOLOGY, DESIGN PRINCIPLES, EXAMPLES
Giridhar Mallya of the Robert Wood Johnson Foundation provided a brief prelude to the next presentation by Pete Davis. Mallya started by stating that taxes are about values as much as they are about economic theory and policy design—they reflect what society believes is worth investing in and also society’s trust in the government. Taxes influence people’s behavior as they promote investment in social goods and pay for public services, Mallya commented, and
1 See https://www.nap.edu/read/24760/chapter/6?term=menu#42 (accessed March 29, 2018).
he said that he had learned three things from his work with sugar-sweetened beverage (SSB) and tobacco taxes: (1) soda companies and advertisers are good story tellers; (2) establishing a new tax is much harder than increasing an existing one; and (3) regressivity is relative. To illustrate his last point, he told the audience that property taxes in low-income communities are over-valued and thus these communities bear a disproportionate economic burden. Mallya drew attention to the workshop materials containing a figure describing tax policy options (see Figure 1) and said that there are tax implications beyond those of “sin” taxes to be considered.
TAX POLICY 101
Pete Davis of Davis Capital Investment Ideas said he hoped that participants would learn to ask the right questions and become aware of the pitfalls of tax policy. Davis added that the takeaway from his talk was that tax policy is a balancing act among competing objectives, which creates winners and losers.
The goal of tax policy is to raise revenue and to do so upholding certain principles of fairness (vertical and horizontal), simplicity, and efficiency. Fairness includes vertical equity, which relates to individuals’ ability to pay and, specifically, holds that the rich should pay higher taxes than the poor. Overall, the U.S. tax code is progressive, he said, but when the effects of the tax code are disaggregated, some taxes are regressive, i.e., have a disproportionate effect on people with lower incomes, and many wealthier people are able to avoid paying taxes. The second component of fairness, Davis said, is horizontal equity, meaning that people of similar circumstances and similar income should pay a similar amount in taxes. One example where this is not the case is real estate taxes, he said, explaining that renters end up subsidizing homeowners, violating both the vertical and horizontal fairness components.
Davis said that the principles of sound tax policy are knowingly violated because of externalities. Externalities are the side effects that behaviors, practices, and commercial activities have on people other than the ones directly involved. These side effects can be positive, such as the effects of education and research and development, or they can be negative, such as the effects of pollution on people other than the ones doing the polluting or the health consequences of tobacco smoke on non-smokers.
Davis said that people can react to taxes in various ways, including by (1) reducing the unhealthy behaviors being taxed, such as smoking, (2) avoiding the tax, or, (3) creating a black market if the tax rate is too high. Thus, he said, a key
to raising a tax successfully is to identify an optimal level of the tax rate. He illustrated the point with the example of the elasticity of smoking, i.e., the percentage change in smoking that results from a given change in the price of cigarettes. Davis clarified that when one is investigating elasticity, it is important to stratify by age because older people’s behavior is fixed and will not change significantly as a result of a tax, while younger people’s behavior is flexible or elastic, e.g., it is responsive to changes in cigarette prices. Davis mentioned that in 1982, to make a tobacco tax palatable, he observed that because tobacco taxes had not been adjusted for inflation over the years, doubling the existing tax would do no more than bring the tax up to the (inflation-adjusted) level of the tax as it had been levied in 1951. Ultimately, he added, although the increase in the tax on tobacco was not as great as some had originally hoped for, it was a compromise solution.
Davis pointed out that income taxes are calculated by multiplying income times the marginal tax rates.2 He explained that people are taxed anywhere from 12 to 39.6 percent, depending on their taxable income, and that “the base” [that is being taxed] is what is important. He mentioned that only 25 percent of taxpayers itemize their deductions, with these people usually being at the top of the income range, and that after factoring in their deductions they end up paying less (relatively speaking) than the other 75 percent of individuals who did not itemize (i.e., because deductions lower taxable income and therefore the better-off pay less in taxes).
