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Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop (2019)

Chapter: 4 Designing Sound Population Health Tax Policy: Small Group Activity

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Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
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4

Designing Sound Population Health Tax Policy: Small Group Activity
1

Rose Marie Martinez, director of the Board on Population Health and Public Health Practice at the National Academies, introduced the small group exercise that was designed to engage participants in considering how they would create a tax policy to support a state wellness fund. The exercise was built on the scenario described by Becker (see Chapter 3) in which the fictional state of Ourlandia is considering tax policy options to fund its population health needs. Small group conversations were guided by the typology of tax policy options (see Figure 1-1) and a set of design questions (a summary of the activity is provided in Box 4-1, with full exercise materials provided in Appendix C).

TAX POLICY PROPOSALS: SMALL GROUP REPORTS2

Upon reconvening in plenary session, a rapporteur from each small group shared the outcome of the participants’ discussion and their proposed tax strategy for Ourlandia.

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1 This section is the workshop rapporteur’s synopsis of the ideas emerging from small group discussion and articulated by individual group rapporteurs and participants, and the statements have not been endorsed or verified by the National Academies of Sciences, Engineering, and Medicine.

2 This small group exercise was intended to engage participants in using what they had learned thus far in the workshop about tax policy. All tax policies proposed by the groups are hypothetical, for discussion purposes only. This summary from the breakout session reflects the discussion of the group and should not be construed as reflecting consensus of the group.

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

Supporting Kindergarten Readiness with an Increased Cigarette Tax

Philip Alberti of AAMC reported for the first group, which was facilitated by Ella Auchincloss of ReThink Health. The ideas below represent the views of individual group participants. The goal decided on by the participants in this group was to raise $25 million for the wellness fund specifically for kindergarten readiness. This would be accomplished by increasing the cigarette tax. Alberti said that participants noticed that the current cigarette tax was only 35 cents per pack. If roughly 20 percent of Ourlandia’s residents smoke one pack per day, a 5-cent increase on the per pack tax would raise $24 million, he said. The tax is aimed at individuals, and smokers bear the cost of this tax policy (the proposal was made on the assumption that Ourlandia was not a tobacco-producing state). Children, parents, communities, and the education sector are all beneficiaries of this tax proposal. Some participants asserted that a 5-cent increase on cigarette tax would not likely be a disincentive to smoke, so the health system would not likely be a beneficiary. Participants in the group acknowledged that this tax is regressive as the children targeted by kindergarten readiness programs often live in communities where there are the most smokers. A design element would be to target all of the funds to Title I schools and communities with a higher prevalence of smokers. At least 50 percent of the governance board for this specific portion of wellness fund money would consist of local parents who would help design the interventions the funding would support.

Among the design principles, effectiveness was the number one priority, Alberti said, and the policy was expected to be effective in achieving the goal. The second priority was fairness, and participants recognized this policy might not be fair to all. Third, the policy might be complex to administer because it is tied to the wellness fund, and direct allocation of the money to child services or public health would be more straightforward. Fourth, participants felt the proposal was plain, clear, and predictable to the taxed entity.

One unintended consequence that was suggested was that the tax might be a disincentive to quit smoking because continuing to buy cigarettes would actually be helping the smoker’s child prepare for school. As such, another option for consideration might be to tax cigarette sellers instead of smokers.

Preventing Opioid Addiction by Taxing Manufacturers and Distributers

Robert McLellan of Dartmouth-Hitchcock Medical Center was the rapporteur for the second group, which was facilitated by Becker. The ideas below represent the views of individual group participants. The group

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

raised concerns that putting money into a general wellness fund was not a very compelling strategy. They felt that it would be more effective to develop a specific, broad-based approach to improve population health as it pertained to the opioid crisis. The desired outcome of the tax policy identified by participants was to raise $25 million to prevent opioid addiction and improve treatment. This would be accomplished by implementing a family of taxes based on a percent per morphine equivalent produced, manufactured, and distributed. This excise tax would be combined with a regulation around price controls, with the intent of limiting the extent to which suppliers could pass on the expense to the consumers. The tax is aimed at corporate entities, including pharmaceutical industry manufacturers and distributors. It was recognized, however, that patients and insurers would also be potentially liable for paying the tax to the extent that the cost was passed on. Those at risk for opioid addiction, or who are already addicted, would benefit most directly. The social circles around them, including their families, employers, and community would also benefit. It was noted that the federal government might also benefit from reduced Medicaid expenses.

