HEALTH ACCESS

HEALTH CARE CUTS ALERT

June 6, 2002

* CONFERENCE COMMITTEE CONTINUES; HEALTH ITEMS ON CHOPPING BLOCK: The Conference Committee is scheduled to reconvene TOMORROW, FRIDAY, JUNE 7TH, at 4:00PM to look at ALL the Governor’s budget cuts to health, including those which both the Assembly and Senate rejected. They are expected to meet through the weekend. Health Access legislative advocate Beth Capell reports that the committee staff has been directed to reconcile the two health budgets, and reduce health spending to the lower of the two proposed versions, the $930 million in spending approved by the Assembly. This is particurly troublesome since the houses in some cases chose different items to fund: such a staff proposal will have significant cuts. As always, Health Access will provide an updated legislative scorecard to show what happened to our 11-point list on Monday.

* UPPER TAX BRACKET PRESS CONFERENCE: Over 50 organizations are on record, in some form, in supporting the restoration of the upper tax brackets. We hope to have over 100 organizations, from the AARP to the League of Women Voters, when we jointly have a press conference on Monday, June 17th, at 11:15am at the Governor’s Press Room 1190 in the State Capitol.

* WE NEED MORE ORGANIZATION SIGN-ONS. Attached is yet another version of the sign-on sheet, which can be faxed back, and has the current list of 50+ organizations. We need ALL organizations to send the permission form back, including those that have given their verbal support. We also would greatly appreciate organizations distributing this form to their networks and soliciting other allied organizations. Also attached is the California Budget Project’s fact sheet on the outlines of the budget.

* MORE PRESS: Below is a good article about this growing coalition for a balanced solution to the budget crisis, from the San Jose Mercury News.

Posted on Thu, Jun. 06, 2002

Unlikely alliance pushes increase in income tax

By Karen de Sá

Mercury News

A push to increase taxes for the wealthiest 2 percent of Californians, rather than slashing social services for the poor, is gaining support among advocacy groups and some unlikely allies. A Republican county supervisor, groups of retirees and Consumers Union say it’s the best alternative to Gov. Gray Davis’ plan to balance the budget with deep cuts in health and human services.

“I’m basically against taxes, so it stretched me a lot,” said Santa Clara County Supervisor Don Gage after voting this week to support a temporary tax increase on the rich. “But from a logical point of view, for somebody making $600,000 a year to pay a few more grand is not going to hurt them. To take away from a lower-income person could mean the difference between being homeless or having food on the table.”

While recognizing the odds of such a hike in a gubernatorial election year, Bay Area city, county and labor leaders are demonstrating in favor of the increase and against the cuts this week, as state leaders wrangle over how to remedy a $23.6 billion budget shortfall.

Davis proposes raising cash through increased cigarette taxes and vehicle license fees. But he also is calling for more than $1 billion in cuts to county safety net programs serving the state’s neediest families. For weeks, local leaders have warned of devastating impacts if the Davis budget goes through: working poor parents cut off from health insurance, longer waits for foster care placements and emergency room visits, thousands of social workers laid off.

But rather than complain, a growing number of advocates and elected officials are convening around an alternative solution. To varying degrees, they are supporting a bill sponsored by state Sen. John Burton of San Francisco, the state’s top legislative Democrat. SB 1255 would temporarily reinstate higher taxes for individuals with incomes of more than $130,000 a year after deductions and for married couples who make more than $260,000. The tax rate would rise from 9.3 percent to 10 percent.

An 11 percent rate would apply to individuals making more than $260,000 a year and to married couples earning at least $520,000.

Gov. Ronald Reagan approved similar increases in 1967 and 1971. And Gov. Pete Wilson added 10 percent and 11 percent tax brackets in 1991, when the state faced a similar budget crisis.

According to the California Budget Project, 2.4 percent of California taxpayers would be affected by the proposed increase. Taxpayers with incomes in the top 1 percent of California households — earning an average of more than $1 million a year — would pay more than 95 percent of the increase.

Santa Clara County supervisors voted this week to support the Burton bill, joining the call for the wealthy to pitch in. The League of Women Voters, the California State Association of Counties, AARP California, Mexican-American Legal Defense and Education Fund, the California Physicians Alliance and more than 30 other statewide organizations agree.

Union’s top priority

The Service Employees International Union, which represents more than 5,000 social workers facing possible layoffs under the Davis plan, has made increasing income taxes its top legislative priority.

“What the governor’s doing is trying to balance the budget on the backs of the poor, and there are a lot of wealthy people in this state who really enjoyed the boom times,” said Rosemary Everett, who coordinates the California justice and peace ministry for Sisters of the Holy Names. “It’s fair to ask them to share some of the need right now.”

The tax strategy has plenty of detractors.