In discussing the earned income tax credit (EITC),3 Davis said that it was implemented because in 1974 the economy was in free fall and a tax cut had to be implemented to keep the economy from going into a recession. Davis was instructed to create a negative income tax with an $8 billion budget. The justification was that under the system at the time, people on welfare were better off remaining in the program than securing a job. However, the bulk of the low-income population at that time were single mothers with children who were unable to afford child care if they entered the workforce, so policy makers believed the tax credit needed to be substantial enough to offset the cost of child care.
During the discussion, Maggie Cook from ReThink Health said that only 17 percent of properties supported by a low-income housing tax credit (LIHTC) were built in a high-performing school districts and in areas of opportunity that could help interrupt poverty cycles. She said that there is still a large population with a high rent burden who have nowhere to live, in spite of the creation of 3 million affordable housing units. Mallya responded that in some states there are state-qualified allocation plans that incentivize using credits in high-opportunity neighborhoods.
Phyllis Meadows from The Kresge Foundation expressed her desire for a better understanding of the intent, or the drive, behind LIHTC. Davis said that low-income individuals derived some benefit, but that much of the benefit of that tax policy was going elsewhere, and “that is a problem.” Davis suggested that those working in tax policy are better off working toward a small goal in order to get their foot in the door, show progress, and then expand the program. Mallya referred to a Bipartisan Policy Center paper that is informative about the low-income housing tax credit and its health effects.4
UNDERSTANDING THE FISCAL ENVIRONMENT OF THE STATE BUDGETS
Christopher M. Brown of PolicyLink moderated the next session on understanding the fiscal environment of state budgets with Nick Johnson of the Center on Budget and Policy Priorities (CBPP). Brown mentioned that PolicyLink had partnered with CBPP to identify revenue streams and funding for programming aimed primarily at low-income communities of color by looking at tax expenditures such as deductions and credits. Johnson described state and local taxes as drivers of antipoverty programs. State and local governments, he added, collect about one-third of all taxes, and half of that revenue is destined to public-sector spending such as education, Medicaid, the state Children’s Health Insurance Program, human services, transportation, and public safety. Johnson said that state taxes can be regressive relative to the federal taxes; low- and middle-income people pay more in state taxes than their more affluent counterparts. For example, those in the bottom quintile pay about 11 percent of their income in taxes, while those in the top 1 percent only pay 5 percent of their income in taxes. He added that in states with the most regressive taxation, there is a seven-fold difference in the tax rate paid by those in the top and bottom portions of the income scale.
Johnson said that states are considering how tax policy could support education reform and help build infrastructure. Unlike the federal government, states must have a balanced budget; if they cut taxes, they must cut spending.
2 “The marginal tax rate is the incremental tax paid on incremental income.” Source: http://www.taxpolicycenter.org/briefing-book/what-difference-between-marginal-and-average-tax-rates (accessed February 28, 2018).
3 “The earned income tax credit subsidizes low-income working families. The credit equals a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum. The maximum credit is paid until earnings reach a specified level, after which it declines with each additional dollar of income until no credit is available.” Source: http://www.taxpolicycenter.org/briefing-book/what-earned-income-tax-credit-eitc (accessed February 28, 2018).
Johnson outlined what he considered three myths about tax issues: (1) cutting taxes is good for the economy; (2) cutting taxes is a political tool; and (3) cutting taxes works in Republican states. He said that states that increase their taxes are better off economically, mentioning the example of Minnesota compared to Wisconsin, where the former increased taxes and is faring better economically than the latter. Johnson said that there is growing cynicism about tax cuts as a political tool and pointed out that even “red” states, which account for two-thirds of states at this time, do not necessarily agree that cutting taxes is an improvement.
