The powerful Service Employees International Union-United Healthcare Workers West is behind a ballot measure that would impose a 3% “gross receipts” tax on for-profit hospitals operating in Anaheim. The tax would apply to the share of the hospital owners’ revenue generated in either Anaheim or statewide. According to the notice of intent filed with the Anaheim City Clerk on January 10, 2024, the initiative’s proponent is Darrell Jerome, an SEIU officer who works as a medical assistant for Kaiser Permanente. Kaiser Permanente, which has a massive hospital facility in East Anaheim, is a not-for-profit hospital chain and therefore would not be subject to the 3% gross receipts tax.

READ: Initiative Would Impose 3% General Tax On Anaheim For-Profit Hospitals’ Gross Revenue
SEIU Chief Steward Darrell Jerome

Paid signature gatherers have been seen at shopping centers and community events like the weekly farmer’s market at the Center Street Promenade.

To fund the signature gathering effort, SEIU-UHW deposited $106,704.45 in mid-February of this year into a campaign committee it controls: “Anaheim for Better Healthcare, Sponsored by Service Employees International Union – United Healthcare Workers West.”

The union originally formed the committee in 2022 with $176,757.22 in seed money to fund a failed campaign to place an Anaheim health care worker minimum wage measure on the ballot. The union wound up spending nearly $270,000 in members’ dues money on the ultimately abortive effort.

SEIU-UHW has until July 23, 2024 to submit 16,788 valid Anaheim voter signatures. The tax would hit any for-profit Anaheim hospital that provides “24-hour inpatient care” that includes “medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy” services. There are several Anaheim hospitals that would be subject to such a tax:

According to the measure’s language, “hospitals subject to the tax could request from the City that the Hospital’s gross receipts be apportioned according to the amount of business activity the Hospital has within Anaheim or the State of California.”

Revenues raised from such a tax would go into the city’s general fund – the initiative makes no mention of unofficially earmarking funds for any particular city service – it’s just more tax revenue for city government.

According to industry sources, the SEIU-UHW is in contract negotiations with several for-profit hospitals, and the union is using the ballot measure as negotiating leverage, i.e. “agree to our terms or we’ll put this tax on the ballot.”

The Hospital Association of Southern California, a membership advocacy organization that lobbies on issues affecting hospitals, had no comment on the 3% gross receipts tax when OC Independent contacted the organization earlier this month.

“We are actively monitoring the gross receipts tax initiatives imposed on for-profit hospitals; however, we do not have a response to the issue at this time,” said Adam Blackstone, HASC Senior Vice President for Communications.

What Is A “Gross Receipts Tax”?

A gross receipts tax levied on the total revenue of a business, without allowing deductions for business expenses such as the cost of goods sold or employee compensation. Put another way, it is a tax on total revenue, not profit. It would be like taxing an individual purely on their income while stripping away all deductions and credits.

Unlike a sales tax, which is applied only to the final consumer purchases, a gross receipts tax is assessed on businesses and applies to business-to-business transactions, as well.

In the context of a for-profit hospital, the gross receipts tax would be applied to the hospital’s total revenue from all sources, including patient services, sales of medical supplies, and any other revenue-generating activities – and any business-to-business transaction taking place in order to provide patient services. This means that the hospital would be taxed on its gross revenue, without being able to deduct the costs of providing those services or selling those supplies.

Gross receipts taxes are regressive and typically passed on to consumers – in this case, patients – in the form of higher costs for services and supplies.