IT’S A BIRD! IT’S A PLANE! IT’S A TAX INCREASE!
Tax Hike on Health Plans Causing Major Angst in Sacramento
Currently on the front burner in the State Capitol is the extremely contentious (and complicated) issue of taxing “managed care organizations.” Because of federal requirements under Obamacare, California must alter the manner in which it taxes healthcare plans or risk losing billions in federal money. But the question everyone is asking is whether the proposed legislation constitutes a tax increase. That question is not merely academic because its answer has significant policy and political ramifications.
While the determination of whether a legislative act imposes a tax may not be that important in other states, it certainly is in California. A requirement imposed by Proposition 13 is that “tax increases” be approved by a two-thirds vote of each house. Thus, although the majority Democrats have almost a two-thirds majority, they lack the power to raise taxes without at least some Republican support. And because most Republicans run for office as fiscal conservatives, they are loath to vote for anything that raises the tax burden on citizens or businesses.
But the question of whether a legislative act is a tax hike isn’t always that simple. Take for example the unpopular “fire tax” imposed on hundreds of thousands of California property owners in rural areas. This unpopular tax – imposed when California’s budget was deeply in the red – was designed to force property owners residing in “State Responsibility Areas” under the jurisdiction of CalFire to pay for various fire protection programs whether they benefited or not. The legality of that tax is currently subject to a class action lawsuit because it never received a two-thirds vote of the legislature.
To read the entire column click here http://www.hjta.org/california-commentary/its-a-bird-its-a-plane-its-a-tax-increase/