During the discussion with the audience, Linda Rudolph from the Public Health Institute brought up the California tax policy in Proposition 13 (a 1978 ballot initiative that lowered property taxes, among other changes to the state property tax system) and asked how the proposed federal tax changes would likely affect it. Johnson replied that the currently proposed federal tax cuts should be a wake-up call to states that they cannot rely on the federal government for progressivity or to support revenue programs in their communities. Philip Alberti from the Association of American Medical Colleges mentioned the considerable research documenting the relationship between income inequality and health, and he said that tax policy is perhaps complicating the set of solutions to population health issues. Brown agreed, saying that federal and state governments are active participants in recreating income inequality. Mary Pittman of the Public Health Institute asked about state-level corporate taxes designed to attract businesses and how those play out in terms of regressivity. Johnson answered that the business incentives system is “bad economics and scary politics” and that states are throwing away too much money, as tax codes were designed in the 1930s to 1950s when a “brick-and-mortar mentality” prevailed (i.e., before the emergence of the gig economy or alternative work arrangements).
POTENTIAL OPPORTUNITIES FOR SHAPING INCENTIVES AND CREATING A PIPELINE OF FINANCING POPULATION HEALTH: EXPLORING “SIN” TAXES AND POPULATION HEALTH TAX CREDITS
Panel moderator Kathy Gerwig of Kaiser Permanente prefaced her panelist introductions by noting that her organization is expanding what it counts as health care in recognition of the need to address the social, economic, and environmental social determinants of health, such as transportation and employment.
Spotlight on Sin Taxes: Overview, Efficacy, Opportunity and Unintended Consequences
Aysha Pamukcu described ChangeLab Solutions’ mission as using law and policy solutions as ingredients to create a just and thriving community. Pamukcu proposed to change the framing of “sin” taxes as something negative and stigmatizing to something that can be regarded as “a positive social good.”
First, Pamukcu pointed out that the burden of chronic disease falls disproportionately on communities of color and on those with lower incomes. Second, she said that sin taxes build on existing public health practices and are used as a tool to reduce negative externalities. She offered the example of alcohol and said that a number of evidence-based interventions, such as taxes on sales along with the enforcement of sales, restricting the density of sites selling the product, and restricting the days of the week on which alcohol can be sold, are effective tools when used in combination. Third, Pamukcu said, taxes can provide funding for community health priorities as they can be earmarked for specific purposes and allow public health agencies to consult with communities and bring them to the table. The types of sin, or excise, taxes that can be used as a public health tool include taxes on substances (e.g., tobacco, alcohol, and cannabis), food items (e.g., sugary drinks, junk food, and specific ingredients such as high fructose corn syrup), other goods (e.g., gasoline), behaviors (e.g., pollution) and activities (e.g., gambling).
Pamukcu said that in California comprehensive messaging and public policy activities concerning tobacco led to a savings of $134 billion, representing a 50-fold return on a $1.8 million investment made through the California Tobacco Control Program. Concerning the equity aspects, Pamukcu said that “the wins” in tobacco smoking rate reductions “were not a win straight across the board,” meaning that different groups did not gain equally, which highlights the need to contend with complex considerations of equity and fairness.
ChangeLab Solutions, said Pamukcu, applies the following principles when addressing health equity in excise tax policy considerations: (1) community partnership and education, (2) decreasing unhealthy influences and increasing healthy ones in a community, (3) earmarking and equitable use of tax revenues, and (4) not stigmatizing individuals or groups.
Pamukcu said that it is as important to remove negative health influences from the community as it is to ensure that “positive healthful influences are flowing back into the community,” in the form of tax revenue flowing to those who bear the highest burden of chronic disease and to their priorities as they articulate them for their communities. Pamukcu said that policies should not stigmatize individuals within groups, as this may strengthen the notion that wellness is a
product of individual choices despite evidence indicating that broader systemic forces shape personal and community wellness. Finally, Pamukcu argued that people should be careful to pair taxes with other public health strategies and to think about holistically combining strategies “to move the needle.”
Berkeley vs. Big Soda: Leading with Health Justice
Xavier Morales of The Praxis Project, who delivered his presentation via video conference, said he would focus on lessons to be learned from the Berkeley vs. Big Soda: Leading with Health Justice campaign. Morales said that the Berkeley municipal soda tax was a success because advocates were able to show quantitatively that health disparities in Berkeley persisted. He added that 40 percent of the city’s ninth-graders were overweight, as documented in the school health report in 2013, and that students of color were more likely to be overweight or obese.
