Calif. Chamber of Commerce Announces 122-Member Coalition Opposed to Single Payer Health Care Proposals

SACRAMENTO, California, Jan. 20 (TNSPol)(TNScapV) -- The California Chamber of Commerce issued the following joint news release with 122 Organizations on Jan. 19, 2022:

A large and diverse coalition of California-based organizations is registering formal opposition to CalChamber-identified Job Killer bills AB 1400 (Kalra, Lee and Santiago) and ACA 11 (Kalra and Lee). The bills would establish and raise taxes necessary to fund a single payer health care system called CalCare in California.

According to a letter sent by the coalition to the Assembly Appropriations Committee today, "AB 1400 and ACA 11 would create a new and exorbitantly expensive government bureaucracy...ultimately resulting in significant job loss to California."

In their letter, the coalition points out that similar past proposals have been estimated to cost more than $400 billion annually, which is a financial commitment four times that of Medi-Cal. "Successfully standing up a new function that would be twice the size of the existing state budget is highly doubtful, given the state's recent experience with benefit delays and massive fraud in the unemployment system," the letter states.

CalChamber Policy Advocate Preston Young, who is leading the coalition, has stated that the taxes identified by the sponsors to fund single payer health care outlined in ACA 11 will significantly impact nearly all of California's employers. According to the Tax Foundation, ACA 11 would hit middle-class taxpayers as well, increasing their annual taxes by $12,250 per household.

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January 19, 2022

To: Members, Assembly Appropriations Committee

SUBJECT: JOINT OPPOSITION TO AB 1400 (KALRA, LEE AND SANTIAGO) GUARANTEED HEALTH CARE FOR ALL - AS INTRODUCED FEBRUARY 19, 2021 - SCHEDULED FOR HEARING - JANUARY 20, 2022

AND

ACA 11 (KALRA AND LEE) TAXES TO FUND HEALTH CARE COVERAGE AND COST CONTROL - AS INTRODUCED JANUARY 5, 2022

OPPOSE/JOB KILLERS

The California Chamber of Commerce and the below listed organizations are OPPOSED to AB 1400 (Kalra, Lee, and Santiago) as introduced on February 19, 2021, and ACA 11 (Kalra and Lee) as introduced on January 5, 2022, as JOB KILLERS, as the bills would create a new and exorbitantly expensive government bureaucracy, which would control and finance a state-run health care system (CalCare), ultimately resulting in significant job loss to California. Similar proposals in the past have been estimated to annually cost more than $400 billion (see SB 562 (Lara), 2017 Senate Floor analysis), which is a financial commitment four times that of Medi-Cal. Successfully standing up a new function that would be twice the size of the existing state budget is highly doubtful, given the state's recent experience with benefit delays and massive fraud in the unemployment system. The crippling tax increases required to pay for this massive new bureaucracy could be as much as $200 billion annually and would be increased in the future by a simple majority of the Legislature.

Single-Payer Health Care is Not Free Health Care - Employers Cannot Sustain an Added Tax Burden Single-payer health care must not be confused with free health care - there's nothing free about a government run health plan. AB 1400's new companion bill, ACA 11, proposes increasing Californians' taxes hundreds of billions of dollars to fund the government run health care system. Proponents have indicated the taxes will generate $160 to $170 billion annually. This proposal would be the biggest tax increase in state history and punish Californians by increasing personal income taxes, payroll taxes, and gross receipts taxes. This enormous tax increase would occur at a time when California is experiencing a $31 billion surplus - a surplus that pales in comparison to the annual expenditures a government run health system would demand.

According to SB 562's analysis (Id.), a single-payer proposal in California was estimated to cost more than $400 billion. In 2008, the LAO analyzed the cost of a single-payer system in California and concluded that over $210 billion would be needed in the first year to sustain such a system and would increase up to $250 billion in subsequent years. Even with a 12% payroll tax paid both by employers and employees under that measure, the report predicted a net shortfall of $42 billion in its first full year of implementation and even higher thereafter. Just to cover the shortfall, a 16% tax on employers and employees was estimated by the LAO, resulting in a multi-billion-dollar-tax increase on Californians. No doubt, the $160-$170 billion tax baseline contained within ACA 11 will be increased annually along with annual health expenditure increases.

Vermont attempted to enact a single payer system in 2011 but the efforts were derailed in 2014 when the Legislature failed to approve an accompanying 11.5% payroll tax on all employers and an individual income tax increase of up to 9.5%. Vermont's plan would have doubled the state budget and Governor Shumlin said the burden would have posed "a risk of economic shock." When asked about the failed single-payer effort, Governor Shumlin said, "What I learned the hard way, is it isn't just about reforming the broken payment system. Public financing will not work until you get costs under control."

The kinds of tax increases needed to finance AB 1400 would detrimentally impact California businesses and certainly discourage companies from growing or relocating here. It would likely lead to significant layoffs or relocations as existing business and employers would be forced to cut costs to sustain the added new tax burden.

