Posted on 01/10/2007 10:03:49 AM PST by calcowgirl
Publisher's Note: As part of an ongoing effort to bring original, thoughtful commentary to you here at the FlashReport, I am pleased to present this column from Mike Genest. Genest is the Director of the California State Office of Finance, appointed by Governor Arnold Schwarzenegger. In this column, Genest addresses the issue, from his perspective, about whether Governor Schwarzenegger's new healthcare proposal includes new taxes or not (he says not). Jon Coupal, President of the Howard Jarvis Taxpayers Association, also pens a column today, where he takes the opposite view. [Dead Parrots and Tax Increases] Enjoy - Flash
Some have tried to argue that Governor Schwarzenegger's health care reform proposal includes a tax increase. The proposal includes fees on a small percentage of the state's employers and health care providers. A balanced look should convince anyone that it is unfair to characterize these fees as constituting tax increases.
First, the net effect of the Governor's health care reform would be to reduce the taxes paid by all Californians. The plan would impose fees that would generate $4.5 billion in revenue in its first full year. Yet, the plan also includes a requirement for employers to provide access to Section 125 plans -- under which employees pay for health insurance with pre-tax money - that will result in total tax reductions of $8.4 billion. So, in net, the Governor's plan reduces the amount of money paid by Californians to the state and federal government by $3.9 billion. It's hard to see how that is a tax increase. Like the Governor did with Worker's Comp, it will infuse billions into the private sector.
Second, the Governor's health care reform will be budget neutral to the state. The plan will contribute to solving the state's budget problems. It spends $10.2 billion on health insurance for our residents and it takes in exactly that amount in new money, more than half of which is from increased federal contributions. So, the plan certainly adds to the Governor's promise to get more of California's tax money back from the federal government, and that is obviously a good thing.
Health providers - hospitals and doctors - will receive more than $15 billion in new money from government payers and the more than 4.8 million new insured Californians. The proposed fees will cost providers $3.5 billion. That's more than a four to one return on your money.
The Governor's plan calls for all Californians to take responsibility for health care. It recognizes the duty of individuals to pay for their own insurance and it assumes that employers who choose not to provide health insurance to their employees should not be subsidized by those who do or the government. Moreover, in the long run the private sector will save billions of dollars by ending skyrocketing health costs and stabilizing our health care system. Every employer needs healthy employees who do not live in constant fear of a health care catastrophe for which they have no insurance.
The bottom line is that we have a broken healthcare system that burdens middle class Californians and our business owners with the cost of paying for the uninsured. The Governor's health plan will save the people and employers of this state billions.
Governor Schwarzenegger is opposed to new taxes. He will not solve the state's budget problems by raising taxes, but instead will insist that government live within its means. At the same time no one can deny that our health care system is broken. A good part of the reason is that government at the federal, state and local levels have created perverse incentives that have distorted the market for health care and health insurance. The governor's health care reform is an effort to fix that broken system by asking everyone to do their part. It is budget neutral and it results in a reduction in the total amount of tax paid by Californians, not an increase.
In a classic Monty Python sketch, a man is duped into buying a dead parrot from a pet shop. ... We feel a bit like the buyer of the dead parrot when we are told by the Schwarzenegger administration that the tax on employers to pay for health care really isn’t a tax, but is really a “fee.”
We know taxes. We have dealt with them for our entire professional careers. Without any doubt, the proposed exaction on employers is a tax.
(snip)
Perhaps we would not be so offended if there were a bit more intellectual honesty here. If you are going to raise a tax, please say so. But do not attempt to cover this tax increase with the fig leaf nomenclature of a “fee.” A true “fee” is an exaction on a person or business in exchange for a direct benefit to the fee payer, to mitigate a harm caused by the fee payer or to pay for a regulatory program directly related to the fee payer’s activities.
This tax fails on all three counts.
(snip)
As a tax increase, this proposal – even assuming it is ever reduced to legislative language – will require a two-thirds vote of each house. While others might find ambiguity in the nature of this levy, we doubt the courts will.
What the guy has done...is ensure that every major company in the state...will review its future and cost to the company. And they will eventually come to a conclusion...movement to Neveda or Arizona will be on the plans book within the next four years. I doubt seriously that Silicon Valley will remain around in its present structure...and hundreds of companies with 200 or more employees will examine the necessity of staying in California.
It will interesting to watch the Neveda folks play out the "friendly" neighbor act and start showing the promising aspects of Reno and Vegas. When you look at the cost of living and the improving education stance in Neveda...it just makes economic sense to plan long-term of making your company headquarters there in the state...and say adios. California will find themselves with a plan that no one will want to pay and bankruptcy within 10 years after this is made effective.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Most healthcare reformns are regulations. They are indirect taxes in that they raise the cost of doing business for providers, insurance companies, employers and other government bodies.
And this is the most perverse yet!
Another way to avoid the "fee" for some employers might be to break up their workforce into smaller, individual corporations consisting of 10 or less.
I work at a mid-size entertainment company and can see us breaking up into little LLC's that work on individual shows in varying aspects-- production, post, management, accounting.
I guess it all depends on the cost to benefit ratio of doing all the paperwork and restructuring to know if it would be worth it.
Before cramming this down our throats (and requiring us to pay for the privilege) out-of-control health care costs need be looked at from more angles --- not only from the insurance companies' perspective.
One simple thing that has been suggested, but has yet to be done, is to standardize the "paperwork".
Since every insurance company has it's own version of the needed paperwork, the extra workload is parasitic drag, costing millions annually, is this "extra' work, alone.
Let's see them do something "simple", before we go along and agree with 'em in doing something vastly more complicated.
I resent the Governator even suggesting that I be forced to do business with for-profit companies, who's bottom line is NOT my "best interests", but theirs!
Prove to me otherwise, Governator, prove it, or maybe next time, those who are pushing to increase their own wealth by way of legislative fiat, should deserve to end up with something more serious than a broken leg.
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