Morales said that the process of planning for the SSB tax gave rise to certain concerns, including (1) adding to the gentrification problem, (2) reinforcing educational disparities between students of color and their white peers, and (3) if the health of African American and Latino children was being used as leverage, then the coalition needed to show that the revenues would go back to those communities.
In its planning, the campaign acknowledged that the old strategy was “the public health perfect, but politically bad option,” which consisted of increasing the price of soda by 2 cents per ounce, having a dedicated tax or a retail tax that focused on raising taxes to curb demand/consumption, and defining success as an SSB price increase. However, he said, that strategy had failed 30 times. The Berkeley leadership debated each point and realized that “public health perfect” had not won, so they had to re-strategize. The “Berkeley politically perfect, but public health good” strategy was devised, and it involved (1) a 1 cent per once price increase, (2) a general fund tax (50 percent) with a panel of experts weighing in on how to invest funds, (3) an excise tax paid by distributors, (4) a focus on generating revenue to address the complex roots of disease caused by the overconsumption of sugar water, and (5) defining success as increasing community knowledge and attaining behavioral changes in people receiving the benefits from the investments.
In terms of revenue generation, Morales said, Berkeley has a population of 100,000, and the general rule of thumb is that $1.5 million of tax revenue can be raised per 100,000 residents. In terms of evaluations to date, Morales said that there are five publications5 that have assessed the impacts of the Berkeley soda tax.
Cap-and-Trade: Carbon Pricing and Health Issues
Meredith Fowlie of the University of California, Berkeley, began by explaining that her work is in pollution regulation and specifically, connecting cap-and-trade with carbon pricing and local health issues. Fowlie said that carbon pollution is a textbook externality, given that neither the producer nor the consumer “factor in” (e.g., consider the real costs of) pollution. Thus, she continued, pollution regulations aim to change behaviors through limits or tax-based incentives that would account for the social cost and then charge a corresponding tax. Cap-and-trade, she continued, is a policy in which regulators set a limit on the total amount of carbon-related pollution that can be produced in a given area and, with a sense of balance (i.e., to avoid spreading the burden unevenly), produce a corresponding number of permits; however, the more aggressive the target, the higher the costs of meeting them will be. Fowlie said that cap-and-trade is usually vilified in comparison to more standard approaches, such as prescriptive regulations, but, she clarified, it is similar to these standard approaches in the sense that regulators are handing the right to pollute to an industry and saying, “You can pollute X amount just as you used to under more prescriptive regulations. [Cap-and-trade] says you cannot exceed this amount. The key difference is that these permits are tradeable, and this warms the hearts of economists.”
Fowlie said that economists get excited about using the market to allocate pollution production and abatement responsibilities. She explained that California aims to reduce carbon pollution levels by 40 percent from the 1990 levels by 2030. This is an ambitious target, so there must be ways to minimize the cost of reaching that target, but groups have pointed out that although the market-based approach is cost effective, it may not be equitable, and the trade-offs must be thought through carefully.
5 Cawley, J., and D. E. Frisvold. 2017. The Pass-Through of Taxes on Sugar-Sweetened Beverages to Retail Prices: The Case of Berkeley, California. Journal of Policy Analysis and Management 36(2):303–326.
Falbe, J., N. Rojas, A. H. Grummon, and K. A. Madsen. 2015. Higher retail prices of sugar-sweetened beverages 3 months after implementation of an excise tax in Berkeley, California. American Journal of Public Health 105(11):2194–2201.
Falbe, J., H. R. Thompson, C. M. Becker, N. Rojas, C. E. McCulloch, and K. A. Madsen. 2016. Impact of the Berkeley excise tax on sugarsweetened beverage consumption. American Journal of Public Health 106(10):1865–1871.
