Research Briefing

Already Facing Fiscal Crises, States Will Be Forced To Raise Taxes To Pay For ObamaCare

OBAMACARE WILL SHIFT MASSIVE DEFICITS TO STATES ALREADY IN BUDGET CRISES,

FORCING THEM TO RAISE TAXES 

“CBO Estimates That State Spending On Medicaid And CHIP In The 2010-2019 Period Would Increase By About $20 Billion As A Result Of The Coverage Provisions.” (Douglas W. Elmendorf, Letter to Nancy Pelosi, 3/20/10)

• Gov. Ed Rendell (D-PA): “I Don’t Think It’s An Accounting Trick, I Think It’s An Unfunded Mandate … We Just Don’t Have The Wherewithal To Absorb That Without Some New Revenue Source …” (CNBC’s “Squawk Box,” 9/3/09)

Former Governor Howard Dean Says States Are Already Bankrupt And Will Need To Raise Taxes.  “Look, the states are in a terrible, terrible bind. It really is a problem for them. Places like California are virtually, virtually bankrupt. I mean I think their bond rating is junk. You know, New York is in big trouble. So they’ve got to do something and there’s just so much you can cut. I think you got to cut, cut, cut, cut but at some point they’re going to have to raise taxes. It is true, whether you like it or not, that the biggest untapped source of taxes for states that makes any sense, is taxes on services.” (CNBC’s “Squawk Box,” 3/29/10)

CEO Of University Hospitals In Cleveland Warns ObamaCare “Creates A Larger Burden On The States.” “UH’s Zenty said, ‘Even though it appears more coverage will be provided through Medicaid, that creates a larger burden on the states. And with the state of Ohio’s looming budget deficit, we need to be mindful of how that will be funded.’” (Evelyn Theiss, “Health Care Bill Should Save Cleveland Hospitals Money On Treating Poor, But Exact Amount Unclear,” The Cleveland Plain Dealer, 4/7/10)

• ObamaCare Adds $300 Million To New York State’s Deficit. “The federal health care overhaul President Obama signed … adds an extra $300 million to New York State’s budget deficit. The problem involves Medicaid reimbursements that state and local governments can use to help balance their budgets …” (Adam Sichko, New Health Care Law Adds $300M To NY’s Deficit,” The [Albany] Business Review, 3/24/10)
• ObamaCare Will Cost California “$2 Billion To $3 Billion” Annually. “Figure $2 billion to $3 billion. That’s the state of California’s rough estimate of what national healthcare expansion ultimately will cost it each year.” (George Skelton, “California Could Take Big Hit From Healthcare Overhaul,” The Los Angeles Times, 3/25/10)
• Indiana Medicaid Program Says It Will “Lose Some $400 Million In [Prescription Drug] Rebates Alone” Over Next Decade. “The Indiana Medicaid program has a strong history of negotiating some of the most favorable prescription drug rebates in the nation. ... The new federal health care reform legislation increases the minimum rebate level for most brand name and generic prescription drugs. Unfortunately for Indiana, the savings we achieve now will be confiscated by the federal government at a cost to Hoosier taxpayers. ... Over the next 10 years, we’ll lose some $400 million in rebates alone because of the federal health care reform legislation.” (IN Social Services Sec. Anne Murphy, Letter To Indiana OMB Director Ryan Kitchell, 3/26/10)
• Texas Puts Cost Of ObamaCare At $27 Billion During First Decade It Is Fully Implemented. “[Texas Health And Human Services] Commissioner Tom Suehs estimates that health care reform’s top-dollar items -- Medicaid expansion to roughly 2.1 million Texans, plus heightened reimbursement rates for primary care physicians -- will cost the state more than $27 billion between 2014 and 2024 ...” (Emily Ramshaw, "The $27 Billion Question," Texas Tribune, 4/1/10)    

