August 22, 2011
Roman Sandals in Hospital HallsBy John F. Di Leo
Roman life in the 5th century B.C. was pretty good, relatively speaking. Roman society had freed itself from the tyranny of Etruscan kings; the people had representation in the Council of the Plebs, and the nation was at peace. And a merchant class was rising from the fields; no longer was the society entirely made up of farmers, soldiers, and rulers. For probably the first time in history, there was a small but growing presence of what we would today call a middle class.
One major sticking point remained, however: the Law was entirely in the hands of the patrician class. The Senate had the ultimate power to decide what was the Law at any point in time, and it might well change from day to day, from morning to afternoon, from case to case.
Can this merchant sell his wares on this intersection? May that merchant sell by the bushel or by weight or by hand count? How are the taxes to be collected on this business, or that one, or on his, across the street?
The merchant would go before a judge with his interpretation and hope; the judge had all the power in the world. Without a written law to rely upon, the merchant, once noticed by Rome's enforcers, was entirely at the mercy of the judge.
So the Council of the Plebs petitioned for a written law; their Tribunes demanded it. For decades, the commoners of Rome insisted that a written law was critical, and finally, the Senate relented. They appointed a commission (to facilitate further delay, no doubt), and by 450 B.C., with the erection of the ivory Twelve Tables (or maybe bronze; the sources of antiquity disagree), the Senate and People of Rome finally had a written legal code.
With public knowledge of the law, commerce can thrive and citizens can prosper. As long as the law remains in place -- read, understood, and evenly enforced -- the private sector can plan for the future and be successful.
But only as long as the law is stable, and is evenly enforced. It all falls apart if different enforcers apply different interpretations.
The state of Illinois is taking dangerous steps down that path. The state's tax collectors began rumbling a few years ago that certain nonprofit hospitals don't provide "enough" charity care, so they are in danger of losing their tax-exempt status.
Springfield began, publicly, with a vague warning that some twenty hospitals would be reviewed, and the first three decisions were announced in August 2011. The first three on the list were declared to be insufficiently charitable, and therefore to be liable for property tax assessment.
This is of course a very big deal, as hospitals are very big entities indeed. They tend to sit on huge tracts of land, with parking lots and driveways and buildings and outbuildings. The difference between paying property taxes and being property tax-exempt is huge.
But Illinois government is greedy for revenue. In a year when much of the American public has renounced liberalism and elected Republican legislatures and governors -- and state capitals all around are tightening their belts and trying to cut taxes to invite business in -- Illinois reelected its Republican-proof Democrat majorities and socialist governor, who jointly engineered a 67% tax rate increase in January. The crackdown on hospitals looks to be part of this effort to wring more blood from every stone in the state.
The state says these hospitals don't provide "enough" charity care, without defining how much is "enough." For example, Provena Covenant in Urbana had provided charity care to just 302 patients in 2002, by the state's definition. But Provena demonstrated that it had provided $38 million in free care and other community benefits, which state courts said last year wasn't "enough." Northwestern Memorial says that its Prentice Women's Hospital donated some $276.7 million in 2010, of which $44 million was for charity care. And Edward Hospital contributed $77 million in charity care the same year. But as percentages of revenue, the state of Illinois says that's not enough -- without ever defining how much would be.
In terms of charitable giving, hospitals must be viewed differently from other businesses. We have a free market in retail clothing shops, in fast food franchises, in computer stores. Not so in health care, where providers often must accept every patient regardless of ability to pay, where providers must accept punitively underpriced compensation for Medicare and Medicaid coverage with the prayer that they can make it up with paying customers, and where the burden of uncollectable debts trumps most other industries due to untraceable illegal immigrants and other miscreants without funds.
Already convoluted federal and state policies -- such as rampant frivolous malpractice litigiousness, the falling dollar, health care nationalization, FDA braking of pharmaceutical progress, and unchecked immigration -- are combining to hobble the health care industry. Already doctors, clinics, and hospitals are suffering from a business model being rendered more difficult by the day. They don't need an Illinois property tax fight on top of all that.
Illinois tax functionaries haughtily remind us that property taxes are necessary for not only the state, but the cities and counties as well -- that property taxes fund the public schools, the public roads, the police and fire commissions.
But do they forget that hospitals too are necessary? That hospitals provide jobs to their own employees and to supporting businesses as well, jobs that generate income taxes, payroll taxes, and local commerce? That hospitals purchase food, clothing, machinery, and drugs -- purchases that generate sales taxes and keep suppliers in business too? That hospital employees pay property taxes on their homes, either directly as homeowners or indirectly as renters? That hospitals provide some of the best construction opportunities for a tortured building industry as they expand with necessary and complex new wings? Does the state forget that if they drive the hospitals out of business in an effort to confiscate a few hundred thousand more dollars in property taxes, they'll lose all those millions that the hospitals had enabled all these years?
In a ghastly recession with nearly double-digit acknowledged unemployment (worse still, in fact, in many of the communities where these targeted hospitals are located), do they really want to run the risk of putting many of these communities' largest employers out of business?
None of this appears to be a concern to the zero-sum mindset of the Illinois Department of Revenue. They have invented a new standard -- that sufficient charitable donations are defined only by what the assessors feel is appropriate, without any clear targets or publicly available guidelines whatsoever.
In short, the Illinois Department of Revenue has made a conscious decision to join the federal onslaught on the health care industry by making that industry subject to the whim of a bureaucrat instead of the clear language of the written law.
For a century or more, Americans have asked the question "Are we Rome?" The jury is still out. Our Founders warned us that all republics have eventually fallen into tyranny -- the only difference being the relative timeline of each republic's descent. There are signals today: governments practice confiscatory taxation to fund bread and circuses; governments grant increasing power to unelected functionaries and to elected executives. A president has even taken to the very Roman practice of establishing a personality cult, with his image on everything from posters to t-shirts.
But at least America has always respected the rule of the written law. From the summer of 1787 when our Framers deliberated over their magnificent Constitution, we have recognized that the clear statement and equal application of the Law is among the most critical duties of any government. If we allow ourselves to lose this, we may as well be back in ancient Rome, subject to the whim of every petty tyrant in the taxing bureau or the zoning board.
For it doesn't matter whether the regulator's foot is shod in a jack boot or a Roman sandal; if he can hold you down with that boot upon your neck, then we are no longer in the America that our Founding Fathers intended for us.
John F. Di Leo is a Chicago-based Customs broker and international trade compliance trainer. His columns regularly appear in Illinois Review.
FOLLOW US ON