News Currents

California hidden tax legislation doesn’t go before committee

The Association of California Insurance Companies warned insurers that the state’s Legislature would consider a bill to establish a hidden, multi-million dollar tax on Californians to publicly fund campaigns of unknown candidates.

Jeff Fuller, ACIC’s executive vice president and general counsel, said the legislation, SB 1459 by Sen. Joe Simitian, D-Palo Alto, raises a number of constitutional issues about freedom of choice and limiting the amount of money available to candidates through the hidden tax. The bill would impose a fee on insurance companies equal to 0.01 percent of the $2.3 billion in gross premium taxes they pay to the state each year. The fees would be used to fund campaigns for insurance commissioner.

“This bill sets a dangerous precedent by allowing publicly funded campaigns in California. It completely ignores public sentiment against such activities as well as constitutional safeguards,” Fuller said.

Listed on the Official California Legislative Information Web site is a view of the bill text: SB 1459, as amended, Simitian, Political Reform Act of 1974.

Under existing provisions of the act, a public officer is prohibited from expending or accepting any public moneys for the purpose of seeking elective office. The proposed bill would exempt campaigns for the office of Insurance Commissioner from that prohibition.

It would also enact the Insurance Commissioner Election Accountability Act of 2006, which would authorize eligible Insurance Commissioner candidates, as defined, to obtain public financing from a fund made up of fees collected from insurers, reimbursements, and interest according to specified procedures and requirements, provided that certain thresholds of public support are shown.

“This fee is a tax in disguise. And, as we all know, fees and taxes are passed down to consumers as part of the prices they pay for products. Therefore, it would be paid by millions of Californians who have one or more forms of insurance coverage, including auto, homeowners, life and health,” Fuller said.

“Legally, the bill may well violate the insurers’, as well as the consumers’, freedom of choice rights because the fee revenue would be used to support the campaigns of candidates they may or may not support for election.”

The bill would impose responsibility for its administration on the Fair Political Practices Commission and provide penalties for violations of its provisions.

The initiative measure provides that the Legislature may amend the act by a statute that becomes effective only when approved by the voters. Also, it would require the Secretary of State to submit those provisions to the voters for approval at the June 3, 2008, statewide primary election.

SB 1459 was scheduled to receive its first legislative test on April 5 before the Senate Banking, Finance and Insurance Committee. According to ACIC, the bill never came before the committee. Simitian, for the time being, withdrew the bill from the committee’s consideration.

In a brief statement to Insurance Journal, Simitian said, “I told the committee I was going to put the bill over for the time being and that I was doing so at the request of assembly member Loni Hancock. She is carrying a broader clean-money, campaign-funding bill of which I am the coauthor. The bill that targeted the insurance commissioner’s position is obviously a much narrower effort.”

Bill Packer, vice president, ACIC said, “The bill is certainly not dead and it wasn’t defeated. Apparently Sen. Simitian is rethinking his strategy on what to do with the bill. There is still time to get it out of committee but there was no action on it April 5. We’ll just have to see when and if it is set for another hearing.”