ACA 11 Will Harm Struggling Small Businesses and the Self Employed

If ACA 11 were enacted California's top personal income tax rate for individuals and sole proprietors - already the highest in the country - would increase by 2.5%. Additionally, ACA 11 would implement a payroll tax of 1% of the aggregate amount of wages or other compensation paid by the employer to resident employees in excess of $49,900. It would also implement a 1.25% payroll tax on the aggregate amount of wages or other compensation paid by an employer to resident employees for employers with 50 or more employees.

California ranks 49th on the Tax Foundation's 2021 State Business Tax Climate Index. California already has the highest income tax rate in the country while Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not impose any income tax. In 2018, the top 5% of earners paid 67.2% of the state's personal income taxes. The taxpayers who makeup this bracket will likely have a long, thoughtful pause as to where they intend to reside and conduct business should ACA 11 become the law. Losing any of these taxpayers and the revenue they contribute to the state could harm California's General Fund and force ACA 11's tax rates to increase to offset the loss.

In addition to having the country's highest personal income tax rate, California also has the highest sales tax rate and gas tax rate in the United States. Our corporate tax rate of 8.84% is the highest in the Western United States. California's business and resident exodus is real, and the mere introduction of this bill will likely drive away those who contribute the largest amounts to our state's General Fund. Thus, ACA 11 will plausibly achieve the exact opposite of its stated intention and drive the state's money away rather than funding a government run health care system.

A Gross Receipts Tax Will Cripple Certain Employers

ACA 11's gross receipts tax will be extremely harmful to small employers, especially startups and those attempting to recover from the pandemic. The 2.3% tax on gross receipts over $2 million proposed in ACA 11 could potentially exceed profits for certain low margin sectors. Additionally, new and emerging employers may experience a situation where their expenses exceed revenue, but they would still be subject to the gross receipts tax.

ACA 11 is an Attack on Low and Middle-Income Californians

While the payroll taxes in ACA 11 are aimed at employers, this sort of tax is shouldered by all taxpayers. Californians earning $49,900 or more would experience double-digit marginal tax rates under ACA 11. This is unconscionable at any time, but especially now when Californians are trying to survive a pandemic and deal with astronomical inflation, housing unaffordability, and outrageous gas prices. The Tax Increases Will Likely Exceed Current Health Care Spending It is indisputable the potential tax revenue ACA 11 will produce will be in the hundreds of billions of dollars.

SB 562's prior analysis anticipated $200 billion could be available through federal, state, and local funding and the state would need at least an additional $200 billion annually from taxpayers to fund a single payer system.

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. The 2020 Kaiser Family Foundation Employer Health Benefits Survey indicated that, for job-based coverage, the average annual premium for single coverage rose 4%, to $7,470. The average annual premium for family coverage also rose 4%, to $21,342, which is nearly one-third of the state's median family income. While these facts and figures are concerning, ACA 11's tax revenue will likely eclipse these expenses year after year for the sake of creating affordable health care. In other words, the health care affordability problem will simply morph into a tax affordability problem.

ACA 11 Seeks to Lower the Legislative Tax Increase Vote Threshold to a Simple Majority

ACA 11 would authorize the Legislature to increase the bill's tax rates by a simple majority vote if an economic analysis determined the CalCare fund had insufficient amounts.

As stated above, Vermont discovered public financing would not work until health care costs were under control. California's employers experience increased premiums year after year because of increasing health care costs. When analyzing ACA 11 it becomes abundantly clear that the proposed tax rates will annually increase to keep up with health care cost demands. Obligating taxpayers to pay higher taxes is a tremendous responsibility and one that will lose its safeguard if the 2/3 voting threshold is disregarded.

Government Run Health Care is Less Efficient and Less Effective

The goal to provide health coverage for all Californians is laudable but establishing a state health care bureaucracy is the wrong approach. We fundamentally disagree that government systems are more efficient than private businesses and that a single-payer system would be less costly than the current private system.

AB 1400 will reduce the level and quality of health care and benefits currently enjoyed by millions of Californians. It will lead to increasingly long wait times to see a physician and will take away choice. Not just choice in physicians but choice in coverage. Under current law, those who wish to buy more, less or different coverage than others can often make those choices, just as those who have other priorities can exercise them in the market. Under AB 1400 one size fits all, no matter what an individual's preference might be.

Californians Have Rejected Government Run Health Care

California voters have twice rejected a government-run health care system at the ballot box - in 1994 and 2004. Additionally, CalChamber conducted a poll in 2018 which found that voters overwhelmingly preferred to keep their current health insurance (78%) over switching to a single-payer approach (22%). Voters strongly support subsidies for people who cannot afford their own health care (75%) and for those who have pre-existing health conditions (81%) but were not ready to embrace government-run health care. Universal Health Care Coverage is Nearly a Reality in California Approximately 94% of Californians have health care coverage in some fashion. A majority of the uninsured population is comprised of undocumented individuals. Governor Newsom's 2022-2023 Budget addresses this very issue and would make California the first state to offer health care coverage for all income-eligible residents regardless of immigration status.

