In summary

The unprecedented breadth and depth of the tax increase to fund single-payer health care is economically tone deaf.

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By Roger Niello, Special to CalMatters

Roger Niello is a CPA and small-business owner. He formerly served as a member of the Sacramento County Board of Supervisors, the California State Assembly, and president & CEO of the Sacramento Metropolitan Chamber of Commerce.

The state of California is experiencing record high budget surpluses while it also imposes among the highest tax burdens in the nation on its citizens. What is the Democrats’ response right out of the gate to begin the 2022 legislative session?

Assemblymembers Ash Kalra and Alex Lee proposed the largest tax increase in our state’s history to pay for a complete government take-over of the health care industry with Assembly Bill 1400. The measure to fund the Guaranteed Health Care for All bill, Assembly Constitutional Amendment 11, was estimated to raise taxes by $163 billion.

While the measure may have faltered as many Democrats feared the political consequences of a “Aye” vote, this issue is not going away. Organized labor appears to be making single-payer a litmus test for their support, and I imagine we will continue to see attempts to hand over health care to the government.

Until then, it is worth examining why single-payer failed and look at the issue with the clear eyes that come from legislative defeat.

The unprecedented breadth and depth of the tax increase was economically tone deaf. Given the constitutional amendment would have to go before the voters, it was almost as if Kalra and Lee wanted the voters to reject the ballot measure. 

Their proposal had something for just about everybody to dislike. It included increased taxes on businesses – a gross receipts tax, imposed whether the business makes a profit or not – increased payroll taxes on employers and employees, and increased personal income taxes on individuals.

If enacted, California would have the highest marginal tax rate in the nation – almost 16% vs. the next highest of 11%. California currently has the 4th highest corporate tax rate in the country. Seemingly not wanting to be inconsistent, Kalra’s and Lee’s proposed gross receipts tax would likely result in our state’s tax burden on corporations also being the highest in the nation.

Conversely, U-Haul says California remains the top state in the country for out-migration. Demand is so high they simply ran out of moving trucks to meet demand for outbound soon-to-be-former Californians. They have plenty, though, for those relative few who want to move to California. With cost of living the primary motivator for those fleeing our state, massive tax increases seem to only accelerate that alarming trend.

And all of this to pay for government run health care, even though the vast majority of Californians already have health coverage. Kalra and Lee presented a solution looking for a problem – one that would disrupt an entire industry to assist a small minority of the population. There is no clearer example of legislation in recent memory that uses a sledgehammer where a scalpel is more appropriate.

Those of you out there who believe that a state government with a record of mismanagement in such areas as the Employment Development Department, the Department of Motor Vehicles, the high-speed rail project and numerous technology project failures can effectively manage your health care, please raise your hand.

Kalra’s and Lee’s proposed government takeover of health care to be paid for by the highest tax increase in California history was an inauspicious beginning to the 2022 legislative season. I worry for what comes next.

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