California progressives want to hike taxes on corporations and billionaires to absorb federal funding cuts to Medi-Cal.<\/p>\n
Progressive Democrats who have long fought and failed to raise taxes on the rich are renewing their push this year in light of a specific threat: the seismic federal cuts to Medi-Cal, the state\u2019s health care program for the poor.<\/p>\n
But backfilling the loss would not address the state\u2019s existing \u2014 and growing \u2014 structural deficit, budget experts say.<\/p>\n
President Donald Trump\u2019s H.R.1, signed into law last July, could strip tens of billions a year in state Medi-Cal funding and cause 2 million low-income residents<\/a> nationally to lose healthcare coverage.<\/p>\n The law has prompted progressive lawmakers and health care advocates to call for higher taxes on corporations or billionaires to keep those at risk of losing benefits on the program.<\/p>\n \u201cWe know that you are not responsible for these awful cuts, but now the responsibility does lie in your hands,\u201d Judy Mark, executive director of Disability Voices United, an advocacy group for people with disabilities and their families, told state lawmakers at a January rally. \u201cYou have the power to increase our revenue so that we don\u2019t have to make such devastating cuts.\u201d<\/p>\n Progressive lawmakers have introduced at least two proposals to tax corporations, including one that would direct funds toward Medi-Cal.<\/p>\n Separately, health care advocates are backing a controversial ballot measure to tax billionaire wealth to replace lost federal dollars.<\/p>\n There\u2019s one glaring problem: Any solution to backfill the Medi-Cal funding could add to the state\u2019s already gigantic structural budget deficit<\/a>, not reduce it.<\/p>\n The deficit could reach $30 billion<\/a> in future years \u2014 so large that the state is already struggling just to sustain the reduced level of care under H.R.1, let alone paying the federal government\u2019s share.<\/p>\n Backfilling the Medi-Cal cuts would make the gap larger, said Keely Martin Bosler, former state finance director with more than two decades of experience in state fiscal policy. To \u201cmaintain the same insured level of coverage, those costs are on top of the deficits that exist, and so that would be significant.\u201d<\/p>\n California, in its fourth consecutive year projecting a deficit, will likely see bigger shortfalls in future years as spending continues to outpace revenue. Even if the state spends nothing to backfill federal cuts, the deficit could reach $22 billion in fiscal year 2027-28, according to Gov. Gavin Newsom\u2019s January budget proposal.<\/p>\n Democratic lawmakers, who already cut certain Medi-Cal benefits and froze new undocumented adult enrollment last year to close a $12 billion budget hole<\/a>, acknowledge that the state should now combine sustainable revenue increases with ongoing program cuts to address the sizable deficit as recommended by the nonpartisan Legislative Analyst\u2019s Office.<\/p>\n Yet it\u2019s likely that no meaningful revenue increases will materialize this year.<\/p>\n Newsom, in his last year as governor, has opposed any wealth tax over concerns that it would drive high-income earners out of California and dampen the tax base. Passing any tax increases would also require a two-thirds vote in each legislative chamber, a high bar even with a Democratic supermajority.<\/p>\n The federal HR-1 cuts spurred the Service Employees International Union-United Healthcare Workers West to sponsor the proposed 2026 Billionaire Tax Act for the November ballot, which, if passed, it would impose a one-time 5% tax on the net worth of individuals worth over $1 billion, with revenue going toward health care and education.<\/p>\n The initiative will be on the Nov. 3 ballot if 875,000 certified signatures are collected by June 24. The ballot proposition would become law if a simple majority approves. It is estimated that just 214 billionaires \u2013 worth more than $2 trillion \u2013 would be affected by the tax for one year only..<\/p>\n In addition to the governor, San Jose Mayor Matt Mahan \u2013 alone among the Democratic candidates seeking the gubernatorial nomination \u2013 opposes the billionaire tax ballot initiative. And wealthy opponents are funding a counter initiative to weaken the billionaire tax.<\/p>\n Supporters estimate could generate $100 billion if extended over five years.<\/p>\n Democratic legislative leaders are exploring different versions of a wealth tax.<\/p>\n \u201cI don\u2019t think anything is going to happen this year,\u201d said Senate Revenue and Taxation Committee Chair Jerry McNerney<\/a>, a Stockton Democrat. \u201cSo why look at options that are doomed to fail in the first place?\u201d<\/p>\n A $44 billion problem<\/p>\n The state is constitutionally required to direct roughly 50 cents of each dollar in excess general fund revenue toward K-14 education and reserves. That means the state would need roughly $44 billion in new revenue annually to close a $22 billion budget hole.<\/p>\n Existing legislative proposals don\u2019t come close to raising that much.<\/p>\n Progressive Democrats are consolidating behind a pair of tax proposals, including one that would close the \u201cwater\u2019s edge\u201d loophole<\/a>, which allows multinational corporations that opt in to only pay taxes on income made within borders of California. That loophole allows companies to establish subsidiaries offshore to avoid paying taxes on their profits, said bill author Assemblymember Damon Connolly<\/a>, a San Rafael Democrat.<\/p>\n Connolly told CalMatters his bill would raise $3 to $4 billion annually. But the revenue could swing, and corporations could still find new ways to reduce their California taxes, according to a Legislative Analyst\u2019s Office evaluation of different tax options<\/a>.<\/p>\n Acknowledging that the amount wouldn\u2019t close the entire structural deficit, Connolly said it\u2019s \u201ca step in the right direction.\u201d<\/p>\n \u201cIt\u2019s only one part of the equation. It\u2019s certainly the time to look at potential revenue solutions but also obviously roll up our sleeves and take a hard look at the budget,\u201d Connolly said. He did not specify which areas he\u2019d consider cutting, saying only that protecting health care is where state lawmakers should \u201cdraw the line.\u201d<\/p>\n Another bill<\/a> by Assembly Health Committee Chair Mia Bonta<\/a>, an Oakland Democrat, would require businesses whose workers rely on Medi-Cal and food stamps to contribute to a fund to \u201cprevent loss of or to restore\u201d health care coverage under H.R.1. There are no details yet on how much the charge would be.<\/p>\n But even if voters approve the billionaire tax, critics say the funds could get locked up in court from lawsuits by billionaire taxpayers or by education groups, who might argue it skirts the state\u2019s constitutional requirements to benefit schools. And it\u2019s unclear how the state would sustain the funding after the money runs out: A Legislative Analyst\u2019s Office analysis<\/a> estimates that the measure could drive away billionaires and reduce income tax revenue the state could collect in future years.<\/p>\n \u201cThe first step is to pass the billionaire tax so that we have five years to work on that plan. And then, right after Election Day, we will be ready to work with the next governor to figure out a long-term solution,\u201d Jimenez said.<\/p>\n Taxing the rich faces uphill battle<\/p>\n While they might do little to address the state\u2019s structural deficit, proposals to tax the rich shrewdly tap into the public anxiety with \u201crather extraordinary disparity in the distribution of income and wealth,\u201d said Kirk Stark, a professor of tax law and policy at UCLA.<\/p>\n \u201cI think that targeting the rich is understandable, but I don\u2019t think that it\u2019s really the kind of policy that can be expected to durably address very long-term structural fiscal imbalance,\u201d he said.<\/p>\n