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California Employers Could See Payroll Tax

California Employers Could See Payroll Tax. California could be headed for a health care overhaul that could leave employers paying an estimated $2.7 billion a year tax on their payroll.

Gov. Arnold Schwarzenegger and state Assembly Speaker Fabian Nuñez filed initiative language late last week with the state attorney general for a ballot measure that would finance their $14.4-billion plan to extend health care benefits to most Californians by almost doubling the state tax on cigarettes to $1.75 a pack.

The plan, which needs approval from the state Senate, would provide medical coverage starting in 2010 to 3.6 million people in California who lack insurance, including some 800,000 children. The plan is opposed by Republicans in the Legislature, who say the proposal would lead to higher health care costs.

“Californians want action to make health care more affordable and accessible for their families, not a back-room deal that will make health care more expensive for everyone,” Assembly Republican Leader Mike Villines said after the Assembly passed the framework for the proposal.

“This is a flawed plan that will impose billions in higher taxes and spending, and I am disappointed that Democrats would rush this through rather than work with Republicans to craft fiscally-responsible reforms,” said Villines, R-Fresno.

In addition to raising the state excise tax on tobacco in the Golden State, the plan would also impose a fee on hospitals and a levy on employers ranging from 1 percent to 6.5 percent of their payroll. The money would be directed into a new California Health Care Trust Fund to help those who cannot afford it buy insurance.

Those companies that spend the required amount on health care for their employees would be eligible to receive a tax credit on their fees they pay to the state.

The Democratic plan, which would be partly bankrolled in a cigarette tax hike in mid-2009, is likely to be an expensive battle for interests on both sides of the issue.

"Taking on Big Tobacco and the private insurance industry is going to be a difficult challenge," Nuñez, D-Los Angeles, said in a statement. "But this is the most effective way to fund the reform we need to fix California's broken health care system."

The Service Employees International Union is expected to lead the signature collecting drive to put the initiative on next November's ballot. About 700,000 valid signatures are necessary to qualify the initiative.

Beth Capell, a Sacramento lobbyist for SEIU, told The Los Angeles Times that although the opposition may have deep pockets, beating them would not be insurmountable.

"You don't actually have to match the opposition in order to win," Capell told the newspaper. "You have to have enough to make your case to the voters."

Source [RTT Financial News]

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