The price of living in California is going up. It is already one of the most expensive states to live in the U.S., ranking third behind Hawaii and the District of Columbia. It has notoriously high housing and transportation costs. But when it comes to state income taxes, California is second to none. With a leading state income tax rate of 13.3%, it rises above even Hawaii.

That’s about to get worse, according to The Wall Street Journal editorial board. Although single-payer healthcare has been relegated to the back burner for now by the White House, the governor of California is anxious to push it through his Democrat-controlled legislature. It passed the Senate in 2017, but collapsed in the more conservative Assembly because it didn’t include funding to pay for its estimated $400 billion annual cost. It also would have required Medicare and Medicaid waivers from the Trump Administration Health and Human Services Department, which was unlikely.

But now progressives are adding gargantuan tax increases to pay for this debacle. Their revived legislation would replace Medicare, Medicaid, and private health insurance with a state-run system and eliminate co-pays, deductibles, and premiums. Californians would also be entitled to an expansive list of benefits including vision, dental, hearing, and long-term care. That ought to swell the ranks of the illegal immigrants crossing the southern border.

If this sounds too good to be true, that’s because it is. Like all socialized medicine systems, a board of bureaucrats would be responsible for controlling costs. (They called this the Independent Payment Advisory Board (IPAB) in the original ObamaCare legislation.) WSJ says, “The simple truth is their job is to ration care. Deliberations about rationing decisions would be concealed from the public. The legislation “imposes a limitation on the public’s right of access to the meetings of public bodies” in order to “protect private, confidential, and proprietary information.” While Californians would technically be entitled to a “free” knee replacement, they might not get one if bureaucrats consider them too old – but the state won’t let people know that’s the reason.”

The bill would also effectively ban private insurance for benefits covered by the state – basically everything besides cosmetic surgery – which most insurance doesn’t cover anyway. This could lead to medical tourism in nearby states such as Arizona.

The state would still need those waivers from the White House for HHS, but this is unlikely to be a problem with the current administration. Progressives have been pushing for such changes to our national healthcare system since Vermont Senator Bernie Sanders introduced similar legislation called Medicare for All. Furthermore, the current HHS Secretary is none other than Xavier Becerra, former Congressman from California, who has supported single-payer healthcare in Congress.

How much would taxes increase?

WSJ says they start with a 2.3% excise tax on business with more than $2 million in gross receipts for what the legislation calls “the privilege of doing business in this state.” This gross receipts tax, which would apply to revenues rather than profits, would punish low-margin businesses large and small. Many will take their privilege elsewhere. (Just another reason for Californians to leave the state as has been happening frequently. In a recent post, The Blue States Exodus, I reported that California leads the nation in emigration of its residents.)

Employers with 50 or more workers would also pay a 1.25% payroll tax, (on top of current payroll taxes) which would be passed onto workers. Workers earning more than $49,900 would pay an additional 1% payroll tax. These taxes would raise the effective income tax on wage earners making more than $61,213 to 11.55%, more than millionaires pay in every state except New York.

An additional progressive surtax would start at 0.5% on income over $149,509 and rise to 2.5% at $2,484,121. Couples making more than $299,509 would pay a top rate of 12.55%. The top marginal rate would rise to 15.8% on unearned income, including capital gains, and 18.05% on wage income.

If you think you can escape these taxes by spending most of your time in another state, think again. This surtax would apply “as if the resident were a resident of this state for the entire taxable year,” which suggests that part-time residents would be soaked even if they spend most of the year in Florida or Texas. Reminds one of Hotel California – where you can always check in but never check out.

Not to be undone by the California constitution, which requires two-thirds of the Legislature to raise taxes, the bill says a simple majority may raise tax rates if necessary to fund single-payer. WSJ says Democrats have a comfortable super-majority holding 75% of seats in the state Assembly and 78% in the state Senate. With these strong numbers, it is likely Governor Gavin Newsome will have his way. However, the tax increases would still have to be approved by voters since they would override the state constitutional’s spending limit. This should be a good test of the strength of the progressives in the state. It is clear they won’t rest until they have put the government in charge of your healthcare.

Note: For more on single payer healthcare, go to the “Search my Posts” box on the left of the screen and put in words like “Single Payer” and “Medicare for All.”