Conclusion

California has made significant progress in providing health care coverage to its residents and while CalChamber shares your concerns in further increasing access to, and affordability of, healthcare, we do not believe that a government run single-payer health care system will achieve these goals. For these and other reasons, we OPPOSE AB 1400 (Kalra, Lee, and Santiago) and ACA 11 (Kalra and Lee) as JOB KILLERS.

Sincerely,

Preston Young, Policy Advocate on behalf of

Acclamation Insurance Management Services

African American Farmers of California

Agricultural Council of California

Alameda Chamber of Commerce

Allied Managed Care

American Composites Manufacturers Association

American Pistachio Growers

American Property Casualty Insurance Association

Antelope Valley Chamber of Commerce

Anthem, Inc.

Associated General Contractors

Bay Area Council

Blue Shield of California

Brea Chamber of Commerce

Building Owners and Managers Association

California Agricultural Aircraft Association

California Apple Commission

California Association of Winegrape Growers

California Attractions and Parks Association

California Beer and Beverage Distributors

California Blueberry Association

California Blueberry Commission

California Builders Alliance

California Building Industry Association

California Business Properties Association

California Business Roundtable

California Cable & Telecommunications Association

California Cattlemen's Association

California Chamber of Commerce

California Children's Hospital Association

California Cotton Ginners and Growers Association

California Financial Services Association

California Fresh Fruit Association

California Fuels and Convenience Alliance

California Independent Petroleum Association

California League of Food Producers

California Lodging Industry Association

California Manufacturers & Technology Association

California New Car Dealers Association

California Pool and Spa Association

California Retailers Association

California Strawberry Commission

California Rice Commission

California Taxpayers Association

California Walnut Commission

California Women for Agriculture

Can Manufacturers Institute

Carlsbad Chamber of Commerce

Cemetery and Mortuary Association of California

Chino Valley Chamber of Commerce

Coalition of Small and Disabled Veteran Businesses

Construction Employers' Association

Corona Chamber of Commerce

El Dorado County Chamber of Commerce

El Dorado Hills Chamber of Commerce

Elk Grove Chamber of Commerce

Family Business Association of California

Flasher Barricade Association

Folsom Chamber of Commerce

Fountain Valley Chamber of Commerce

Fresno Chamber of Commerce

Gateway Chambers Alliance

Gilroy Chamber of Commerce

Greater Coachella Valley Chamber of Commerce

Greater Conejo Valley Chamber of Commerce

Greater Grass Valley Chamber of Commerce

Greater High Desert Chamber of Commerce

Greater Riverside Chambers of Commerce

Greater Stockton Chamber of Commerce

Health Net

Hollywood Chamber of Commerce

Housing Contractors of California

Independent Lodging Industry Association

Innovating Commerce Serving Communities

La Canada Flintridge Chamber of Commerce and Community Association

Laguna Niguel Chamber of Commerce

Long Beach Area Chamber of Commerce

Los Angeles Area Chamber of Commerce

Mammoth Lakes Chamber of Commerce

Manteca Chamber of Commerce

Mission Viejo Chamber of Commerce

Metal Finishing Association of Northern California

Metal Finishing Association of Southern California

Murrieta/Wildomar Chamber of Commerce

NAIOP California

National Electrical Contractors

National Federation of Independent Business

Nisei Farmers League

North San Diego Business Chamber

Norwalk Chamber of Commerce

Oceanside Chamber of Commerce

Olive Growers Council of California

Orange County Business Council

Pleasanton Chamber of Commerce

Rancho Cordova Area Chamber of Commerce

Roseville Area Chamber of Commerce

Sacramento Regional Builders Exchange

San Diego Regional Chamber of Commerce

San Mateo Area Chamber of Commerce

San Ramon Chamber of Commerce

Santa Ana Chamber of Commerce

Santa Maria Valley Chamber of Commerce

Sharp Healthcare

Silicon Valley Leadership Group

Simi Valley Chamber of Commerce

South Bay Association of Chambers of Commerce

Southwest California Legislative Council

Torrance Area Chamber of Commerce

Tulare Chamber of Commerce

Tulare Lake Basin Water Storage District

United Chamber Advocacy Network

United Contractors

Vacaville Chamber of Commerce

Walnut Creek Chamber of Commerce & Visitors Bureau

West Coast Lumber & Building Material Association

West Hollywood Chamber of Commerce

Western Agricultural Processors Association

Western Growers Association

Western Manufactured Housing Communities Association

Western Plant Health Association

Whittier Chamber of Commerce

Word & Brown

Yuba Sutter Chamber of Commerce