Insights

Will Sacramento’s proposed single-payer plan cause more high-net-worth individuals to make for greener pastures

By Tony Gales, Partner, Tax 

California's legislature has introduced a pair of bills to create and pay for a single-payer healthcare program. The proposed system, tentatively dubbed “CalCare,” would provide comprehensive coverage, including coverage for hospital stays and services, prescription drugs, and dental care. It would require the state to hike taxes to cover the $163 billion needed to finance the system — all that despite California already having the highest taxes in the nation. 

Businesses would face a gross receipts tax of 2.3% on gross income above $2 million, while employers with 50 or more employees would see new payroll taxes of up to 2.25% per employee. And, of course, there would be additional income tax hikes for high-income individuals. 

There are several hurdles to overcome before CalCare can become law. First, the bills were introduced in 2021, which means they would need to pass the Assembly and be sent to the state Senate by the end of the month. Because the act requires an amendment to California's constitution, it must attain a two-thirds majority in both houses of the legislature to get on the ballot for citizens. From there, it needs approval by a majority of voters. But if signed into law, it could trigger an exodus of California's high-net-worth individuals toward lower tax jurisdictions. 

So, what does all this mean for you Well, it’s too early to say for certain. It’s doubtful CalCare would be on the ballot for the upcoming June or November elections. The most likely scenario is that it gets pushed until the 2024 election cycle. There is significant opposition to the bill from the California Chamber of Commerce, California Medical Association, and California Hospital Association, among others, so passing it is an uphill battle.  

Your partner in success, BPM will continue to monitor the situation and look for strategies to help offset any negative impact CalCare might have if passed into law. Should you have any lingering concerns, please follow up with your BPM team as soon as possible so we can help answer your questions and provide more information.  

About BPM Private Client Services 

Our No. 1 goal is to minimize your taxes. With a body of seasoned tax professionals who utilize all the tools available to increase your savings, BPM’s Private Client Services team can handle everything from tax return preparation, to comprehensive estate, gift, and trust planning, to stock option and retirement planning. We have a track record of proven strategies which we proactively apply to the diverse problems that our clients face. By understanding your needs and goals, we craft intelligent, personalized tax roadmaps that minimize your risks and maximize your peace of mind. 

 

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