AB 1400, California’s Single Payer health care bill, passed out of the Assembly Health Committee last week and is scheduled to be heard in the Assembly Appropriations committee this week. Past single payer bills have followed the same track as AB 1400, but they lacked one thing this bill now has – a funding mechanism.
While AB 1400 is garnering all the attention, its companion bill ACA 11 deserves just as much of the spotlight. ACA 11 was introduced in the beginning of January and makes several proposals that will hike taxes to astronomical heights – even by California’s standards – to pay for the state’s government run health care proposal. Specifically, ACA 11 proposes a surtax on personal income taxes, which are already the highest in the country. Additionally, the bill outlines a gross receipts tax of 2.3% on business income over $2 million. Last, employers with 50 or more employees would pay a 1.25% payroll tax rate on wages and other compensation of their employees and employees earning more than $49,900 in wages or compensation per year would pay a 1% payroll tax. These taxes will impact nearly all of California’s employers. Proponents have publicly stated they estimate these taxes will raise $160-$170 billion annually.
While the $160-$170 billion estimate is breathtaking, the reality is these taxes will likely underfund California’s proposed single payer system while the tax hikes will cost employers more than their current health care spending. California employers and employees spent $144 billion on health care in 2019. $27 billion was spent by employees on premiums while $100 billion was spent by employers on premiums. Furthermore, the Healthy California for All Commission reported that California’s total health expenditures were an estimated $399.2 billion in 2018.
While premiums, deductibles, and point of care spending will end under single payer, tax hikes will replace those expenses. According to the Tax Foundation, ACA 11 would annually increase taxes $12,250 per household. Additionally, there’s no indication this number would remain constant since health care expenses increase annually and state spending would have to increase alongside them. Furthermore, California’s residents who are weary of government run operations (i.e. EDD fraud, DMV issues, bullet train delays, FI$CAL hiccups, etc.) and suffering from tax exhaustion will likely have their own exodus since they will retain their freedom of health care coverage choice in 49 other states.
While the current health care system is far from perfect, handing enormous tax revenues over to a state bureaucracy to run one of the most complex systems in our country isn’t the solution. AB 1400 will need to pass out of the Assembly by January 31 otherwise the proposal will die. ACA 11 has not yet been brought forward for a vote.