When is a tax not a tax?

by Robert Maynard

Governor Shumlin had the following to say about Vermont taxes in his State of the State Message, on January 5 of this year:

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.

Putting aside the validity of his judegment regarding the fairness of a progressive income tax, it is clear that he has signaled a commitment not to raise taxes. Such a commitment would lead one to believe that he intends to take the route of cutting spending as a way out of our impending fiscal crisis. I will address this “path not taken” in a bit, but first would like to examine the request for fee increases from numerous entities of the state government. It looks like the answer to the question posed in the title of this piece is that a tax is not a tax when it is a fee.

Yesterday, April 4th, the Senate Finance Committee took testimony from representatives of several state government entities regarding H. 761 – An act relating to executive branch fees, including motor vehicle and fish and wildlife fees. The breakdown of the various fees requested was posted on 2010 State Representative candidate Tom Burditt’s Facebook page:

Rep. Carolyn Branagan from Georgia reports Ways and Means Committee testimony continued on fee requests by the administration. The Committee has divided the fees roughly in half. House bill H.761, about half of fees requested by the administration, was presented on the House floor early in the week. It was approved following an 11-0-0 Committee vote. This portion of requested fee changes included the Department of Motor Vehicles fees strongly supported by the House Transportation Committee. Remaining fees are all from the Department of Environmental Conservation …

In addition to those entities, the Senate Finance heard from representatives of the Department of Labor, the Department of Disability, Aging & Independent Living, the Vermont Supreme Court, the Defender General’s Office and the Department of Health. Each made the case that fees needed to be raised in able to allow for the expansion of services, the more efficient delivery of services, upgrading the technology used to run the programs, etc.

The presentations were relatively brief and the questions were few. On the surface each request seemed reasonable, but I find it difficult to believe that the surface was even being scratched to find out whether further revenue is indeed needed to achieve these goals. In the business world there is a managerial concept known as “Lean Six Sigma” that “is a synergised managerial concept of Lean and Six Sigma that results in the elimination of the seven kinds of wastes/muda (classified as Defects, Overproduction, Transportation, Waiting, Inventory, Motion and over Processing) and provision of goods and service at a rate of 3.4 defects per million opportunities (DPMO)”.

The idea is to deliver more quality and quantity at a lower cost, or “doing more with less.” I have yet to hear of this concept being adopted by government agencies. Until it is, or something like it, I do not see how it is possible to evaluate requests for increasing revenue. Besides asking the government to learn a lesson from the business world and operating more efficiently, a review of the proper role of government is long overdue. There are numerous functions undertaken by government that are more properly the domain of civil society. In other words, since government is a blunt instrument, there are certain functions that it is simply not competent to handle. I do not expect such a review to happen before deciding the fate of H.761, but am firmly convinced that we need to go down that road before we go “Off the Rails.”