Gov. should reexamine sales tax hike for healthcare

By George Skelton

Oct. 15, 2007 12 AM PT

SACRAMENTO — Gov. Arnold Schwarzenegger’s eyes always have been bigger than the state’s wallet when it comes to healthcare expansion. It’s the main reason why he and the Legislature can’t agree on a plan to insure every Californian.

How do you pay for it? Especially when the state is looking at a projected budget deficit for next year that grows by the week. It’s now up to $8.6 billion, largely because of the housing slump.

The tab for Schwarzenegger’s healthcare plan is up to $14 billion after having started at $12 billion in January.

The governor rolled out a slightly new version last week, discarding the most recent idea for helping to finance the ambitious program: a sales tax increase.

Too bad. A sales tax hike to pay for healthcare reform might have half a chance of winning voter approval, according to a new poll by the Survey and Policy Research Institute at San Jose State.

In the statewide survey, 400 frequent voters were asked: “Would you vote for or against a proposal to increase the state sales tax by one cent per dollar to help pay for medical insurance for all Californians?”

The results: 52% for, 38% against.

Not surprisingly, voters who are least likely to have insurance -- the young, the poor, non-whites, singles -- are among the biggest fans of raising the sales tax to pay for healthcare.

Women (57%) support it much more than do men (43%). Retired people are basically split; presumably most already are covered by Medicare and many oppose any tax hike because they’re on fixed incomes.

Nearly two-thirds of Democratic voters favor it. Only 38% of Republicans do.

Zero percent of Republican legislators support any form of tax increase. That’s why Schwarzenegger and Democratic lawmakers are planning to bypass the GOP and place a healthcare financing initiative -- if they can negotiate one -- on the November 2008 ballot.

A sales tax hike, says San Jose State polling director Philip J. Trounstine, would “have a shot. With the right kind of campaign, they might be able to pull it off.”

Veteran political consultant Darry Sragow agrees.

In recent years, Sragow says, surveys have shown that voters will support a tax increase -- preferably a sales tax hike -- that’s dedicated to healthcare, especially for children and the poor.

A strategist for Democratic legislators, who asked not to be identified, isn’t as optimistic: “It’s not impossible, but it’s very hard.”

The idea of partially financing healthcare reform with the sales tax came from business lobbies -- grocers, retailers, restaurateurs -- leery of possibly stiff employer taxes.

Schwarzenegger tacitly embraced the idea, although not publicly, but Democrats have resisted.

Why, Democrats reason, should they stick their necks out for a consumer tax when Republicans won’t?

“It puts Democrats in a vulnerable place,” says Assembly Speaker Fabian Nunez (D-Los Angeles), “while Republicans stand on the sidelines.”

Moreover, he adds, the sales tax is “somewhat regressive,” hitting low-income people the hardest.

Of course, the uninsured working poor would be among the biggest beneficiaries of healthcare expansion.

Hospitals have agreed to pay 4% of their revenue into a healthcare financing kitty, persuaded they’d get more in return from increased Medi-Cal reimbursements.

The big fight between Schwarzenegger and Democratic leaders is over how much employers should kick in if they don’t already provide medical insurance for their workers. Schwarzenegger’s revised proposal charges companies a sliding-scale fee of from 2% to 4% based on payrolls exceeding $100,000.

“He’s letting employers off the hook,” contends Nunez, who has proposed a 7.5% fee and vows: “I’m not going much below that.”

Employers that do provide medical insurance, Nunez says, pay an average 13.5% of payroll.

In pushing aside thoughts of a sales tax hike, Schwarzenegger last week proposed a scheme that smacks of gimmickry: Leasing out the California Lottery and generating $2 billion a year for healthcare.

The governor figures a private outfit could produce more lottery ticket sales than state bureaucrats can.

Basically, he’d pay for healthcare by promoting gambling addiction.

The lottery was sold to voters in 1984 as a means of helping to finance public schools. “Many people feel they were snookered,” Sragow says. “They were told the lottery would pay for education and it hasn’t even come close.”

Education receives roughly $1.1 billion annually from state lottery winnings. Under Schwarzenegger’s plan, it no longer would. But the same amount -- the governor promises -- would come from the strapped state general fund, replenished with lottery lease money.

“It appears to me to be a shell game,” says state Supt. of Public Instruction Jack O’Connell. “I want quality healthcare, but it has to be real. The sales tax is a stable, predictable revenue source.”

Lottery revenue is a gamble.

John Handley, lobbyist for the California Independent Grocers Assn., which endorsed the sales tax hike, sits on the lottery advisory board.

“I’d prefer a one-cent sales tax over messing around with the lottery,” he says. “It’s a much broader base.

“The lottery was set up to be state-run and it ought to stay that way. It’s run pretty efficiently.”

Nunez says he’ll keep an open mind about leasing the lottery. But, privately, legislators say the idea’s going nowhere.

Let’s hope. If Schwarzenegger wants to pad the state wallet for healthcare, he should use real dollars, not funny money.

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