Health care tax initiative pulled new tax initiative floated

By CMTA Staff

Capitol Update, Feb. 1, 2008 Share this on FacebookTweet thisEmail this to a friend

With the demise of ABx1 1 (Fabian Nunez, D-Los Angeles), the major health care reform legislation agreed to by Assembly Speaker Nunez and Governor Arnold Schwarzenegger, lawyers for the advocates have notified the Attorney General's office that they would like to withdraw the ABx 1 companion funding piece intended to go before voters in November 2008.

The proposed financing initiative, the Secure and Affordable Health Care Act of 2008, contained three taxes:

    1. A payroll tax requiring employers to spend a certain amount on "health expenditures" for their employees of between 1 and 6.5 percent of Social Security wages, depending on size of payroll. The tax would have penalized manufacturers as high wage employers.

    2. A hospital tax of 4 percent on net patient revenues for both private and public hospitals.

    3. A $1.75 per pack cigarette tax increase, which under current law would have forced an automatic increase to the excise tax on other tobacco products.

 In the midst of a state budget crisis, and on the heels of a Legislative Analyst report indicating funding problems, Senators at the January 28th hearing acknowledged the problems with the proposed financing of this program and the questionable nature of tying it to a ballot initiative.

 In his letter of opposition to the Governor and Speaker, Senate President Don Perata (D-Oakland) wrote, "the unusual legislation-initiative you have proposed effectively means that health care reform will be decided by whichever clever television advertising is most convincing. Finally, once pursued, there is little chance of repairing the financing mechanism. Either way, it is a poor way to make complex, far-reaching public policy such as health care for all our residents."

Perata maintains the state's fiscal crisis was one of the key reasons he changed his mind about the health care reform plan put forth by the Governor and Assembly Speaker. Perata indicated that the plan lacked adequate funding and could exacerbate the state's fiscal problems.

In fact, Perata is suggesting a potential ballot initiative to raise taxes in order to address the ongoing budget deficit.

In 1991 California faced a $14 billion budget shortfall – similar to what the state faces now – and state officials at that time responded by temporarily increasing sales taxes and imposing an income tax on the wealthiest Californians for five years.

Finding support for a tax increase within the state Capitol won't be easy this year. Governor Schwarzenegger has maintained he doesn't want to increase taxes and Republican lawmakers in both houses of the Legislature also against an increase.

Perata says he recognizes this and suggests asking voters to weigh in.
''We should try to figure out how to put a (temporary tax measure) on the November ballot,'' he said.

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