Within the Capitol – and the media that cover it – there’s a tendency to conjoin Gov. Jerry Brown’s two tax-increase proposals.
However, they are very different – structurally, politically and, in truth, qualitatively.
Brown wants the Legislature to re-enact, with some tweaks, a tax on “medical care organizations” whose proceeds generate additional federal financing for Medi-Cal, the state’s medical care system for the poor.
He also wants the Legislature to pass new taxes for much-needed maintenance and rehabilitation for state and local roadways.
The MCO tax issue involves a political Ponzi game. Health insurers have been paying a tax on the promise that the extra federal money would provide a net financial gain for taxpayers.
The feds, however, clamped down and said the qualifying tax would have to be much broader.
One political problem is that expanding the tax would hit entities that wouldn’t profit. Brown has offered a complex scheme involving offsetting corporate tax cuts, but so far has been unable to make a deal.
Another is that any tax would require at least a modicum of support from Republicans, and they are not disposed to vote for any tax, no matter how it’s packaged.
Brown contends that without the MCO tax there’s a billion-dollar hole in Medi-Cal financing, but that’s just a political argument, not a fact.
The state’s Medi-Cal share comes out of its general fund, which is running multibillion-dollar surpluses. Although Brown says failure to enact the tax would curb Medi-Cal services, it really has nothing to do with Medi-Cal and everything to do with the state’s overall fiscal condition.
Republicans are also a stumbling block for new highway taxes – or some alternative, such as a mileage-based fee. They argue that since the state is running general revenue surpluses, they should be tapped for roadways.
That’s a popular position, according to a new poll, but also dead wrong. Unlike Medi-Cal, transportation has been historically – and separately – financed by user fees on motorists, including fuel taxes, truck weight fees and licensing fees.
Our gas taxes, although among the nation’s highest, have been declining of late because they are partially based on fuel prices, which have been dropping. And an overhaul of user fees is needed as vehicles become more fuel-efficient and as electric and hybrid cars become more common.
Nevertheless, roadway financing should remain separate from the general fund. Transportation needs stable, long-term financing to match the long-term nature of planning and building projects.
Intermingling transportation funds with the state’s general fund would make it too easy for politicians – as they have done occasionally in the past – to tap highway maintenance funds to satisfy other demands of the moment.
Republicans should uphold the separation principle while pressing for adequate financing and much-needed reforms in user fees and project management.