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California Single Payer: Lower Net Cost to Families

Summary – Last week saw the release of a tax plan to finance California’s single payer legislation, AB 1400. It was immediately attacked as a tax increase of $12,250 per family. Hey, wait, don’t premiums and cost-sharing disappear under single payer? Yes indeed! The typical family saves money. Health insurance guaranteed, with savings. And no more medical debt or bankruptcy.

ACA-11 Taxes to fund health care coverage and cost control
California Legislative Information
Jan 5, 2022

This measure would impose … taxes at specified rates to fund comprehensive universal single-payer health care coverage … [under AB 1400]

(1) An annual excise tax … upon a qualified business … at a rate of 2.3 percent of the gross receipts … minus the first $2,000,000 in annual gross receipts.

(2) (A) A payroll tax … on every employer who pays … 50 or more resident employees … at a rate of 1.25 percent of wages or other compensation … [plus] 1 percent of wages or other compensation in excess of $49,900 per employee.

(3) (A) … a State Personal Income CalCare Tax:

            $149,509 but not over $299,508               0.5% of the taxable income
            $299,509 but not over $599,012               1% of the taxable income
            $599,013 but not over $1,299,499            1.5% of the taxable income
            $1,299,500 but not over $2,484,120        1.75% of the taxable income
            $2,484,121 and above                                2.5% of the taxable income

California Considers Doubling its Taxes
Tax Foundation
Jan 6, 2022
By Jared Walczak

A proposed constitutional amendment (ACA 11) in California would increase taxes by $12,250 per household …

Comment by: Jim Kahn & Don McCanne

$12,250 per household in new taxes sounds like a lot. This plan includes a 2% payroll tax, a highly progressive income tax (starting at 0.5% at $150,000), and a business excise tax.

However — bottom line — the net savings for a typical middle-class family are highly attractive.

Currently, working families pay a lot for health care:

$5,969 annual employee premium contribution for family coverage
$4,000 annual per household in out-of-pocket spending

That’s $10,000, which under single payer disappears. Huge savings.

Plus, employers contribute $16,253 for premiums for family coverage. That high cost keeps wages low, so if it went away (the proposed payroll tax is about 90% lower), annual wages would rise by $10,000 or more.

Thus, for a working family, we’re into net financial gain territory.

And … the actual tax increase for a middle-class family would be way less than the $12,250 average. That’s because the tax plan relies on a very progressive income tax, $750 at $150,000 and really kicking in above $1 million in annual income.

Overall, single payer reduces costs for the vast majority of families, while providing guaranteed health care.

And: no more medical debts or bankruptcy. That’s a huge boost to financial security.

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