For Immediate Release: January 22, 2007

Proposal costs 2 ½ times more than planned, 50,000 to 100,000 jobs lost annually

Introducing the California “Sick Tax” Calculator

San Francisco — Governor Arnold Schwarzenegger’s proposed $14 billion dollar health care plan would likely cost $36 billion in 2010 – 2.5 times more than budgeted – according to California Health Care Deforminator: Model ABX1 1, a new report released today by the California-based Pacific Research Institute (PRI).

ABX 1 1, legislation proposed by the Governor and Assembly Speaker Nuñez in December 2007, recommends increasing health care spending by 7 percent over current levels by levying new taxes from uncertain sources: the federal government, tobacco, workers’ incomes, and possibly the lottery.  If enacted as anticipated, ABX1 1’s increased taxes will kill between 50,000 and 100,000 jobs in California for each year it is in force. 

“ABX 1 1 grossly underestimates future taxes and government-driven health spending,” said John R. Graham, author of California Health Care Deforminator and director of Health Care Studies at PRI.  “Individual Californians and small businesses will suffer the most from this so-called reform.”

ABX 1 1 will also impose a new arbitrary regulation on health plans, a minimum Medical Loss ratio of 85 percent, which threatens to reduce competition in health insurance by one half. “This arbitrary accounting convention has no relevance whatsoever to how Californians choose their health plans,” explained Mr. Graham.  “It will drastically shrink small businesses’ and individuals’ ability to choose from a variety of competing health plans.”

“Sick Tax” Calculator

In California Health Care Deforminator Mr. Graham proposes six alternative, real reforms to private health insurance that will make health care more affordable and accessible to ordinary Californians.  Among these reforms is repealing the California “Sick Tax.”  The Federal government and almost every state encourage Health Savings Accounts by allowing individuals and their employer to fund them with pre-tax income, similar to an IRA or 401(k).  California is one of the last states that continue to tax residents for their contributions in the form of a “Sick Tax.”  To increase awareness of this issue, PRI has launched a ticking clock and “Sick Tax” calculator at http://health.pacificresearch.org/id.171,type.1/basic_page.asp.

“Californians enter 2008 after a year of false starts and dead ends on the health policy front,” said Mr. Graham.  “A tax hike is not health reform and ABX1 1 will achieve none of its objectives except to send taxes and government spending into an upward spiral.” 

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About PRI
For 29 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. http://liberty.pacificresearch.org/.