As big as the $163 billion tax hike associated with now-defeated California single-payer … [+]
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California Assembly members, where Democrats hold a 16-seat majority, declined to vote on Assembly Bill 1400, legislation that would install a single-payer health care system in California called CalCare, before a Jan. 31 deadline to pass such legislation through the Assembly. the tax increases associated with this proposal reportedly amounted to $163 billion a year, roughly doubling California state tax revenue.
For progressive lawmakers and activists who want to implement a national, single-payer health care system, the rejection of a state-level “Medicare For All” proposal in one of the bluest states in the country, where Democrats significantly control state government, is seen as a major setback. “Big Picture: A single-payer who failed to secure a majority vote in a chamber where California Democrats had 16 votes, in a state where Democrats are overwhelmingly in control, does not bode well for the national push #MedicareForAll”, tweeted The California Politico reporter shortly after Democrats refused to vote on AB 1400.
“We shouldn’t be surprised that even the state legislature couldn’t vote to pass a government-run health care program that would force Californians to give up their current coverage,” noted Lanhee Chen, a candidate vying to be California’s next Comptroller. “After all, who wants to put some of the same bureaucrats who mismanaged our public unemployment insurance system in charge of our health care? But let this be a lesson: Californians will not be fooled. You can’t claim to be giving people something better when you’re taking away their choices, raising their taxes, and failing to properly account for the billions of dollars that are already being spent on health care in our state.”
By letting AB 1400 die, California Democrats didn’t just reject what would have been the biggest state tax hike in US history. They refused to vote on a proposal that would also have made it easier to raise state taxes in the future. As large as the tax hike associated with AB 1400 would have been, it was likely just a down payment, as another change in the package would have greased the skids for future state tax hikes.
Currently, thanks to Proposition 13, the California constitution requires that state tax increases be approved by a two-thirds majority vote of the state legislature. Besides the immediate tax hike he would have directly imposed, the enactment of AB 1400 and the associated tax package would also have changed state law to be so. three new taxes imposed to fund CalCare — an income surtax, a new payroll tax, and a gross receipts tax — could be increased in the future with only a simple majority vote in the state legislature. This exemption from the supermajority requirement to raise taxes was seen by many as an admission that, as large as a $163 billion annual tax hike, CalCare supporters acknowledge was likely still insufficient to finance the new law. The AB 1400 failure may be the most significant and certainly the most recent, but it’s not the only defeat for advocates of single-payer health care in the states, as California lawmakers abandoned the previous single-payer bills due to high costs.
“This isn’t the first time California lawmakers have considered creating a single-payer health care system, which previous estimates saw as requiring 200 billion dollars in additional state funding”, Remarks Jared Walczak, vice president of state projects at the Tax Foundation. “It further assumes that California obtains federal approval to redirect approximately $200 billion in federal funding to a health care counterpart, since the total cost of the program is approximately $400 billion per year. Even with this match, the numbers only balance out if a single-payer system generates significant cost savings, an assumption that is, at the very least, controversial. And similar to earlier considerations about single-payer, single-state proposals, one wonders if residents would still need health insurance to cover them. out of statedepending on how the program is designed.
California is not the only state, let alone the only blue state, where single-payer healthcare legislation has crumbled and burned. New York Assemblyman Richard Gottfried (D), the longest serving member in New York Assembly history, has long lobbied for the New York Health Law, a single-payer proposition for the Empire State. The Gottfried Assembly Bill was approved by the New York Assembly five times between 1992 and 2018, only to see the state Senate refuse to pass it. As in California, exorbitant cost projections have been the biggest barrier to single-payer adoption in New York. It has already been reported in this space that New York’s health law “would be consume all federal dollars that go to the state for government health care spending (credits related to Medicaid, Medicare, and Obamacare) and still require lawmakers to more than double the state’s tax burden– already the highest in the country.”
Assemblyman Gottfried announced he would retire after this year, creating an urgency in Albany to pass his bill before he left. “There is nothing more important to me legislatively than passing the New York Health Act,” Gottfried said. noted in a December 2021 interview with City & State New York. “I’m hopeful and confident we can do it.”
“I can tell you that I’m going to work, like, doubling harder — if doubling is a word — doubling harder to pull it off this coming year,” said New York Senator Gustavo Rivera, sponsor of the Senate version of the New York Health Act. “That would be the equivalent of spanking (Gottfried) a new Rolex.”
Surpassing single payer in New York might be Gottfried’s equivalent of Rolex, but it would impose on New York taxpayers the biggest state tax hike they’ve ever seen. The Rand Corporation issued a 2018 report projecting that New York lawmakers would have to impose an additional $139 billion in higher taxes in 2022 and $210 billion by 2031 to pay for state-run universal health insurance. A tax hike of this magnitude would equate to a 156% increase in total state tax revenue. While the California and New York proposals underscore the huge cost to taxpayers associated with single-payer healthcare systems, it is the state of Vermont, single-payer champion Bernie Sanders, where Medicare-For-All at the state level proved unachievable for the first time.
Over a decade ago, Vermont state legislators enacted legislation to implement a single-payer system called Green Mountain Care. This Vermont experiment is not heralded by progressives today because the government of the day. Peter Shumlin (D) pulled the plug in 2015. Shortly after the single-payer bill passed in 2011, Vermont officials were faced with the reality that “free” health care is actually quite expensive for taxpayers. Governor Shumlin and Vermont lawmakers found they would have to impose a new 11.5% payroll tax and a 9.5 percentage point income tax increase to pay the new duty. Together, these tax increases would have represented a more than 150% increase in state income tax.
“In a word, huge,” is how Shumlin described the tax increases needed to fund Vermont’s single-payer. “The bottom line, as we complete the funding modelling,” Shumlin explained, “is that the risk of economic shock is too high to come up with a plan that I can responsibly support.” The Shumlin administration found that spending would rise from $2 billion to $2.6 billion in 2017, reaching $3.2 billion by 2021. The program was also expected to run deficits of by 2020, thus necessitating the enactment of new tax increases.
By refusing to vote on AB 1400, California lawmakers have once again demonstrated the high costs to taxpayers associated with single-payer health care systems. But as New York and Vermont have also demonstrated, this is not a California-specific problem, but a general math problem. The fact remains that there has yet to be a proposal for single-payer health care that hasn’t required huge tax hikes to pay for it, tax hikes so big that even lawmakers in blue states are unwilling to accept.
