January 19th, 2022

California Doubles Down on Small Business – Again. 

The Wall Street Journal Reported in its Review & Outlook section on January 11th, that “Single-Payer Makes a Comeback”, meaning California democrats will try again to eliminate private health insurance plans. They plan to combine Medicare, Medicaid, with private plans, and supposedly eliminate copays, deductibles and premiums.
Sounds great so far?

The problem for small business is a host of new taxes on topline revenue, and additional payroll taxes on individuals. The starting revenue excise tax would be at just $2,000,000, and be hair raising 2.3% tax on annual gross receipts. In addition, those companies with over 50 employees would also pay an additional 1% payroll tax. More additional taxes would be imposed on higher wage earners.

Needless to say, larger companies could suffer greatly. The cost of the revenue tax could easily cut profit in half for many businesses. This does not even consider those who compete with out of state, and out of country competitors who would have a price dis-advantage of at least 2.3%, a major issue for competitive industries. A business owner could expect to pay both a 2.3% penalty for being in California, but also have their revenue drop due to lack of competitiveness.

One can imagine the ways new businesses will spring up out of state so instate revenue never goes over $2 million. On the other hand, as always happens the revenue threshold will fall, and the tax will go higher as the gargantuan cost is realized. All residents will pay even if they are only in California part of the year.
 
The state government expects it to cost $400 Billion. Keep in mind the ENTIRE current budget is more in the range of $270 Billion. Imagine the new bureaucracies they can create.
But business issues aside, the plan also calls for all residents to enjoy free care, meaning all immigrants and non-citizens; totally free for them. How will we ration this care? A panel of “experts” will determine who gets a new knee, but they will not have to explain their rationale. The meeting notes will be private.
​
The Wall Street Journal says, expect Arizona to become a health tourist mecca.
On the other hand, very small businesses and start ups will have one major obstacle removed. Having to figure out how to afford expensive health care. This expense alone keeps many from making the break from the old job. We may see an additional boom in very small business formation. So, the older successful ones will be paying for their new competitors health care! That seems fair.
 
MicroGiants