Participants in the group acknowledged the fact that opioid addiction is not homogeneously distributed. McLellan reported that an advisory board would consider how and where to spend the tax revenue, and advisory board members would be selected from the communities most affected by substance use disorder. The tax policy would be reviewed after 3 to 5 years to see how effective it had been. The group ranked effectiveness as the most important design element, followed by fairness, simplicity of administration, and clarity and predictability. Unintended consequences include the potential for the cost burden to be passed on to patients. In addition, there were concerns about encouraging a black market. It was also noted that there is not yet a good suite of alternatives to opioids, or the infrastructure to pay for pain management strategies not related to morphine.

A Cannabis Excise Tax to Grow the Wellness Fund

The next group to report was facilitated by Pamela Russo of the Robert Wood Johnson Foundation, and the ideas below represent the views of individual group participants. The rapporteur for the group said that participants decided that Ourlandia had legalized cannabis use, and they chose to implement an excise tax aimed at cannabis distributors.3 The

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3 This is a hypothetical scenario for discussion purposes only. A caution was raised in the closing discussion of the workshop that the unintended consequences of marijuana legalization are not known.

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

policy would last 5 years, and its effectiveness would be evaluated. The distributors would initially bear the cost of the tax policy, but it would likely be passed through to retailers, and then to consumers. The beneficiary of this tax policy is the wellness fund (the group did not specify a particular beneficiary). The policy was designed to tax cannabis per dry weight. The rapporteur noted that there would be an exclusion for medical marijuana users. The policy was expected to be effective in achieving its goal, and it should be simple to administer because it is an excise tax. Because it is a tax on distributors, it may not be straightforward for everyone to understand, she noted. Potential unintended consequences might be reversion back to black market distribution, which she said is still readily available in areas where cannabis has been legalized. Another possibility is attempts to evade the tax by pursuing medical marijuana cards.

Four-Part Strategy to Equitably Grow the Wellness Fund

Tracey Rattray of the Public Health Institute reported for the fourth group, which was facilitated by Mallya. The participants’ goal was to generate $25 million for the wellness fund, equitably, through four strategies: (1) increase the tax deduction for people who make contributions to charities from 30 percent to 50 percent; (2) tax health systems and health plans one dollar per member; (3) implement an additional payroll tax for employers because they stand to benefit; and (4) implement a tax on high income earners. This policy is aimed at multiple entities to equitably spread both the costs and benefits. The costs of this policy would be borne by the state, health entities, employers, and the wealthy. Rattray said the participants believed that evaluation was an important design element, but it was not clear if a return on investment could be demonstrated in the short term. Process evaluations would be done to show progress in the near term, and an assessment of both social and financial return on investment would be done after 20 years. Fairness was a design priority, followed by effectiveness, simplicity of administration, and then clarity.

Alina Baciu, director of the National Academies’ Roundtable on Population Health Improvement, noted that the 2012 IOM consensus study report For the Public’s Health: Investing in a Healthier Future includes a similar recommendation for a tax to be applied to health care services to support public health (IOM, 2012).

Taxing Inherited Wealth to Grow and Sustain the Wellness Fund

The fifth group was facilitated by Gerwig, and the proposal was reported by Ana Tellez of Human Impact Partners. The desired outcome of this policy, as articulated by participants, was to raise $25 million

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

annually, with equitable distribution to improve Ourlandia’s residents’ health outcomes. The revenue would be raised through a tax on inherited wealth. The policy is aimed at wealthy individuals, and their heirs bear the cost of the policy. All of Ourlandia’s residents are the beneficiaries of this annual revenue for the wellness fund, with a focus on equity. A resident commission, including people from the most affected communities in terms of health disparities, would help decide how the wellness fund resources would be spent. Spending would also be tied to a community health needs assessment and a community health improvement plan. The intent is to carve out resources for both evidence-based programs and innovative new programs, Tellez said. Fairness was the priority design element, followed by the policy being effective; plain, clear, and predictable; and simple to administer. One potential unintended consequence is that the wealthy might move elsewhere. To help prevent this, the group discussed the need to keep the tax rate low, and to ensure that Ourlandia remains an attractive place to live.

