February 21, 2019

By David Flemming

Last month, Vermonters were shocked to hear about police confiscating guns from an innocent man because a boy was trying to steal the man’s guns to target a school. This confiscation was made easier with state legislation passed last year. Fortunately for the owner, the guns were returned to him. The gun owner may not have been so lucky if the state had decided to seize his guns under a different statute.

“Civil asset forfeiture” occurs when police suspect an individual of wrongdoing, and decide to take property used in the alleged crime (such as a vehicle, home, guns or cash). Since confiscating goods is easier than securing a criminal conviction, police officers have been known to offer freedom in exchange for a person’s property related to the “crime.” Law enforcement can then sell the property and pocket a portion of the proceeds, which varies by state. In the strict legal sense, the property is guilty until proven innocent. Getting it back in a court of law can often prove more costly than the property itself, leading many to give up on its safe return.

Civil asset forfeiture first came into vogue during 1920’s Prohibition with the seizure of alcohol. It was revitalized during the 1980’s as a way to battle drug dealers. Over the past two decades however, law enforcement has become increasingly reliant and aggressive toward ordinary citizens in using asset forfeiture to fund its operations.

For 14 years from 2000 to 2014, the CATO Institute ranked Vermont around #10 among the 50 states for asset protection, but we’ve recently dropped to #15.

In 2015, Vermont passed a law requiring a conviction in criminal court prior before property could be confiscated in civil court. Unfortunately, this step forward was accompanied by a move to allow law enforcement agencies to keep 45% of forfeiture proceeds, whereas before the entire amount went in the state treasury. Thus, Vermont’s police officers were given an incentive to take property from their neighbors.

Vermont and 39 other states require the owner of the property to prove their property’s innocence, which is no easy task. In 2012, a grandmother lost her home after her son used it to sell marijuana out of, unbeknownst to her.

Vermont is a little better in regards to “how convincing” the government’s evidence must be to a judge or jury. Vermont courts require the government to use evidence that points toward guilt “beyond a reasonable doubt” or in a “clear and convincing” manner, depending on the property seized. This is a better presumption of innocence than the “preponderance of evidence” standard that most states use, but it is still a worse standard than the most protective states.

While we can thankful about the recent Supreme Court win against broad forfeiture, only time will tell if Vermonters’ property will be safer from the government’s prying hands. In the meantime, keeping all of your property in Bitcoin is the safest way to protect it.

David Flemming is a policy analyst at the Ethan Allen Institute

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February 20, 2019

by John McClaughry

On Tuesday Senator Bernie Sanders announced his campaign for the Democratic nomination for President – despite the awkward fact that he has steadfastly refused to belong to the Democratic Party.

His ten minute announcement video was, I admit, a perfectly engineered appeal to America’s teeming left wing element. To no one’s surprise, Bernie inveighed against Wall Street, multinational corporations, billionaires – at least the ones who don’t fund left wing causes – the health insurance industry, the drug manufacturers, the fossil fuel energy sellers, and the National Rifle Association.

He denounced Donald Trump as a racist, sexist, homophobic, pathological liar, fraud and bigot. Curiously, he didn’t attack Trump for shamelessly running up a trillion dollars in national debt. Bernie should be grateful to Trump for setting a precedent for the future progressive presidents who will need lots of borrowed money to pay for their lavish agendas..

Bernie promised his usual menu: All-out war against climate change, countless new jobs in renewable energy, tuition free higher education, reducing if not wiping out student debt, sweeping immigration reform, wealth taxes on the unworthy rich, a living wage, national paid leave, an end to the War on Drugs, and of course, Medicare for All.

Bernie’s action line was for a million people to sign on to his crusade to transform our country economically, socially, and racially.

I can’t believe this will end well for him, but I give Bernie high marks for clarity of objectives.

John McClaughry is vice president of the Ethan Allen Institute

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February 19, 2019

by Rob Roper

Governor Scott and some key legislative leaders indicated a willingness to reform Vermont’s estate tax, raising the exemption from $2.75 million to $5.75 million. This is a good step if Vermont wants to keep wealthy taxpayers as citizens rather than see them flee entirely, or simply spend six months and a day somewhere else. However, if Vermont wants to actually attract wealthy retirees, an even better step would be to eliminate the estate tax all together.

Only a dozen states plus Washington DC have an estate tax (38 get along fine without one), so we wouldn’t be alone. But, among those states that do are neighboring (and neighborhood) New York, Massachusetts, Maine, Connecticut, and Rhode Island. Vermont, if we were smart, would position ourselves to be the financial as well as lifestyle destination for New England retirees who don’t want to leave the region, and, more importantly, don’t want to be fleeced when they die.

There would likely be quite a few candidates from just the Boston, New York, Newport, Greenwich areas who would jump at the chance to escape their local tax man and take in Vermont foliage season at the same time. These are people who will then build and renovate houses (construction jobs), eat in restaurants, shop in local stores, donate to and volunteer in local philanthropic entities, such as EMT services. They would be paying Vermont income taxes, sales taxes, rooms and meals taxes. How gratifying would it be to see New York Governor Andrew Cuomo complaining that Vermont, not Florida, was stealing his taxpayers. We don’t need all of them. We’re small. We just need a few.

Vermont has to have a tax strategy for attracting and encouraging some sort of economic activity. Right now, we have none. We tax, and therefore discourage, everything. We have high income taxes, 6-7% sales taxes, high property taxes, business taxes, estate taxes…. The only low tax strategy we employ is for the captive insurance industry, and it is tremendously successful in bringing in revenue. Why not replicate it in other areas? Retirement is an easy and sensible place to start.

Proponents of the Death Tax like the fact that it “soaks the rich.” This is shortsighted. You can’t soak the rich if they don’t live within your borders. Nobody has to live here. To harvest a crop, you need to cultivate that crop. And, to cultivate a crop sustainably, you can’t over harvest that crop. We need to cultivate a tax base, but we’re creating an economic dustbowl.

Rob Roper is president of the Ethan Allen Institute.

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February 15, 2019

by John McClaughry

The crowning dream of Democratic Gov. Jerry Brown’s last term as governor was the great bullet train to whisk Californians from Los Angeles to San Francisco in under three hours. This was Brown’s leading contribution to the fight against climate change. Now Brown is retired – finally – from office, and his very green, liberal successor, Gavin Newsom, took a fresh look at what has grown from a $33 billion project to over $80 billion, and pulled the plug.

The state rail authority has spent more than $5 billion acquiring and destroying hundreds of properties but not yet laid tracks. Taxpayers have lost patience, and Gov. Newsom stated the obvious when he said that “there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to LA.” He says he’ll complete the 160 mile section from Bakersfield to Merced, far out in the central valley, but added “don’t call it the train to nowhere.” Not very convincing.

What the people out in the Valley want is not a high speed train, but irrigation water. The state has curtailed water to Valley farms to protect the Delta Smelt.

The Wall Street Journal editorialized that “California’s bullet train provides a miniature model of the Green New Deal. Alas, the main reason liberals like Mr. Newsom are likely turning against it is they are eager to redirect taxpayer money to entitlements and other green largesse.”

John McClaughry is vice president of the Ethan Allen Institute. 

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February 13, 2019

by Rob Roper

The Paid Family Leave (PFL) program being discussed in the legislature this week will require a massive, $100 million-plus payroll tax, which is a tax on earned income. This is a very big number in and of itself. In 2016, for example, Vermonters paid just over $500 million to the State in total income tax receipts, so this is like an overall 20% income tax increase.

However, unlike the “progressive” income tax, the PFL payroll tax is a flat rate across all income levels. (PFL is a mandatory insurance program, like social security, and supposedly not a welfare program.) As a result, the poorest working Vermonters, those in the lowest income tax bracket, will get hammered with a de facto 28% income tax increase to pay for Paid Family Leave – a program most will never use.

