Jobs on the line with passage of AB 8

There was a scorpion who wanted to cross a river, so he approached a frog and asked the frog to let him hop on his back to cross the river. The frog responded that he could not consider this since the scorpion would surely sting him. But the scorpion responded that if so, not only would the frog die, but the scorpion himself also would drown. After much deliberation the frog succumbed to the scorpion’s logic and let the scorpion on his back. Halfway across the river the scorpion struck, fatally stinging the frog. On the way down to both of their deaths, the frog asked in amazement why the scorpion had stung him. The scorpion responded that it was his nature.

While quaint, this analogy is very telling of the pending health-care-reform debate taking place inside the Capitol. Government-mandated health care (a.k.a. the “scorpion”) is now in the midst of a propaganda campaign to convince small business (a.k.a. the “frog”) that health care paired with the largest tax increase in state history will be mutually beneficial and not cause California to lose a quarter-million entry-level jobs.

The sting could hardly be worse for small businesses, particularly those in the labor-intensive retail, trade and construction sectors, who will bear the greatest brunt of financial loss. A recent study of the effects of AB 8 on small business shows that over a course of five years, a total of $8.3 billion will be drained from California businesses in the form of employer payroll taxes, administrative costs and insurance search costs. The poisonous impact of mandated health care burns all the more due to $67 billion in lost sales.

While well intentioned, government-mandated health care is based on the flawed assumption that small-business owners do not want to provide health-care coverage to employees. Rather, it’s far more likely that the increasing lack of affordable coverage has driven many small businesses out of the market. The only way to bring these job creators back into the insurance market, and protect the vital jobs they have today and will create in the future, is to address affordability as the means to achieve health care.

Additionally, AB 8’s plan to pay for coverage for the uninsured solely with a 7.5 percent employer payroll tax will eventually create a funding shortfall because neither this bill, nor other related proposals, contains tangible cost containment or reduction measures. To borrow another apt analogy, we should not put the cart of health care in front of the horse of affordability. It is time for the governor and Legislature to stop, turn around, and focus on the causes of rising health-care costs and insurance premiums.

AB 8’s heavy tax on employers will have serious consequences for California workers. Companies with less than 500 employees will be forced to lay off workers at an estimated 2 percent annually within the first five years. Later, these affects will spill over to surrounding states with which California normally conducts business, and they will experience the same kind of job losses. Companies in the retail, food, construction and more la
bor-intensive sectors will be forced to lay off more than 150,000 employees.
We will continue to speak on behalf of the mom-and-pop businesses that are the backbone of California’s jobs-based economy and whose voice clearly needs to be heard in these discussions. Our recently launched Web site,, is a place that small business-owners can go to calculate the tax they will owe if AB 8 is implemented and share stories about how a new payroll tax will impact their individual business.

Though affordable, accessible health care for all Californians is an admirable goal, small business will not willingly let the scorpion jump on our backs. We plead with the governor and legislative leaders to leave the scorpion on the shore of this debate and focus on ways to bring small business across to the shore of affordable health care with California jobs intact.

Want to see more stories like this? Sign up for The Roundup, the free daily newsletter about California politics from the editors of Capitol Weekly. Stay up to date on the news you need to know.

Sign up below, then look for a confirmation email in your inbox.


Support for Capitol Weekly is Provided by: