News

Tobacco tax initiative fails to stop fraud and waste

It has been widely reported that as much as 10 percent – in excess
of $3 billion annually – of the Medi-Cal budget for the poor and
elderly is lost to fraud and waste, year after year. Yet a new
measure targeted for the November ballot would ignore this problem
and simply reward a system that is out of control with waste and
fraud.

Currently gathering signatures for the November 2006 ballot is an
initiative that would raise over $2 billion annually from a new tax
on tobacco products to increase funding to hospitals and others
related to California’s out of control healthcare system. The fact
is that taxpayers already pay more than $40 billion annually to
fund health care programs in the state – and the proponents will
work hard to hide the realities of the tax dollars currently wasted
due to fraud and mismanagement. Another tax increase does nothing
to respond to this mismanagement of healthcare dollars.

The numerous reports of this waste are disturbing, and highlight
why this system must be cleaned up before any additional funding
should be considered. Numerous daily newspapers and other media
outlets have published outrageous examples of how doctors, dentists
and others file fraudulent Medi-Cal claims, bilkingCalifornia’s
taxpayers of billions. These include Medi-Cal claims filed for
prenatal services to women who had already undergone abortions; a
dentist charged for filling teeth that had been extracted; and a
suspended doctor billed for hundreds of nuclear brain scans without
proper equipment and expertise. Other media outlets have also
highlighted that California is the only state in the nation to pay
retail prices for wheelchairs – at more than $36,000 each. Reports
of fraud and waste go on and on. (For media reports on the ongoing
problems of health industry fraud and waste, please visit www.caltax.org/MediCalFraud.pdf> http://www.caltax.org/
MediCalFraud.pdf.)

In addition to the wrongheaded nature of this measure regarding the
misuse of taxpayer funding, there are other major issues that must
be considered. Law enforcement sources have identified cigarette
smuggling as a source of funding for terrorists abroad. The extreme
taxation imposed by this measure is certain to produce more tax
fraud and smuggling by organized gangs and others whose black-
market profits amount to hundreds of millions of dollars a year.

It is clear that higher taxes are unnecessary. When managed
responsibly, there is more than enough revenue to meet California’s
priority needs for hospital and health care. Proponents of this
initiative want policy-makers to raise new taxes and ignore
widespread mismanagement.

This type of ballot-box budgeting through the initiative process
has been identified by the nonpartisan Legislative Analyst’s Office
as a root cause of unaccountability, taking billions of tax dollars
away from legislative oversight. This puts more public spending at
risk to corruption and mismanagement instead of being subject to
state laws that require competitive bidding on contracts and guard
against conflicts of interest.

This tax would be a terrible signal to special interest
manipulators to push more and more taxes targetingCalifornia
consumers. Instead of simply raising taxes, we must responsibly
manage California’s tax dollars. We encourage Californians across
the state to reject the irresponsibility of this measure by
refusing to sign petitions to place it on the November 2006 ballot.


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