Silver, L. D., S. W. Ng, S. Ryan-Ibarra, L. S. Taillie, M. Induni, D. R. Miles, J. M. Poti, and B. M. Popkin. 2017. Changes in prices, sales, consumer spending, and beverage consumption one year after a tax on sugar-sweetened beverages in Berkeley, California, US: A before-and-after study. PLoS Medicine 14(4):e1002283.
Taylor, R., S. Kaplan, S. B. Villas-Boas, and K. Jung. 2016. Soda Wars: Effect of a Soda Tax Election on Soda Purchases. Department of Agricultural and Resource Economics, UCB. https://escholarship.org/uc/item/0q18s7b7 (accessed April 2, 2018).
Fowlie said that pollution is unequally distributed, and this is a problem, as exposure over a lifetime can have real effects on health; thus, equity must be considered. She added that environmental justice concerns are more complicated because carbon trading addresses a global pollution problem, making it difficult to frame local environmental problems in the context of global climate change policy. The correlation between local and global pollution is not perfect—“Why target a local environmental problem with something that is aimed at the global level like CO2 emission reduction?” She added that California is going in the direction of designing cap-and-trade programs to deal with carbon and coordinating abatement revenues to address problems in local communities. As examples, Fowlie mentioned that there were two bills: AB 398, which extends cap-and-trade, and the companion bill AB 617, which increases monitoring and pollution and earmarks funds to be invested in environmental justice communities.
“Sin” Taxes: An Academic Perspective
Jim Sallee, also of the University of California, Berkeley, said that he “brings the perspective of academic economists” who have studied taxes for a long time, and he added that there are lessons to be learned from other subfields in thinking about how to design tax policy and measure its effects and welfare impacts. He said he wished to highlight two themes. The first is how to use the revenue received from taxing some sort of “bad,” and the second is the heterogeneity or the differences among the people affected by a tax and the impacts of tax policies.
To start with, Sallee said, “sin” taxes are by their nature regressive. “The initial burden of these policies will be disproportionately on low-income people,” he said, but added that they can be made progressive by redistributing the revenue by lowering taxes or writing people a check. He gave the example of the case of cap-and-trade policy in California, which provides Californians with rebates on their utility bills. Sallee said that even if a “sin” tax is progressive on average, many low-income individuals or households will be harmed or experience a negative impact from such a tax. Sallee explained that the variation of the impact of sin taxes within similar groups is wider than the variation between groups and that it is very difficult to design policy that does not do any harm to any group. The second point he made was that economists increasingly have access to fantastic data and can assess who is affected by policies and can measure differential impacts—e.g., health outcomes as a result of pollution and exposure—in a more granular way. He also said that researchers are using tax returns to measure the impacts of different policies on long-term outcomes. For example, he said that students at Berkeley are using remote sensing data to analyze in granular form the impacts and exposures that allow for theoretical insights to be paired with empirical measurement.
During the discussion period, Ella Auchincloss of ReThink Health asked Morales about the “public health perfect” and how strategic assessments were used to guide the targeting of the tax and how the tax policy actually came to pass. Morales underscored the need “to accept that in a political world, perfection is not going to be there, and the more it is pushed, the chances of losing are larger.” Another participant asked about the use of “regressivity” by those who oppose taxes. Morales answered that it is known that some tax policies are regressive. However, he said, if the community knows that the money from the taxes will flow back to them, they will be more receptive. He added that if the community is “used to substantiate the need for a tax, then it must be made explicit how this community will benefit from it; otherwise the community feels used politically.” Furthermore, he continued, having lobbied for a state tax and having spoken with representatives of color who voted against it, he deduced that talking about the regressivity of a disease does not resonate with policy makers. Morales explained that it becomes an issue of “raw power” and going into the community and educating and empowering residents to ask policy makers themselves is more effective than experts going to talk to legislators.
