Many Californians I speak with seem to agree that health insurance for all California residents is seriously needed for all of us to continue to enjoy quality health care and to preserve our state’s healthcare industry, a substantial component of our economy. There are, of course, different opinions as to how to accomplish that. Assembly Speaker Fabian Nunez and Gov. Arnold Schwarzenegger introduced a plan in December to extend health insurance to 3.6 million Californians that are currently without coverage. The plan would require most Californians to obtain private medical insurance. To get to the voters, the plan, which was approved by the state Assembly, will also require approval by the state Senate. According to Senate President Pro Tem Don Perata there are serious concerns in the Senate over the plan’s effect on state finances. If the Senate approves the legislation with significant changes, the initiative will require re-writing. If the plan does get on the ballot it will face significant opposition due primarily to the proposed funding mechanism which includes a requirement that employers spend from 1 percent to 6.5 percent (depending on the size of their payroll) of their payroll costs on healthcare for their workers, and approximately doubles the cigarette tax by raising it to $1.75 per pack. Strong opposition is anticipated from state business groups, the tobacco industry and drug companies. Another expected opponent is Blue Cross, the state’s largest insurer. That opposition appears to be due to plan provisions that bar insurance companies from denying coverage based on existing medical conditions and requires at least 85 percent of health insurance premiums to be spent on medical care. Although Blue Cross is expected to oppose the plan, Kaiser Permanente and Blue Shield currently support it. An additional funding component is a $2.3 billion tax on hospitals. The hospitals support the plan which will use these funds to pay for increased Medi-Cal payments to doctors and institutions that help the poor. The tax will also qualify California for $2.3 billion in matching federal funds. I know that the Governor has worked very hard to develop a plan that will be successful and I am sure that many funding sources have been considered. However, I don’t remember hearing about consideration being given to the alternative I will suggest. My suggestion will serve several purposes. It will provide funding for health insurance, help further the efforts toward making California “green,” and reduce our dependence on fossil fuels. My suggestion is to levy a per-gallon “gas guzzler” tax surcharge. Unlike the cigarette tax, the “gas guzzler” tax would not prey on victims of addiction. It is strictly a matter of choice: Do you wish to drive a gas- guzzling and probably greater polluting (and thus greater health risk) vehicle and pay a tax to do so, or do you wish to drive an efficient vehicle and avoid the tax? Although it is unlikely that too many people who desire non-efficient luxury or sport-utility vehicles will change their course for a surcharge of, say, 25 cents per gallon, if they do, and the revenue begins to shrink, the surcharge amount on the remaining gas guzzlers can always be increased to cover the shortfall. Based on the information I was able to locate (which is a bit stale), in 2000 the number of registered autos and trucks was approximately 28 million. Other statistics indicate that at least 75 percent of California vehicles do not exceed 30 mpg (“gas guzzlers”). If we assume for argument’s sake that approximately 50 percent of trucks are used as passenger vehicles (SUVs, light pick-ups, vans etc.) and operate on gasoline, as of 2000 there were approximately 22.5 million passenger vehicles operating on gasoline. If 75 percent of those, or almost 16.9 million, are “gas guzzlers,” and if the average gas guzzler is driven about 15,000 miles per year and gets 18 mpg, the average number of annual gallons used by gas guzzlers is approximately 14 billion gallons (total gallons sold in California in 2006 were 15.8 billion). Therefore, if each gallon used by a gas guzzler vehicle was assessed a $0.25 surcharge, the revenue generated by this tax would be $3.5 billion annually. This would cover approximately 25 percent of the estimated $14.4 billion cost of the healthcare plan. Based on statistics I have seen, this is approximately $2 billion more than the amount of coverage that can be anticipated by the additional cigarette tax. To administer the gas surcharge program perhaps there could be separate gas pumps with different size hose nozzles and the gas guzzler cars could be equipped with the same size receiving end (either factory or dealer installed). This would obviously have a front-end cost that the cigarette tax would not, but I believe the result would be far better for the future of our healthcare, our environment and our economy. Gregory N. Lippe, CPA, is Managing Partner of the Woodland Hills-based CPA Firm of Lippe, Hellie, Hoffer & Allison, LLP, 1st Vice-chair of the Valley Industry and Commerce Association (VICA) and a Director of First Commerce Bank.
