Under Federal law, Utah gets a 3-to-1 match for every dollar its spends on Medicaid. Thus, if Utah taxes nursing homes and then uses the money to fund nursing homes, there will be four times that amount coming back to the nursing homes under Medicaid.

The tax, which is being termed an assessment based on the gross receipts of the facilities, would mean the industry would pay $4.2 million into the Medicaid pot. The resulting extra federal money would mean an additional $12.3 million. The industry would get all but $750,000 of the additional money, under Walker’s proposal.

From deseretnews.com | Revival of tax backed — partly
Referenced Mon Jan 12 2004 13:04:04 GMT-0700

Of course, there’s some complaining about the $750,000 being taken out of the pot. Seems like a good deal for the nursing home industry to me. In exchange for giving the Governor a way to fund her prescription drug benefit, you net $11.5. Good for the nursing homes and good Utah, huh? Is there anyone who doesn’t like this?

Well, me, for one. Beyond the actual specifics of the bill, this whole scheme strikes me incredibly wrong. I say wrong because this kind of financial shenanigans goes against the basis of what I think makes good tax law and good government in general: transparency.

The more transparent things are, the better the chance that average citizens can be expected to pay attention and make informed decisions. Federal matching and its affect on state budgets gets so complicated that it baffles even the experts sometimes. For example whenever the State’s Division of Information Technology Services makes changes to its pricing to other agencies, it always has to take Federal money into account and more often than not, the result is a counter-intuitive pricing decision. There are people who work for the State who’s primary job is tracking and understanding these kinds of things. Imagine then what chance the average citizen has of following all this.

Here’s where the lack of transparency affects us in the case of the increase on taxes on nursing homes. If we were all just paying for nursing homes out of our pocket, we’d immediately see the increase in taxes on nursing homes as a drain on our pocketbook. In this case, however, the complicated shell game fools all but the most careful observers. The nursing homes are getting $12 million extra dollars and ultimately, that’s coming from our pockets. What’s even worse is that Utah’s citizens are not likely the ones paying: some citizens of other states are going to pay more in taxes to fund Utah’s nursing homes and none of them will ever suspect it.

One of my golden rules for evaluating a piece of legislation or public policy is simply this: does it lead to a more or less transparent government. Our freedom rests upon a bedrock of transparency in government. Unfortunately, funding and accounting games that would never be allowed in a public company because of the potential to fool the shareholders are tolerated and even encouraged inside government. If transparency is good for public companies, I think its doubly good for government. Unfortunately, far too few politicians feel this way or even understand it.