AFTER SOME DEM GOVERNORS ALREADY RAISED TAXES,

THEY’RE LOOKING FOR MORE WAYS TO FLEECE RESIDENTS TO PAY FOR OBAMACARE 

With Obama Signing Health Care Bill, States Considering Host Of New Taxes As They Face “A Period Of Economic Gloom.” “In the scramble to find something, anything, to generate more revenue, states are considering new taxes on virtually everything: garbage pickup, dating services, bowling night, haircuts, even clowns. … But this is also a period of economic gloom for states. Pension funds are in the red, federal stimulus help will soon vanish, and revenues from traditional sources like income and property taxes are slumping ever lower, with few elected officials willing to risk voter wrath by raising them.” (Monica Davey, “States Seeking Cash Hope To Expand Taxes To Services,” The New York Times, 3/27/10)

In 2007, Gov. O’Malley Passed A $1.5 Billion Tax Increase, Largest In Maryland’s History. “Republican leaders said the session was more likely to remembered for its frantic pace and for what would arguably be the largest tax increase in Maryland history. Legislation expected to be given final passage before adjournment included increases in sales, corporate income, tobacco and vehicle titling taxes, as well as an overhaul of the personal income tax system that would result in high-end earners paying more.” (John Wagner, “Md. Lawmakers Approve Tax Package,” The Washington Post, 11/20/07)

• Now Gov. O’Malley (D-MD) Has Not Ruled Out Further Tax Increases If Reelected. “When pressed on whether he was leaving open the possibility of raising taxes should he be reelected, O’Malley did not rule them out. He said that after taking office, he supported a $1.4 billion tax increase, the state’s largest, to close a budget gap he inherited.” (Aaron C. Davis, “O’Malley Puts ‘Economic Recovery’ Ahead Of Tax Increases,” The Washington Post, 1/22/10)  

Last Year, Gov. Deval Patrick Increased Taxes On Massachusetts By Over $1 Billion. “Governor Deval Patrick said yesterday that he will sign more than $1 billion in tax increases, ending a months-long standoff with the Legislature and ensuring Massachusetts residents will pay more for everything, from satellite dishes to cheeseburgers.” (Matt Viser, “Patrick Stresses Upside Of Tax Hikes,” The Boston Globe, 6/27/09)

• Now Patrick Is Proposing Another $100 Million In Increases On Food Items. “Cigar smokers, car owners, people with a sweet tooth and people in poverty could all soon be paying higher taxes or fees if Gov. Deval L. Patrick gets his way. Seeking money for such services as health care, police training and recycling, the governor is proposing to raise $100 million from new taxes and fees in the $28.2 billion state budget proposal he filed for the fiscal year that starts July 1. … Patrick, the state’s Democratic governor, is again asking legislators to approve such proposals as imposing the state’s 6.25 percent sales tax on candy and soda, a move that would raise $51 million for health care.” (Dan Ring, “On The Up And Up Governor Proposes Tax, Fees Increases,” The Republican, 2/1/10)

Last Year, Gov. Ted Strickland (D-OH) Raised Taxes On Ohioans By $844 Million Dollars. “Lawmakers and Gov. Ted Strickland yesterday broke a long-awaited deal to patch an $851 million hole in the state’s education budget by delaying for two years the final 4.2 percent installment of a total 21 percent cut set in motion in 2005. . . . With withholding rates largely having run their course for the year, the state expects to recoup roughly $844 million to apply to the $851 million hole when taxpayers file their returns next spring, with many getting smaller refunds than expected.” (Jim Provance, “Deal Reached To Patch Hole In Ohio Schools Budget,” The Toledo Blade, 12/18/09)

• And Executive Director Of Center For Community Solutions In Cleveland Says Ohio Will Have To Raise Taxes “To Meet The Obligations Assumed In The Bill.” “John Begala, executive director of the nonprofit Center for Community Solutions, said preliminary analyses show that $20 billion (per year) in costs for health care reform will be divided among the 50 states, but added … ‘It’s almost unimaginable that Ohio will be in a position three years from now to meet the obligations assumed in the bill without raising revenue for that purpose.’” (Evelyn Theiss, “Health Care Bill Should Save Cleveland Hospitals Money On Treating Poor, But Exact Amount Unclear,” The Cleveland Plain Dealer, 4/7/10)