California considers tax on veterinary care

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Nov 11, 2008
Sacramento, Calif. -- Gov. Arnold Schwarzenegger is looking for more ways to make ends meet in California,

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including a proposed new tax on veterinary services.

A "dramatic drop" in revenue projections over the last two months has pushed the state's budget deficit to $11.2 billion, and the solution to closing that shortfall is $4.5 billion in cuts plus $4.7 billion in revenue from new fees and taxes, according to the governor's office. More than $350 million of that new revenue will come from broader service taxes, including a new tax of nearly 10 percent on veterinary care.

"We are strongly opposed to this. We think it's inappropriate to be categorized in with appliance and furniture repair services," says Dr. Bill Grant II, president of the California Veterinary Medical Association (CVMA). "There's already people making decisions based on economic factors with caring for their pets, and this automatic increase, we think, is very inappropriate."

If passed, the new tax would make California the fourth state to tax veterinary services, following Hawaii, New Mexico and South Dakota. Besides veterinary services, the new tax would fall on furniture repair, vehicle repair, golf, amusement-park fees and sporting events, according to the governor's office. Total revenue from the new tax is estimated at about $357 million a year.

If the measure is passed, veterinary care would be the only medical service taxed in California. Grant says that unfairly singles out animal medicine as a revenue source.

"It makes no sense whatsoever. They're going to target a specific population," he says. "Do a broad-based 1 percent [increase] across the state. Don't target certain areas to fix the state deficit."

No human medical services in California are subject to taxes, says Grant, but the veterinary profession reportedly is being added because practices already are set up to add sales tax to transactions because of pet food and other sales. But Grant says that's not the case for surgical-only practices, and if that were the case, he wonders why optometrists and other human medical-service providers who sell products are not being targeted.

"My personal feeling is that they should be looking on the cost-cutting side instead of the revenue side," says Grant.

The American Veterinary Medical Association (AVMA) is no more in favor of the proposed change than the CVMA.

"It's a pretty unusual step and, given the economic conditions today, we are concerned about any outside, arbitrary or artificial sources to increase cost to consumers," says Adrian Hochstadt, assistant director of the AVMA State Legislative and Regulatory Affairs Department. "I think this is a terrible time to be raising taxes on veterinary services. A 9 percent tax might not amount to much for people at the top of the income distribution level, but for people who are hurting, 9 percent is a lot."

Still, the tax proposal is a state matter, and Hochstadt says the AVMA will wait in the wings, ready to assist the CVMA as needed. Should it become a national trend, the AVMA might become more involved. But Hochstadt says he doesn't think the issue will go far.

Grant has the same hope, saying the proposal must be passed by both state legislative bodies. It could go through the current "lame duck" houses, or wait to be presented to a new group of legislators taking over in the New Year," Grant explains.

"There's no way to tell," he says.

Check back with www.dvm360.com and the December print edition of DVM Newsmagazine for continued coverage.