SPOTLIGHT ON TAX CREDITS: A PAPER PRESENTATION EXPLORING POTENTIAL TAX CREDITS TO FINANCE POPULATION HEALTH INVESTMENTS
Anne De Biasi of Trust for America’s Health (TFAH) introduced Stacy Becker of ReThink Health. Becker explained that the information she presented about tax credits was going to be delivered through the example of a fictional state of Ourlandia contemplating tax credits as a mechanism to fund population health interventions.
Becker reminded the audience that tax credits, also known as tax expenditures or “tax breaks,” are one form of tax policy. She explained that (1) tax deductions are a reduction of certain expenses from taxable income such as home mortgage interest deductions or charitable deductions, (2) tax exclusions are reductions of certain income from taxable income (such as social security income), and (3) tax credits offer a dollar-for-dollar reduction in tax liability, making their value more certain. Becker added that tax credits work like a rebate program. For example, if an individual spends $10,000 on solar panels and there is a 30 percent tax credit, at the end of the fiscal year that person can ask the federal government
for $3,000 of his or her taxes back. Becker said that tax credits subsidize private investment and they increase the return on investment (ROI) to private investors, thereby stimulating supply or demand.
Becker introduced what she characterized as key tax credit design questions for population health. First, “Is there a tax payer?” Becker explained that those who want to fund population health interventions have to consider taxing the private sector so that the tax credit can reduce the amount of taxes it owes. Second, Becker said, there must be a market, i.e., a specific supply-and-demand dynamic has to exist in order for a tax credit to work. Third, Becker asked, how much should a subsidy (i.e., the amount to be generated by the credit) be? She said that those setting up the credits do not want to pay people for things they are already doing and that the tax cannot be set so low so that there is no impact. Fourth, in terms of the distributional impacts and unintended consequences, Becker asked “Who claims the credit?” “How will the funds from the credit be used?” and “What does it take to administer the tax credit?” Becker then offered a list of key conclusions: (1) tax credit programs are feasible, (2) design is important, and (3) there is an opportunity to redeploy funds for greater impact.
During the discussion De Biasi asked how tax credits can be used to solve the “wrong pocket” problem (where the cost is incurred in one sector, but the ROI is realized elsewhere or spread over multiple sectors). Becker responded that tax credits can be used to reduce the cost of population health investments by providing a return in the first year and reducing the risk for investors.
A participant asked why there was an argument for a dollar-for-dollar ROI versus a social ROI. If society decided that a source of revenue is needed, why the self-imposed need to have an evidence-based ROI? The participant added that being bound to an evidence-based set of interventions would limit the breadth of activities that would be supported. Becker agreed with the participant and said that she, too, has asked why population health investments are held to a standard to which no one else is being held.
Designing Sound Population Health Tax Policy: Small Group Work
Rose Marie Martinez of the National Academies of Sciences, Engineering, and Medicine introduced an interactive exercise for workshop participants. The exercise was designed to engage participants in considering how they would create tax policy to support a state-wide wellness fund in the fictitious state of Ourlandia. Martinez guided workshop participants through the context of the exercise, and participants engaged in lively discussion about various tax policy design options.
Informing Sound Population Health Tax Policy in the Current Environment
Alan Gilbert of General Electric (GE) explained that his company became concerned with health care costs when, even 10 years ago amid the 2008 recession, GE was paying $3 billion in health care costs for active employees and retirees. GE Ventures started investing in the communities where the company had 10,000 or more employees, such as Cincinnati, Ohio; Erie, Pennsylvania; and Houston, Texas. GE had the opportunity to work with new business models in community and population health, Gilbert said, but there was a general lack of leadership in cross-sector collaboration. GE began by giving nine communities $25,000 each for planning, and those that showed the most promise received $250,000 to fund their programs. The question then, Gilbert said, is how to address the issue of sustainability, given that it is often the case that as program funding ends, so does the specific effort in the community.
