NEWS & ANALYSIS

California Democrats Seek to Double Taxes to Fund State-Run Government Healthcare


California democrats are pushing a state constitutional amendment that could double the state’s income taxes to fund state-run government healthcare. 

Under the proposed change, individual households would on average pay a whopping $12,250 in increased taxes, according to Tax Foundation’s Vice President of State Projects Jared Walczak, per BizPacReview

Increased payroll taxes would kick in for employees making more than $49,990. 

The tax increases would be authorized under ACA 11 and would be used to fund a government healthcare program proposed by Assembly Bill 1400. Combined, the bills would create a $200 billion taxpayer-funded single-payer healthcare system for all California residents. 

Walczak explained there are two additional taxes on top of the payroll taxes, including a surtax on top of the existing individual income tax structure starting for those making $149,509 or more and a 2.3 percent gross receipts tax on any gross business income after the first $2 million.

“Imagine, for instance, the overly simplified hypothetical of a company with 49 employees making $80,000 each. At 49 employees, the company has no payroll tax burden. Hiring one additional employee generates a tax bill of $90,000 – more than that employee’s salary!” he wrote.

“Gross receipts taxes are widely understood as extremely disruptive and inequitable taxes, because they are imposed on businesses without regard to their profit margins,” Walczak explained. “For low-margin businesses like supermarkets, 2.3 percent of gross receipts may literally exceed current profits even if the company is doing well. For instance, Kroger’s profit margins dipped to 0.75 percent in late 2021 and have historically hovered around 1.75 percent.”

“These taxes are even worse for businesses posting losses, including startups that haven’t turned profitable yet, because they are taxed on their receipts even if their expenditures exceed revenues. For startups, a high-rate gross receipts tax could be disastrous,” he added.