Vermont’s four income tax brackets currently rage from 3.35% for individuals earning less than $38,700 up to 8.75% for those earning $195,450 or more. So, when you tack a .93% payroll tax on top of these rates, you have a de facto 28% income tax rate increase on Vermont’s lowest earners, those below the $38,700 income level. However, when you apply that .93% to folks paying 8.75%, the highest income tax bracket, it’s less than 11% increase — possibly much less than 11% because this does not take into account that there is a $150,000 income cut off for income exposed to the new tax, or the likelihood that when you get to those higher incomes folks often have non-wage income, such as investment, that wouldn’t be subjected to the tax.

This seems like an odd policy priority for a state that already boasts one of the heaviest tax burdens in the United States, and for a liberal state that is ostensibly looking out for the poor.

Rob Roper is president of the Ethan Allen Institute. 

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By John McClaughry

Last summer the Joint Fiscal Office awarded a legislatively mandated contract to Resources for the Future, a Washington consulting firm, “to analyze the costs and benefits for Vermont of adopting and implementing policies to reduce greenhouse gas (GHG) emissions caused by Vermont’s consumption of fossil fuels.”

The firm delivered its 114-page report last month. As befits this complicated subject, it discusses a wide range of alternative choices for legislators concerned about meeting the state’s greenhouse gas emission goals. Here are 12 questions and answers about the study. The text in quotes is from the study itself.

  1. Why did the Legislature commission the decarbonization study? For five years a coalition of environmental groups has promoted the enactment of a carbon tax. Its purpose is to drive up the price of fossil fuels – gasoline, diesel, heating oil, natural gas and propane — so that consumers will reduce their consumption of these fuels. The resulting reduction in greenhouse gas emissions, the advocates believe, will contribute to a global effort to reduce emissions and thereby reduce projected harmful and possibly catastrophic increases in global temperatures. When the Legislature repeatedly failed to enact carbon pricing legislation, the coalition in 2018 got the Legislature to earmark $120,000 for the decarbonization study.
  2. Have the CO2 emission reduction goals set in statute in 2006 been met? No. Today Vermont is emitting well above the 2005 greenhouse gas emissions goal, and emissions are rising, instead of dropping toward 58 percent below the 2005 level by 2025.
  3. Would a carbon tax allow Vermont to meet those goals? “Vermont is unlikely to meet its emissions targets with a carbon-pricing-only strategy unless the carbon price is substantially higher than the prices modeled in this study ($19-$77 per metric ton equivalent).”
  4. How much revenue would the carbon taxes modeled in the study bring in? “$74.7-$433.8 million a year in annual revenue in 2025,” depending on coverage (motor fuels, natural gas, heating oil, propane) and exemptions (aviation gas, off-road construction fuel, federal, state and municipal fuel use etc.) (Electricity is not included in the study.)
  5. How would those revenues be used? The study discusses three options. First, a lump sum rebate to every household; second, lowering payroll or income taxes; and third, spending the money on state programs, such as renewable energy, weatherization, public transit, and electric vehicle subsidies.
  6. Since the carbon tax would raise the price of gasoline and diesel fuel, would a portion of the proceeds go to the transportation fund to support highway and bridge maintenance? That could be a legislative choice under the third option, but the study does not take a position on that.
  7. Would a large carbon tax in Vermont drive consumers to adjacent states to get much lower prices on gasoline, diesel and heating oil? The study does not believe that people would do that.
  8. Is there any combination of policies that would allow Vermont to meet any of the declared emissions goals? Yes. “Combining moderate carbon pricing and non-pricing policy approaches could reduce emissions to meet Vermont’s US Climate Alliance target … of 32-38% below 2005 levels in 2025.” This would presumably require using most of the carbon tax revenues for subsidies to promote switching away from fossil fuels.
  9. What effect do the various levels of carbon taxes have on economic welfare? “When revenues are returned to households via rebates, total economic welfare falls between $7.1 million and $61.2 million in 2025 (in 2015 dollars), depending on the price level and the scope of sectoral coverage.”
  10. How does the study overcome these economic welfare losses? By adding in “climate benefits” and “health benefits.” The economic value of both of these calculations – especially the climate part — are admittedly highly debatable. The calculation assumes that Vermonters will agree to let climate benefits projected to accrue elsewhere on the planet compensate for diminished economic welfare here.
  11. What is the payoff to Vermonters, who will bear the costs of “decarbonization”? They will get some slight air quality improvements from moving away from fossil fuels for heating and transportation. But “the success of Vermont’s decarbonization strategy will depend on the extent to which it drives action in other states or other countries. Vermont cannot solve the climate challenge on its own, but if Vermont’s policy leadership were to inspire increased leadership and policy innovation in other states or nations – it would indeed amount to a significant impact.”
  12. And that impact would make up for the much higher tax burden and economic disruption that a carbon tax would impose on Vermonters? (Insert your answer here).