De Biasi responded that at TFAH, both resources for cross-sector collaboration and the sustainability of effective efforts have been a concern for a few years. De Biasi said that she wanted to focus on the examples she had found where tax policy is contributing to population health, and she mentioned that population health tax incentives can be viewed as funding three broad categories: (1) the social determinants of health; (2) other evidence-based policies and interventions, including primary and community prevention; and (3) infrastructure for multi-sector, local, and braided efforts to improve community health.
De Biasi provided examples of programs that operate via funding from taxes, tax expenditures, and assessments. The first example was the Sojourner Family Peace Center in Milwaukee, Wisconsin, which uses a family justice model. It is a national model, but it is not federally funded; the center hosts the country’s largest array of services under one roof to address domestic violence and the root causes of violence. The program integrates services such as a shelter with law enforcement, medical services, and behavioral health services, and in all there are 19 programs delivered by 10 different community providers. De Biasi mentioned that the funding for the center involves a lot of tax policy approaches and that it is a partnership with the domestic violence agency Sojourner House and Children’s Hospital of Wisconsin, which was the child welfare provider in Wisconsin. The hospital applied for the Building Commission Funds because Sojourner House was not eligible. The hospital also loaned Sojourner House $10 million, which was used as the match for a new market tax credit, so the hospital got its money back. Sojourner House did not have money in the bank to match, so they got $4.4
million in New Market Tax Credits, and the hospital then donated $3.8 million from the community benefit funds. The venture, De Biasi said, resulted in a debt-free $27 million facility, and she added that $8 million of philanthropy money and state commission matching funds contributed as well. The hospital gets permanent rent-free space in the building and pays for the operating costs needed to serve the population.
In a second example, this time at the state level, De Biasi discussed state charitable-giving tax credits, with Arizona an example of a state allowing taxpayers to earn tax credits by donating to schools or to any of a variety of antipoverty organizations that appear on a state list. In Colorado sin taxes on marijuana are funding behavioral health interventions for students, a population with high rates of suicide and substance use. De Biasi said that Colorado knew that delivering behavioral health services at the middle and high school level is an effective evidence-based intervention; this was combined with population health–based approaches that are multi-tiered, including the creation of positive school climates and the use of positive disciplinary practices. The funding from the marijuana tax provides support to schools by funding behavioral health and substance use prevention programs as well as funding for hiring psychologists, social workers, counselors, and nurses. The tax also funds professional development training and the resources needed to implement evidence-based programs for substance use prevention, including universal screening.
The third state tax policy example De Biasi provided came from Florida, which has children’s services councils dating back to World War II, when child welfare taxing districts were established. These councils fund organizations that serve children and families to ensure children’s health, safety, and readiness to learn. The councils fund two-generation approaches, nurse family partnerships, early learning, after-school and summer school programs, and juvenile justice programs, among other activities. Each set of activities is specified in each individual county. De Biasi mentioned that the cost to the taxpayer, which ranges from $25 to $80 annually, is relatively inexpensive. These organizations braid funding streams for services such as 2-1-1 call, Kids Care, Healthy Start Coalition, healthy families, and school readiness. De Biasi mentioned that councils appear to be an efficient way of operating and that the councils then re-grant the money out to those nonprofit organizations that are carrying out services on the ground.
De Biasi then moved to the topic of tax assessments. The example of Massachusetts’ determination- or certificate-of-need process when applying for capital expenditures can be categorized as an assessment, she said. De Biasi explained that funds (5 percent of expenditures) are assessed when someone is building a structure or buying medical equipment such as magnetic resonance imagery (MRI) machines. Such certificates of need are enforced to address price inflation and provide access to the taxpayer at a reasonable cost. The state requires that for any capital project undertaken by a hospital or a health system, there be a community-based health initiative proposed that addresses the social determinants of health issues; the state further requires that this health initiative be aligned with the state health improvement plans, which include activities addressing chronic diseases such as diabetes, heart disease, cancer, and other areas such as mental health and substance use, as it is meant to work in conjunction with the state’s Medicaid waiver.
De Biasi added that the 1115 Centers for Medicare & Medicaid Services demonstration waivers and the recent delivery system reform incentive payments (DSRIPs) that pay for performance require a non-federal share, i.e., a state match, which states usually pay for through taxes. In Oregon, specific provider taxes have been implemented for its waiver match. Other states use intergovernmental transfers among different public agencies to produce their state match; still others are asking hospitals to voluntarily contribute to these transfers because it ultimately is in their best interest to do so. In Arizona, transfers were used for the Medicaid expansion and hospitals were also able to count the money they contributed to the transfers as their community benefit dollars, all the while expanding the Medicaid program in the state.
De Biasi concluded her presentation by describing the Massachusetts Prevention and Wellness Trust. It was funded through a one-time assessment on large hospitals and health insurers in 2012, which raised $60 million over 4 years to support prevention and health promotion activities in the form of local community initiatives, workplace wellness programs, and other priorities.
REFLECTIONS ON THE DAY AND CLOSING
Roundtable co-chair George Isham of HealthPartners and the HealthPartners Research Foundation began by thanking the planning committee. Isham underscored Mallya’s comment about taxes being a representation of the values of society. The workshop, he added, shed light on larger issues that must be considered—for example, the role of government and the private sector, the difficulty of establishing taxes, and the inclusion of diverse stakeholders during the planning of policies, including tax policy.
Isham then solicited reflections from the audience. Individual participants expressed appreciation for the cross-disciplinary and cross-sector dialogue, the case studies, and insights learned from the Berkeley example and its successful strategy (e.g., engaging the community), which stands in contrast to the Cook County experience where the SSB tax
failed. An audience member asked the workshop participants to consider if they were building one complexity over another—for example, adding tax policy to the braiding and blending of budgets.
Another workshop participant said that at a higher level it is important to consider the roles of government and society in the broader narrative of scarcity versus abundance, asking, “How to move away from that? How do we talk about bigger narratives in society that are preventing us from making policy decisions and focus on short-term and long-term vision?”
Pittman added that in terms of transparency, although it may be more expedient to carry out tax policy behind closed doors, there are considerations, such as equity, that may be brought forth by the community members who stand to lose as a result of the policies. Isham agreed and remarked on “the principles of fairness and equity and transparency with respect to the people we are serving and the communities we are working with” and the importance of advancing policies on their behalf.♦♦♦
DISCLAIMER: This Proceedings of a Workshop—in Brief was prepared by Carla Alvarado as a factual summary of what occurred at the workshop. The statements made are those of the rapporteur or individual workshop participants and do not necessarily represent the views of all workshop participants; the planning committee; or the National Academies of Sciences, Engineering, and Medicine.
REVIEWERS: To ensure that it meets institutional standards for quality and objectivity, this Proceedings of a Workshop—in Brief was reviewed by Marice Ashe, ChangeLab Solutions; and Linda Rudolph, Center for Climate Change and Health. Lauren Shern, National Academies of Sciences, Engineering, and Medicine, served as the review coordinator.
SPONSORS: This workshop was partially supported by Aetna Foundation, Association of American Medical Colleges, California Endowment, Dartmouth-Hitchcock Medical Center, General Electric, Health Partners, Kaiser Permanente, Kresge Foundation, National Association of City & County Health Officials, Nemours, New York State Health Foundation, NYU School of Medicine Department of Population Health, ReThink Health, Robert Wood Johnson Foundation, Samueli Institute, U.S. Department of Health and Human Services’ Health Resources and Services Administration, U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Health, and Wake Forest Baptist Medical Center.
For additional information regarding the workshop, visit nationalacademies.org/hmd/Activities/PublicHealth/PopulationHealthImprovementRT/2017-DEC-07.aspx.
Suggested citation: National Academies of Sciences, Engineering, and Medicine. 2018. Exploring tax policy to advance population health, health equity, and economic prosperity: Proceedings of a workshop—in brief. Washington, DC: The National Academies Press. doi: https://doi.org/10.17226/25066.
Health and Medicine Division
Copyright 2018 by the National Academy of Sciences. All rights reserved.