Governor reacts to Dems’ plan hinging on tobacco tax hike.
Sacramento Bee (California)
Gov. Arnold Schwarzenegger‘s administration Tuesday called a new universal health care proposal by Democrats a “positive sign,” but took issue with the funding, including a proposed $2-per-pack cigarette tax.
The tax would replace Schwarzenegger’s plan to sell the rights to run the state’s lottery to a private management company and use the proceeds to help finance his proposed $14 billion health plan.
“We still think that’s the most viable source of those revenues,” Daniel Zingale, one of the Republican governor’s top advisers on health care, told reporters a day after Assembly Speaker Fabian Nunez, D-Los Angeles, outlined the Democratic plan.
That plan would raise the state’s tobacco taxes, including an increase in the current 87-cents-a-pack cigarette tax to $2.87. A $2.60-a-pack increase, sponsored by California’s hospital industry and health care advocates, was opposed by Schwarzenegger and rejected by voters last year.
All the funding in the Democratic and governor’s plans would be on the November 2008 ballot and require passage by voters.
The new Democratic plan establishes a sliding scale requiring businesses, depending on their size, to spend 2 percent to 6.5 percent of their payroll on health care or pay into a state fund.
The governor has proposed that employers pay zero to 4 percent of their payroll based on a sliding scale to help finance his plan.
Nunez and Senate President Pro Tem Don Perata, D-Oakland, had proposed 7.5 percent in AB 8, a previous plan that the governor vetoed.
The California Chamber of Commerce contends any employer mandate would violate the federal Employee Retirement Income Security Act, which pre-empts state laws dealing with employee benefit plans.
“Additionally, what the Speaker and (Senate president) will establish is a growing entitlement program to be funded by a declining revenue stream — tobacco taxes,” chamber President Allan Zaremberg said in a statement.
Kim Belshe, Schwarzenegger’s secretary for health and human services, said the fee on small businesses “clearly needs to be lower” than Democrats are proposing.
“It doesn’t include any exemptions for the smaller businesses, which is very important,” Belshe said.
The revised Democratic plan would mandate that Californians obtain health insurance, as Schwarzenegger has insisted, but exempt families where the total cost of coverage would exceed 6.5 percent of household income.
Belshe said the exemption could pose a problem because in order to require insurers to cover individuals with pre-existing medical conditions — as both sides are proposing — healthy people also must be required to buy coverage.
The Foundation for Taxpayer and Consumer Rights opposes the individual mandate and contends it would guarantee a windfall for insurers at the expense of middle-class workers.
The California Labor Federation opposes the governor’s individual mandate, charging that Schwarzenegger’s plan does not provide enough subsidies for middle-class families.
Under the Democratic plan, families of four earning up to $92,925 a year would receive a tax credit for the portion of premium costs that exceed 5 percent of their incomes.
Art Pulaski, executive secretary-treasurer of the labor federation, said the organization will hold a series of meetings to review the Democratic proposal before taking a formal position.
—————–
Contact the author Aurelio Rojas, Bee Capitol Bureau, at (916) 326-5545 or [email protected].