Sen. Tom McClintock, R-Thousand Oaks, said it’s impractical. He contends tax increases have historically done nothing but drive rich people away from California to places like Nevada, where there’s no income tax.

“It’s common sense,” McClintock said. “You move your office to Las Vegas, spend a pleasant four nights at your penthouse on the Strip, and you’re still right back at your beach house in Malibu or Palm Springs for the rest of the week. There’s nothing more portable in this world than money and rich people.”

Plan criticized

Dianne Fisher, wife of an investment banker and an Atherton city councilwoman, said the proposal amounted to “confiscation.” Her high-income constituents would be among those most affected by a tax increase.

“Do we need all the programs we have?” she said. “I’m not insensitive to people who have social welfare needs, but I don’t think the answer is, `Oh, just tax the top 2 percent some more.’ The concept now is that if you succeed in this country, you are lucky enough to pay more taxes.”

It’s rare for some of the groups signing on to the budget-solving solution to call for raised income taxes.

AARP California chose to endorse the Burton bill only because of “the enormity of the budget deficit” and the impact that cuts in health and social services would have on seniors and their children and grandchildren, said Lupe De La Cruz, the group’s legislative director.

“We don’t believe that cuts are going to get us through this very difficult budget,” he said. “We have to look at the other side of the ledger.”



Anthony E. Wright

Director of Organizing

Health Access

1127 11th St., #234, Sacramento, CA 95814

Ph: 916-442-2308, Fx: 916-497-0921

awright@health-access.org

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From the California Budget Project:

What Would Be The Impact Of Reinstating The 10 And 11 Percent Personal Income Tax Rates?

One option for helping to bridge the state’s budget gap would be to reinstate the 10 percent and 11 percent tax rates for high-income Californians. This approach was used in 1991 when the state faced a budget crisis of similar magnitude. The higher rates would add a 10 percent tax rate for single taxpayers with taxable incomes in excess of $130,000 and married taxpayers with taxable incomes in excess of $260,000. The 11 percent rate would apply to single taxpayers with taxable incomes of more than $260,000 and married taxpayers with taxable incomes in excess of $520,000. The state’s alternative minimum tax rate, a rate that applies to taxpayers that claim certain preference items, would also be increased proportionately to 8.5 percent. The state’s current top income tax bracket of 9.3 percent applies to taxpayers with taxable incomes in excess of $37,725 (single) and $75,450 (married). Reinstatement of the top rates would raise $3.1 billion in 2002-03, $3.2 billion in 2003-04, and $3.5 billion in 2004-05.

How Many Californians Would Be Affected?

Only 2.4 percent of California taxpayers would be affected by the proposed increase. Taxpayers with incomes in the top one percent of California households – with average incomes of $1,341,700 – would pay more than 95 percent of the increase. The average increase for this group, after taking into account the deductibility of state income taxes for federal tax purposes, would be $7,674. The average increase for taxpayers in the next 4 percent, with average incomes of $253,200, would be just $115 after adjusting for the deductibility of state income taxes.

Top Brackets Have Been Used To Bridge Prior Deficits

The state’s top tax rate has exceeded the current maximum for nearly half (33 years) of the years since the state instituted the personal income tax. Former Governor Ronald Reagan signed into law two increases in the top brackets, one in 1967 and again in 1971. Governor Pete Wilson signed a measure adding 10 and 11 percent tax brackets in 1991.

Taxpayers Affected By Top Brackets Received Big Savings From The Federal Tax Package

When fully phased in, last year’s federal tax package will provide substantial savings to high-income earners that far exceed the increased state taxes they would pay under the proposed top brackets. The top one percent of California taxpayers will receive a federal tax cut of $51,717, once the federal reduction is fully phased in. In contrast, reinstating the top tax brackets would increase the average tax bill of the top one percent by $7,674, after taking into account the deductibility of state income taxes for federal tax purposes. More than a third of the cost of Californian’s higher income taxes would be paid by the federal government in the form of higher deductions.

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SUPPORT RESTORING THE TOP INCOME TAX BRACKETS

Endorsement Form

To raise the needed revenues to prevent severe state budget cuts to health and other important services, our organization supports restoring the upper income tax brackets to their 1995 levels.

We give permission for our organization’s name to be used in press materials as a supporter of increasing the top income tax brackets.

Organization:

Signature

Contact Name

Title

Address

Phone/Fax

E-Mail

Please return to Anthony Wright, Health Access, Phone: 916-442-2308. Fax: 916-497-0921. E-mail: awright@health-access.org or Rebecca Gonzales, California Budget Project, Phone: 916-444-0500. Fax:(916) 444-0172 E-mail: rgonzales@cbp.org

Health Access California promotes quality, affordable health care for all Californians.

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