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What the New Tax Plan Could Mean for Healthcare Prices in California

by
Bob Mason
on
1/20/2022
What the New Tax Plan Could Mean for Healthcare Prices in California

Universal healthcare means everyone - regardless of where you come from or what your status is - has access to the health services you need, when they need them, all without dealing with the financial stress normally required to pay for them. It is not, however, a straightforward issue by any means. Having said that, there is a somewhat significant downside depending on your perspective: namely, the question of "who is going to pay for it?"

More often than not, the answer falls to higher taxes - something that Democrats in California are dealing with the fallout of after a recent proposal to do precisely that.

In addition to lowering overall costs for everyone, universal healthcare also helps to lower administrative costs, it helps create a standardized level of service to give everyone equal access and more. Likewise, it ultimately helps create a healthier general population, which in and of itself is the most important benefit of all. But it's still a complicated topic that people need to consider from multiple perspectives.

Healthcare in California: The Story So Far

Earlier in January 2022, Democrats in California announced a wide-reaching plan to fund government-run healthcare for every citizen in the state. Those who are opposed to the plan argue that it isn't a good idea to raise taxes in order to do so.

It's been confirmed that new taxes would be passed impacting businesses and individuals who make more than $49,900 every year.

Under the proposal, there would be a new 2.3% excise tax on all businesses after they earn their first $2 million in income during a calendar year. Likewise, if your organization employs more than 50 people, you would be subject to an additional 1.25% payroll tax.

There would also be a progressive income tax starting at 0.5% for all residents of the state who make more than $149,500 per year, continuing up to 2.5% for those making more than $2.5 million. Of course, those rates would also likely be adjusted for inflation.

Again, the argument here is that the higher cost of taxes upfront would essentially pay dividends for the entire state for years to come. Not only would it consolidate healthcare costs into a single government program, but it would also allow California to move away from its reliance on private insurance - something that would almost assuredly save funds in the long term.

Another argument for the move is the fact that out-of-pocket healthcare costs in the state of California have continued to rise over the last decade - and are expected to continue to do so. So while your average citizen or business owner would be paying more money in taxes today, the money they would save on healthcare would theoretically offset that burden.

Not surprisingly, a number of influential people have already come out against the proposal. One of the more notable is Rob Lapsley, the current president of the California Business Roundtable. He indicated that from his point of view, this was a tax increase targeted heavily towards the middle class, and one that would "drive more families into poverty, force more small businesses to close and compel more employers - and jobs - to leave the state."

The Assembly member Jim Wood, however, shared a different sentiment. He said that he continued to feel both the frustration and the desperation that many experience when it comes to accessing quality and affordable healthcare and that when the time came, he was going to cast his vote for what he hoped to be a positive change.

It's a controversial subject, to be sure - and given the fact that it is currently an election year in California, it's one that many people will be paying close attention to moving forward. Governor Gavin Newsom in particular finds himself in something of a precarious situation, as it was he who voted to implement single-payer healthcare when he first ran for the position in 2018. It was easy to make as a campaign promise but now that the reality of the situation is actually here, it will be interesting to see exactly what he does given the current circumstances.

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Bob Mason

Bob Mason

Founder

Bob Mason is a skilled financial professional who is fully equipped to assist any of your accounting needs. Founding his firm in Santa Cruz, Bob understands the importance of small businesses and how they form the backbone of the area. Coast Financial Services, Inc. has been dedicated to the growth and profitability of businesses in Santa Cruz for 17 years. To learn more about Bob Mason and the rest of his team, visit their website.

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