 This commentary is by John McClaughry, the vice president of the Ethan Allen Institute.

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February 12, 2019

by Rob Roper

Joyce Manchester, a Senior Economist for the Vermont Joint Fiscal Office, testified before the House Committee on General Housing & Military Affairs regarding the estimated cost of implementing the proposed mandatory, government-run Paid Family Leave program. The total estimated annual price tag is $106 million. This number does not include start -up costs, and is potentially underestimating the ongoing administrative costs, perhaps significantly.

As for those start-up costs, the program would require a new IT system to operate. Estimates for this were between $500,000 and $80,000,000. That’s not a typo. Apparently, the options run the gamut from the tech equivalents of a Lamborghini to a unicycle. Committee chair Tom Stevens settled on an estimate of $10 million as a reasonable starting point for purposes of discussion and future analysis. But this is a wild guess, and, of course, we all know how well the state does with new IT systems (think Vermont Health Connect).

This Paid Family Leave proposal, for which the $100 plus million necessary to pay for it would come from a brand new payroll tax, would guarantee some (more on defining “some” in a later post) employees 12 weeks of leave at full pay up to a little more than $1000 per week for bonding with a new child, or 6 weeks to help care for a sick relative. If the costs exceed these conservative estimates, and many think the certainly will, the payroll tax rate will be increased to meet the demand for revenue.

David Simendinger, president of Champlain Farms, which operates thirty-six convenience stores in Vermont, testified following Manchester. He was blunt, saying, “This has the potential to bankrupt us.” Simendinger further noted that there is no incentive in the bill to encourage someone who takes advantage of the Paid Leave program to return to work when the money runs out.

It is hard enough for Vermont employers to find workers, and once found, depend upon them to reliably show up for work. A government program that pays employees their full salaries not to work will make this dynamic even more difficult for employers.

Simendinger speculated that if this passes, on day one there will be a lot of employees out there figuring out how to game the system so that they can spend six weeks of summer caring for a “sick relative” while receiving 100% of their salary at taxpayers’ expense.

Rob Roper is president of the Ethan Allen Institute.

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February 11, 2019

by Rob Roper

The Burlington Free Press had an excellent article on the city’s upcoming ballot question regarding the banning of plastic grocery bags. This has been a trendy policy across the country in many “progressive” municipalities. But, as the article points out, the actual consequences banning the convenient little things isn’t what its banners intended.

As we have pointed out before, “single use” plastic grocery bags are really multi-use, finding second lives as liners for garbage cans, for picking up pet waste, transporting dirty gym clothes, etc. Banning them requires shoppers not only to find replacements at the checkout counter that are more often than not less environmentally friendly, such as paper, but also require the purchase of heavier plastic options for trashcan liners, pet waste, etc. This is neither economically nor environmentally sound.

Still, plastic bags are a litter issue. How do we solve it? Here’s where the free market comes into play…

The Free Press notes that these plastic bags can be and are being recycled. Profitably.

The example they cite is the Trex corporation, which uses the recycled bags to make high quality decking, fencing, and outdoor furniture. The deck pictured here is made from old plastic bags!

This is the free market at work. Entrepreneurs figured out a profitable way to turn a waste product into a valuable resource, meeting a market demand for durable outdoor building materials, while at the same time solving, or at least helping to solve, an environmental problem. This costs taxpayers nothing, and, in fact increases sales tax revenues when customers purchase Trex products. Everybody wins.

Rob Roper is president of the Ethan Allen Institute

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February 7, 2019

By Dan Treat

Note: Dan will be making a guest appearance to discuss this topic with Bill Sayre on Common Sense Radio this coming Tuesday, February 12, at 11am on WDEV FM 96.1 and AM 550.

