by Robert Maynard
In recent years Vermont has consistently ranked among the states with the highest tax burdens in the nation. It appears that this continues to be the case with the future trend being even more worrisome than the present reality. At a time when other states around the country are actually cutting back on taxes, Vermont is poised to enact the mother of all tax increases. This is not a recipe for economic competitiveness, but a prescription for fiscal disaster.
According to the Tax Foundation:
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2012, Vermont taxpayers work until April 19 (ranked 13th nationally) to pay their total tax bill. The Tax Freedom Days of neighboring states are: New York, May 1 (ranked 2nd nationally); Massachusetts, April 22 (ranked 8th nationally); and New Hampshire, April 16 (ranked 20th nationally).
Vermont’s state and local tax burden is currently estimated at 10.2% of income (8th nationally), above the national average of 9.8%. Compared to the 1977 data, Vermont had a tax burden of 11.6% (6th nationally), decreasing 1.4% overall. Currently Vermont taxpayers pay $4,181 per capita in state and local taxes.
On one hand Governor Shumlin seems the recognize the fact that Vermonters are “Taxed Enough Already”: “We are spending too much, and have used up our tax capacity.” WCAX YCQM 1/14/07 “There is no more tax capacity left in Vermont. There is no more money in the bank.” (Rutland Herald, 2/1/07). That was before he was elected Governor, yet he continued to push this argument after becoming Governor:
“I am a proud and strong supporter of Vermont’s progressive income tax structure – the most progressive in the country, where unlike the federal government, we require our wealthiest citizens to pay their fair share of income tax. But, we cannot correct the tax failures of Washington from the State House in Montpelier, and we must be always mindful that every day, we compete with our neighboring states for jobs. Therefore, I remain determined not to increase broad-based taxes on Vermonters as we begin to see signs of modest economic growth. “ – State of the State Message, January 5, 2012
How does this commitment not to raise taxes square with the push to have Vermont’s state government take over the state’s $5 billion dollar a year health care industry? Vermont has tried to move toward a single payer health care system twice before and each attempt was abandoned when it became clear just how much taxes would have to be raised to do this.
“In 1992 the legislature, urged on by Sen. Racine, snatched $900,000 from an insurance reserve fund and gave it to a new Health Care Authority. Its main task was to develop a single payer plan and something called a regulated multiplayer plan, by the end of 1993.” (From John McClaughry’s EAI Commentaries) They did so, but the numbers they came up with were not popular, so the plan went nowhere. “In 2006 the Democrats created a Health Care Reform Commission and told it to do much the same thing. It hired Prof. Kenneth Thorpe of Emory University to produce a new plan.” (McClaughry) Again the plan went nowhere, but Prof. Thorpe got paid for $181,323.22 his services. In the 2009-2010 legislative session, Senator Racine proposes S.88, which calls for spending “400,000 to study socialized medicine.” (McClaughry) “The Senate Appropriations committee agreed to spend only $250,000 on this study.” This brings us to the “Hsaio-Gruber Report.” “In this report (costing $300,000) the legislature’s health care guru Dr. William Hsaio costed out the Option 3 model embodied in H.202. He concluded that his package would require a 9.4% employer payroll tax, plus a 3.1% employee payroll tax.” Of course the bill passed by the House, did not include the financing plan we already paid for, but gave the Shumlin administration “another $1.1 million to produce its own financing plan.”
Polls have shown that Vermonters overwhelmingly want our political leaders to reveal the cost of this initiative before the next elections, but Governor Shumlin and the Democrats have steadfastly refused to do so. I guess they figure that the voter ire caused by such lack of transparency pales in comparison to the expected reaction to the price tag that will come with Vermont’s latest attempt to move down the single payer road.
The prospect of looming record high tax hikes comes at a time when most other states in the nation are going the other way in regard to taxes. According to a Bloomberg.com story earlier this year: “For the first time in 10 years, states cut taxes more in 2011 than they increased them, according to the National Conference of State Legislatures. The hesitancy to raise taxes is likely to carry over into 2012 as lawmakers face an election year, says Steven Roll, a state tax analyst with Bloomberg BNA.” More than likely this is a result of the rise of the Tea Party movement.
Vermont can ill afford to continue down its current path that is sure to result in record high tax increases at a time when most of the rest of the country is cutting taxes. Perhaps Vermont should take a page out of the Tea Party playbook.