Governor’s Plan Is Still a Tax Increase

Taxpayers are feeling like Chevy Chase when years ago he would read the news on Saturday Night Live. Each week Chase would tell viewers that Generalissimo Francisco Franco the then recently deceased Spanish Dictator was still dead.

When we first reviewed Governor Arnold Schwarzenegger’s universal healthcare proposal last January we at the Howard Jarvis Taxpayers Association declared it was a tax increase. Now almost twelve months later we can report that the healthcare plan after some tweaking by the State Assembly is still a tax increase and a dangerous one at that.

The one concession being made to taxpayers is that now instead of calling the costs to implement the program "fees" Speaker Fabian Nunez and the governor the joint backers of the current healthcare incarnation are acknowledging that tax increases are involved.

During his successful reelection campaign Schwarzenegger repeatedly promised he would not raise taxes. On several occasions he expressly stated that "I campaigned that I will not raise taxes and I say this again: I will not raise taxes." The sad fact is that any trust that taxpayers had in our governor is now wholly evaporated.

Whatever one thinks of socialized medicine the collapse of California’s financial house should have put the whole issue on the back burner. But Schwarzenegger has persisted calling a special session of the Legislature in an effort to muscle through his healthcare plan. Ironically he is now calling for another special session to deal with the state’s looming $14 billion deficit that will require ether massive tax increases — according to Nunez — or massive spending cuts — according to the governor — to bring the budget into balance.

The current budget crisis is the result of reckless overspending. State spending is up 44 percent since Schwarzenegger took office. And now he is promoting additional taxes to cover the cost of his ambitious health care plan. This makes no sense at all. And much of the plan would inflict significant harm on California taxpayers.

As currently written the proposal passed by the State Assembly would:

– Require that every Californian must have health insurance coverage by July 2010. This "individual mandate" could be waived if the family made less then 250% (under $51000 for a family of four) of the federal poverty level annually.

– Would establish "guarantee issue" coverage which would mean that insurers must cover those with pre-existing conditions.

– Defines a California resident as an "individual who is physically present in the state for at least 6 months."

– Hospitals will pay a four percent fee on patient revenues which of course will be passed onto consumers in the form of higher bills.

– Place a 2-6.5% sliding scale payroll tax on business demanding on payroll amount. This could lead to massive job loss especially if employers find themselves on the bubble between one scale level and another.

– A large portion of the funding would depend on a tobacco tax increase of $2 per pack.

It should be noted that when a similar plan was tried in Kentucky 45 health insurance carriers left the state. Not surprising when a person could go without insurance until they took ill but insurance companies would still be compelled to provide coverage. Of course the ultimate costs would be born through higher premiums for all.

In the early 1990s Governor Wilson worried that our state had become a welfare magnet. After state and federal welfare reforms the lure of the Golden State for those interested in being subsidized by taxpayers declined. But that trend is now reversing yet again. Although middle and high income taxpayers are leaving the state according to a just-released study by the Department of Finance it is being offset by births and more than 200000 immigrants from other countries. (The political left loves to complain about the shrinking middle class and the widening gap between the rich and poor. But all they need to do is look in the mirror to see the cause of the problem.)

Add "free" healthcare to the mix and California’s status as the nation’s number one welfare magnet will be restored. Feeing ill in Idaho? Why California is the place to go. Planning to enter the United State illegally? Let’s see which state is making the best offer.

California residents are already among the most highly taxed in the country. This is one of the reason that so many are leaving for greener pastures. Additional taxes will just accelerate the exodus of people with jobs and money who on their way out will be passing the inflow of those who need or want public services.

The only good news about the Schwarzenegger-Nunez plan is that it faces huge hurdles before it becomes a scary reality.

First Senate President pro Tem Don Pereta who although a fan of expanding government mandated health care coverage is questioning the wisdom of taking on these new costs during a fiscal crisis and he has the power to block Senate passage.

Second having confessed that they are raising taxes the governor and speaker thanks to Proposition 13 must place the tax increases on the ballot for approval. After reviewing the facts voters are not likely to retain the same enthusiasm suggested by a recent Field Poll.

The final obstacle is federal law. In 1974 Congress enacted the Employee Retirement Income Security Act (ERISA) which gives the federal government exclusive authority to regulate employee benefit plans including self-insured plans. The only way that California could implement this healthcare proposal would be to be granted a waver by Congress and it is unlikely that those in Washington D.C. really hate us that much.

Jon Coupal is President of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights.