Massive $163 Billion Tax Hike Proposed to Dismantle CA Healthcare System

Taxes on California businesses and consumers would be increased a stunning $163 billion annually (yes, annually!) under disastrous legislation introduced this week by Assemblymember Ash Kalra (San Jose) to fund a single-payer healthcare system that has been rejected multiple times as unworkable, impractical and too costly. The Bay Area Council has long been a strong advocate for reforming our healthcare system to improve quality, access and outcomes while also reducing costs for business and consumers, and we were an outlier among business groups in supporting Affordable Care Act reforms. But replacing a free-market system with a government-run program isn’t the answer, even if you can somehow forget the state’s middling track record in effectively and efficiently managing and operating large, highly complex projects.

The tax hike proposed in Kalra’s Assembly Constitutional Amendment 11 (ACA 11) includes:

• A $108.1 billion gross receipts tax on California businesses. Annual excise tax at 2.3 percent of gross income above $2 million for all qualified businesses in the state.

• A $31.5 billion payroll tax on employers and employees. Employers with 50 or more employees would pay a 1.25 percent 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 percent payroll tax.

• A $23.2 billion personal income tax increase. California’s 13.3 percent top personal income tax rate, already the highest in the country, would increase to 15.8 percent. While the author describes the tax as one on “high earners,” it also would impact many taxpayers who meet most definitions of being in the middle class.

The $163 billion annual tax hike that Kalra wants to lard on businesses and consumers is just part of the overall $400 billion that it’s been estimated to cost to switch to a single-payer system. The other funding presumably would come, at least in part, from changes to federal Medicare and Medicaid funding that many believe will never happen.

How far Kalra’s proposal will go remains to be seen. Kalra’s legislation (AB 1400) to create the single-payer system that his proposed tax hike would fund got a very cool reception last year. And a predecessor bill in 2018, which the Council opposed (read CEO Jim Wunderman’s commentary on SB 562), also went nowhere after Assembly Speaker Anthony Rendon called it “woefully incomplete.” Even if ACA 11 can somehow get the difficult two-thirds vote in the legislature to be placed on the ballot, it would still need voter approval at a time when voters are increasingly reluctant to approve new taxes. And while Gov. Newsom has no vote on ACA 11, he has made clear in the past his opposition to new taxes.