A Modest Proposal on the Budget Impasse

June 20, 2018

by Rob Roper

Yesterday 51 legislators voted to uphold Governor Scott’s veto of H.13, a tax/budget bill that would have raised property taxes on Vermonters. The Governor has made a promise not to raise taxes or fees – including property taxes — a cornerstone of his platform since he ran for office two years ago, so his stance should come as no surprise. And, given that the state is running an unanticipated surplus of around $170 million this year, it should be an easy promise to fulfill.

The Democratic leadership, however, makes some legitimate points in their reluctance to adopt Scott’s plan. We should not use one-time money to fund ongoing expenses, using one-time money to make property tax bills artificially low (based on the budgets passed at the local level) further severs voters from the real impact of their school budget votes, and we do have to address the issue of unfunded pension liabilities, which is where the Democrats want to use some of the surplus funds.

So, here is a modest proposal for compromise….

  • Allow the property tax rates to increase in line with local spending decisions as they normally would at 5 cents and 7 cents for residential and non-residential respectively.
  • Put $50 million of the surplus revenues toward paying down the pension liabilities.
  • Use $100 million of the surplus revenues to fund a one-time tax rebate check to all Vermont taxpayers, which they can use to cover the cost of their property tax bill – return the money to the people who earned it!
  • Use the balance of the surplus revenues to cover inflationary costs of programs between the FY18 and FY19 budgets.

This would be a win/win for all sides.

The Democrats would get the needed pay-down of pensions liabilities they want (and, frankly, all Vermonters should want) and successfully avoid the use of one-time funds for ongoing education expenses.

Scott and the Republicans could legitimately claim that, when you balance the tax increase with the tax rebate check, they did not raise taxes. Although technically there will be a tax rate increase (Scott will have to compromise here), the fact that Vermonters will see the increase only reinforces Scott’s message that reform to the education financing system is still very much needed, so he does benefit in that respect.

All can claim victory in providing a tax relief bonus to Vermonters in the short term, while securing long-term savings for our pension obligations – and avoiding a government shutdown.

The stumbling block to this proposal is the fact that the legislature intends to spend that surplus money on things other than a rebate to taxpayers. But, whose money is it anyway? That’s a debate we can hash out over the next week and a half as we avert a government shutdown.

– Rob Roper is president of the Ethan Allen Institute.

{ 4 comments… read them below or add one }

Ralph Colin June 22, 2018 at 10:05 pm

Another “stumbling block” re the proposed tax rebate: by the time the Tax Department could figure out how to process such a refund, half of us would have died.

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Steve Hearne June 22, 2018 at 11:44 pm

Paying into the retirement fund is what Gov. Douglas wanted to do several years ago but the lefty legislature insisted on hiring even more teachers that we couldn’t afford. I believe that was the start of pre-school. The pension fund is on very shaky ground at present. It is only right that the promise of a retirement is taken seriously. Any additional money should be returned to those who pay into the bloated system. That refund check may come at the critical time when the well pump or the water heater needs replacing. The taxpayers have other obligations besides what the socialists deem worthy.

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Elizabeth B. June 25, 2018 at 1:00 pm

A raise in property taxes only earns more money for income based apartments that are already overpriced and subsidized by federal government. Those who say it’s a good idea honestly don’t know what it’s like to live in one of those places. It is awful, not a true way out of poverty and the brunt of the money goes to who knows where especially when those owners of the type of housing, well, what are their property taxes like.

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Doug Richmond June 27, 2018 at 3:25 pm

Hmmm? Could it be that the business and economy revival emphasized and enabled by HIM are the source of our Vermont tax prosperity.

BUT………… Why the hang should we pay out of staters $10,000 to move here. Now is that $10,000 for husband and also $10,000 for the wife.??

Is it still true that New Hampshire has twice as many resident, and HALF as many bureaucrats as Vermont. And as a relatively poor and small state have the Fifth Highest education costs per pupil – approaching $20,000, and no one can see a way to look at other states as an option for our school and property tax spending?

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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