Author’s Addendum:

On the same day this post was published, The Wall Street Journal reported the California bill, proposed by Progressive California Assemblyman Ash Kalra of San Jose, was killed in committee. Kalra said, “I don’t believe it would have served the cause of getting single payer done by having the vote and having it go down in flames and further alienating members.”

The editors of WSJ said, “These sweeping tax increases were too politically toxic even for Democrats who believe confiscatory taxation as an article of faith. Governor Gavin Newsom campaigned on single-payer but declined to endorse the bill. “It’s one thing to say, it’s another to do,” he said last month. Lest anyone think single-payer is dead, Mr. Kalra said “this is only a pause” and “we will not give up.” The left never does.”

Lockdowns fail. The last two years have proven that point, if it was ever in doubt. They fail to prevent the spread of a highly contagious virus and they fail to save lives. In fact, they actually result in many lives lost through mental illness, increased illicit drug use, and suicide. These facts have been well documented in other posts. (Lockdowns Historically Failed, The Control Pandemic)

But what about the economic harm lockdowns cause? For two years economists have had a chance to evaluate the economic harm of lockdowns and now they’re speaking out. The University of Chicago economists Tomas J. Philipson and Casey B. Mulligan have been vocally opposed to lockdowns from the beginning, and now they are reporting the calculated harm of lockdowns.

In a recent article published in The Wall Street Journal, Philipson says attempts to limit the number of Covid deaths are not enough. We must also reduce the total harm caused by both infection and heavy-handed attempts to prevent them. He says, “Reducing the incidence of disease isn’t necessarily desirable if excessive prevention, in the form of lockdowns or school closures, is more costly to society than the damage done by an illness. We don’t close highways to minimize accidental deaths, despite the existence of dangerous drivers. Yet this is exactly what we’re doing when the government intervenes to limit the spread of communicable diseases by, for instance, mandating vaccines that don’t prevent transmission.” 

Philipson says the public health community has proven incapable of quantitatively assessing trade-offs between the harms of prevention and the harms of disease. This has hindered the development of policies that could have minimized the total harm to society from Covid-19. Economic epidemiologists, by contrast, have for decades used quantitative methods to evaluate these harms by looking at them the same way they look at taxes.

He explains: “The burden of a tax doesn’t fall solely on those who pay it directly. A $1 million tax on airplane tickets would generate no revenue because no one would ever fly again. The mass migration to other forms of travel would impose huge costs on the rest of the transportation industry. Similarly, case counts don’t capture the total burden of a disease. The costs of efforts at avoiding the disease must be quantified and tallied as well.”

Since early 2020, University of Chicago economists have estimated that about 80% of the total damage from Covid came from prevention efforts that hindered economic activity – and only 20% from the direct effects of the disease itself. In other words, in economic terms, the attempts to prevent the disease were four times more costly than the disease itself!

This analysis prompted these economists to recommend that initial efforts to stop the spread should focus on older people, who are at higher risk of severe illness and not as active in the economy as younger people. This is consistent with the recommendations of most doctors who have advocated we spend more time and money preventing the disease in the elderly and those at the highest risk, rather than wasting it on the young who are at the lowest risk.

Mr. Mulligan found that total monthly Covid-related harms fell from 2020 to 2021, even as the number of deaths rose. In tax terms, this is an effect not unlike that of the Laffer curve – a lower rate may increase revenue because of growth in the tax base. Similarly, vaccines and treatments reduced the costs associated with getting sick – call it the “disease tax”- but also increased social and economic activity, allowing the infection to spread. Even if the disease tax is paid by more people, the costs are outpaced by the overall benefit derived from the subsequent tsunami of economic activity.

Mr. Philipson notes Joe Biden accused President Trump during the campaign of getting Americans killed by refusing to clamp down completely on all economic activity. But the evidence shows that the U.S. experienced lower total harm in 2020 than did the nations of the European Union. Under Biden’s presidency, we have not only experienced even more deaths than under Trump, we have also experienced more economic harm. Philipson concludes, “Mr. Biden surely understands how difficult it is to contain the spread of a highly contagious respiratory disease. He should make the reduction in total harm his administration’s objective now – and that includes the harm done by lockdowns, school closings, and unproductive restrictions on economic activity.”