Tobacco-tax initiative fails to stop fraud and waste

It has been widely reported that as much as 10 percents–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, so as to increase funding for hospitals and organizations related
to California’s out-of-control health-care system. The fact is that
taxpayers already pay more than $40 billion annually to fund health-care
programs in the state–and 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 health-care

The numerous reports of this waste are disturbing, and highlight why this
system must be cleaned up before any additional funding should be
considered. Countless daily newspapers and other media outlets have
published outrageous examples of how doctors, dentists and others file
fraudulent Medi-Cal claims, bilking California’s taxpayers of billions.

These include Medi-Cal claims filed for prenatal services to women who
already had 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 also have 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

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 policymakers 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 signal to special-interest manipulators to push more and
more taxes targeting California 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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