A Portfolio of Excise Taxes and a Tax Credit for Donation to the Wellness Fund

The sixth group was facilitated by Mary Pittman of the Public Health Institute. The rapporteur for the group said that the desired outcome of the tax policy is to improve the health of all the citizens of Ourlandia. Participants discussed specific policies, such as a smoking tax, a tax on tanning, legalizing and taxing cannabis,4 and other selective excise taxes. The group also considered tax credits, including a tax credit for donations to the wellness fund, particularly for small businesses. The costs of any taxes would be borne by the users and the sellers of the products and services (cigarettes, tanning services, etc.). Small businesses that donate to the wellness fund could benefit from the tax credit. There are numerous beneficiaries of the interventions supported by the wellness fund, including individuals (who are healthier); the health care system; state, local, and other government employers (save on health care costs); employers (reduced employee sick days); and schools (better student attendance, increased graduation rates). Rather than ending after a specific period, the policy would be reviewed every 5 years. The rapporteur said that the program is simple to administer; is relatively plain, clear, and predictable to the taxed entity; and it should be effective in achieving its goal. The policy does place an unfair burden on certain groups using

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4 This is a hypothetical scenario for discussion purposes only. A caution was raised in the closing discussion of the workshop that the unintended consequences of marijuana legalization are not known.

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

certain products or services. Unintended consequences raised included the potential to appear to legitimize certain industries by awarding them a tax credit for donation, and the potential for hindering innovation and entrepreneurship.

Taxes and Tax Credits to Support Playful, Stable Neighborhoods

Allison Gertel Rosenberg of Nemours reported for the final group which was facilitated by Milstein. Members of group proposed a package of taxes and tax credits to support playful, stable neighborhoods. Taxes discussed included taxing guns and bullets, raising the tobacco tax, and implementing a wage tax on those earning more than $127,200 from both the individual side and the company side. Tax credits would be given for activities around rent stability, lead abatement, and increasing youth engagement in sports and the arts. The sports and arts supplement is available to everyone, she said, and behind the scenes, the policy aims to improve neighborhoods through lead abatement and rent stability, addressing the wage gap, and reducing harms through the tobacco and gun taxes. The policy is aimed primarily at individuals with the exception of the wage tax that might affect companies, the corporate payroll tax, and any corporations who may own rental properties where the lead and rent issues may come into effect. The policy is regressive relative to the tobacco and gun taxes, and progressive relative to rent, lead, sports/arts, and payroll. From a design perspective, the taxes in the portfolio would be simpler and more predictable, while the tax credits would be less simple and less predictable. Participants in the group felt that the effectiveness and fairness would balance out across the board for the taxes and credits, Gertel Rosenberg said. In terms of unintended impact, there were concerns that bringing guns and ammunition into the debate might incite acts of violence. In addition, given the tone of these debates, questions about “deservedness” could be raised in discussions of who would and would not benefit.

Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×

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Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
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Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
Page 48
Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
Page 49
Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
Page 50
Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
Page 51
Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
Page 52
Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
Page 53
Suggested Citation:"4 Designing Sound Population Health Tax Policy: Small Group Activity." National Academies of Sciences, Engineering, and Medicine. 2019. Exploring Tax Policy to Advance Population Health, Health Equity, and Economic Prosperity: Proceedings of a Workshop. Washington, DC: The National Academies Press. doi: 10.17226/25237.
×
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The National Academies of Sciences, Engineering, and Medicine’s Roundtable on Population Health Improvement has been focused on the subject of dependable resources for population health since its inception in 2013. On December 7, 2017, the roundtable convened a workshop to explore tax policy as it relates to advancing population health, health equity, and economic prosperity. This publication summarizes the presentations and discussions from the workshop.

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