California shouldn’t tax employers for hiring the people who need jobs the most

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OPINION — California has spent years encouraging businesses to hire people who face barriers to employment. The state has expanded reentry programs and Medi-Cal coverage to help people transitioning from incarceration become workforce-ready, and expanded job training for other untapped talent pools, like veterans and opportunity youth, to help them stabilize their lives and career trajectories. 

Now, the Legislature is considering a proposal that would undermine those efforts by making some of those very workers more expensive to hire.

Specifically, the Legislature has asked the Department of Finance to develop options that would tax businesses based on how many of their employees are enrolled in Medi-Cal. The more workers a company has on the program, the more they would be taxed.

Consider who is most likely to be enrolled in Medi-Cal: someone in an entry-level job, a young person entering the workforce, a veteran rebuilding their life after service, a person recently home from incarceration. There are millions of them. More than 4 million young people in this country are neither working nor in school, and many veterans return to civilian life facing barriers that keep them on the margins of the labor market. 

These are the workers a Medi-Cal tax would make more expensive to hire. This policy disincentivizes companies from opening their doors to them.

Through our inclusive hiring initiatives, the Responsible Business Initiative for Justice (RBIJ) has helped hundreds of companies build real career opportunities that help people rebuild their lives after justice involvement, or even prevent it in the first place. Our employer-focused resources, learning opportunities, and technical support have equipped businesses to tap into the one in three Americans with a criminal record and the millions of young people ages 16 to 24 who are out of school and not working and, without that first chance at stable employment, far more likely to end up in the justice system later down the line. The companies we work with have learned that when they welcome these workers, the workers show up, they stay, and they move up.

California has spent years trying to encourage exactly this practice. In 2023, it became the first state to use its Medicaid program to support people leaving incarceration, enrolling them in coverage before release and connecting them to the care they need to stabilize and find work. That effort, part of the state’s CalAIM reforms, rests on a simple premise: People need health care, housing and a job, or they’re likely to cycle back into the system. A tax that discourages employers from hiring Medi-Cal enrollees works directly against the state’s own goal.

The employer tax proposal is also simply unworkable by design. Employers cannot legally ask workers whether they are on Medi-Cal, let alone require them to take company coverage instead. A business would be taxed for a private decision its employees are fully entitled to make.

And the cost of getting this wrong is not theoretical. Work is the single strongest predictor of whether someone stays out of the justice system. In 2018, the most recent year with available data, only 54% of people leaving federal and state prisons found employment within a year of their release. A Safer Foundation study found that for those who do hold a job for a year after leaving prison, rates of recidivism are just 16%. For those who cannot find or keep work, it climbs to 52%. The same logic holds for young people and veterans at the edge of the labor market: A steady paycheck is what moves them forward, and being shut out of work is what pulls them back.

California should be lowering the barriers to hiring these workers, not building new ones. Lawmakers and the Department of Finance should set this proposal aside and work on affordability measures that help people who are simply asking for the chance to work.

Maha Jweied is the CEO Responsible Business Initiative for Justice (RBIJ).