Every year more than 1 million individuals across the United States benefit from healthcare sharing instead of purchasing health insurance. Back in 2009, Obamacare exempted healthcare sharing ministries already in existence from the individual mandate requirement. This allowed thousands of Americans to decrease the financial risk of an unforeseen healthcare expense by joining one of several organizations that aligned with their values.

I joined one of these  organizations, Christian Healthcare Ministries, 9 years ago.  I was between jobs at that time and did not have access to low cost health insurance.  Since then they have saved me thousands of dollars in medical expenses.  Back in 2012 I had to go to the hospital for surgery and CHM came through by helping share the  cost of the surgery.  Also around that time I was battling an unknown condition that blurred my vision and caused painful burning and itching in my eyes.  I received cards in the mail from fellow members who said they were praying for me and wished me well.

Founded in 1981, Christian Healthcare Ministries (CHM) is a 501c3 tax exempt organization that operated in all 50 states.  They are a non-profit, faith-based ministry that assists its members in paying for health care costs. CHM’s mission is based on a Bible passage commanding Christians to “bear one another’s burdens and so fulfill the law of Christ”  (Galatians 6:2).

CHM offers 3 different levels of participation: Gold, Silver, and Bronze.  Gold level members are asked to pay a monthly gift amount of $150 and have a personal responsibility (think deductible) of $500 per incident.  Silver members pay $85 monthly with a $1000 responsibility level, and Bronze members pay $45/month with a $5000 responsibility level.  Members are encouraged to ask for discounts on their medical bills and CHM will assist them in negotiating discounts with their health care providers.

The Gold level has some additional features that the other levels do not.  For example, certain pregnancy related expenses and expenses related to physical therapy are eligible for sharing.  Bills for ambulance transportation under certain circumstances may also qualify for assistance.  In addition, Gold members have some extra help for pre-existing conditions

Regarding pre-existing conditions, another helpful feature is the prayer page.  The prayer page is a section of CHM’s monthly newsletter that lists medical needs that do not qualify for assistance through the regular CHM program.  CHM members are invited to give above and beyond their monthly gifts to help fellow Christians.  All such contributions are tax deductible.

Last year, our legislators passed a bill prohibiting Vermonters from refusing to buy health insurance, and did not explicitly exempt health sharing ministries like CHM. This means that Vermonters may have to pay a penalty for not having insurance, even if they are part of an organization that “shares,” expenses. The possible exemption, and possible penalties will likely be discussed at the Legislature in the coming months.

For anyone wishing for more specific information on how CHM operates, go to www.CHMinistries.org.

Dan Treat is a lifelong Vermonter and a friend of the Ethan Allen Institute. He lives in South Burlington.

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February 5, 2019

by Rob Roper

The Wall Street Journal ran a story about New York’s $2 billion plus budget shortfall. New York’s Governor Cuomo blamed the predicament on, “wealthy individuals living in these areas were either moving or shifting their official residence to lower-tax states, causing the shortfall.” This actually presents an opportunity for Vermont, but it would require our legislators to reshape our state as an attractive tax landscape for these individuals rather than an out-of-the-frying-pan-into-the-fire option.

Vermont, with our natural beauty and stellar quality of life should be an attractive landing spot for mobile, high income retirees. It isn’t to the extent is could be because currently…

  • 37 states do not tax social security benefits. Vermont does. (Source)
  • 33 states have no estate or inheritance tax. Vermont does. (Source)
  • 9 states have no income tax (like our neighbor to the east). Vermont does. (Source)
  • 44 states have a lower marginal maximum income tax rate than VT (Source)
  • Only 8 states have higher property tax rates than VT (Source)

So, if you’re looking for a place to move and live on a fixed income, while at the stage of planning to pass your assets on to your children, what incentive(s) does Vermont offer? If we don’t change our tax policies we will not only find that we can’t attract high asset retirees, but we will neither be able to retain our own. And, like New York, we will find ourselves wondering where our revenue has gone.

Rob Roper is president of the Ethan Allen Institute. 

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