California GOP May Cave on Jerry Brown’s Health Care Tax

Governor Jerry Brown has continued to demand that a new managed healthcare organization (MCO) tax be imposed by the state legislature.

Brown and his fellow liberal Democrats who run the State Capitol are, no doubt, put out by the fact that, due to GOP gains in 2014 that denied the Democrats a supermajority, they can no longer raise taxes on a party-line vote.

It is an inconvenient fact that the current MCO tax, which is projected to shift $1.7 billion from the private to the public sector this year alone, is slated to expire this year. It was a temporary tax, with a sunset–and, of course, no one should be shocked that the Democrats want it to keep going and going.

The current MCO tax was authorized for a three-year period by a vote of the legislature in 2013, during a window period of time when Democrats’ enjoyed supermajorities in both legislative chambers, but the “corruption-athon” in the State Senate hadn’t yet resulted in three Democrat Senators losing their votes.

I will save you the trouble of looking up the vote on this three-year, multi-billion dollar tax: every Democrat voted yes, and not one Republican voted for it. Not a single one. And the MCO tax will end this year if Republicans simply show the same level of resolve in 2016 that they showed in 2013.

In fact, in many respects, letting the MCO tax sunset would really be the keeping of a promise to the voters – that if they increased Republican numbers, the brakes would be hit on new taxes (and when you extend an expiring tax, that is a new tax by any reasonable definition).

Liberals in Sacramento are scratching their heads, saying, “Wait a second, there is over a billion dollars of annual federal money that will come to California if we adopt a new MCO tax!”But a liberal would have no idea how much it would gall a conservative that the federal government would seek to manipulate our state to raise taxes with the “carrot” of what are essentially matching funds.

What a complete mockery of the 10th Amendment to the United States Constitution, let alone the fact that there are probably a lot more better uses for those federal dollars–like fighting ISIS or working to retire a massive federal debt, rather than just dropping it into the record-sized coffers of state government for more social welfare spending.

Of course, in order to make things more complicated, and perhaps try to confuse legislators and certainly the public, legislators orchestrate a complex policy kabuki dance that involves Republicans putting up votes for a new MCO tax (which will now have a bipartisan patina), while two other obscure but expensive taxes on healthcare companies will be terminated, supposedly providing a potential net upside to some of those companies.

Except these two other taxes are not at all structured like the current MCO tax, and they affect different companies different ways. And so that potential deal means some companies with benefit, to the detriment of others. Again, government picks winners and losers – the favorite past-time of the left.

But that must be okay, right? The healthcare organizations say they support this triple-backflip back-room deal. It is important to remember that these companies are at the mercy of the dovernor and his administration, and of the legislature, in so many ways–including regulatory action, and potential new laws.

Now, raise your hand if you’re the one in the room who doesn’t think that when this new MCO tax is imposed, that insurance companies, at some point, won’t go back to their customers with rate increases – with an explanation that unfortunately, the State of California has implemented a new tax. I’ve heard assurances have been extracted that this won’t happen. Well, I don’t mean to reinforce negative stereotypes – but really? You trust the word of insurance company executives?

A final cautionary note to Republicans: everything about this deal has been characterized by the Governor, the legislature, and the media – television, radio, print, online – as a tax increase. It is a tax increase by definition (note the two-thirds vote requirement). In fact, the story that will be told far and wide is how Democrats and Republicans in Sacramento got together and agreed on a multi-billion dollar tax increase.

Now even if you are the smartest Republican in the room, and think you have successfully gamed the system to somehow raise taxes but help the taxpayer – when you are explaining, you are losing. Just look at the Republican Presidential primary happening right now. Don’t delude yourself into thinking that somehow California Republicans are not angry and cynical where it concerns their own Republican elected officials right now. I would draw your attention to the Field poll from early January showing that the top two candidates being supported by California Republicans are Ted Cruz at 25% and Donald Trump at 23%.

The recent “deal” between President and Speaker Paul Ryan on the omnibus spending bill sent conservatives into orbit by increasing spending $400 per family in America. This will be the California version of that. This is a difficult election year for Republicans anyway: a Presidential year is not as good for the GOP. A party divided upon itself will make a difficult year almost impossible.

The counsel I would humbly offer to State Senate and Assembly Republicans is to keep your commitment to taxpayers. Simply let this multi-billion dollar MCO tax that expires this year, expire. And send the message out far and wide that Republicans don’t just talk the talk, but actually keep their word.


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