By Meg Hansen

Meg Hansen

“If a mandate was the solution, we could solve homelessness by mandating everybody buy a house,”

then-Democratic presidential candidate Barack Obama quipped in a 2008 critique of his opponent Hillary Clinton’s health care plan to force everyone to purchase insurance or pay a noncompliance penalty. Six months into his presidency, however, the individual mandate became integral to the Patient Protection and Affordable Care Act (ACA), and Obama’s stance evolved to “Everybody must do their part.”

Last December, when the Tax Cuts and Jobs Act eliminated the mandate (an aspect of ACA or Obamacare unpopular with two-thirds of the public), a number of Democrat-controlled state legislatures, eager to show up D.C., sought to resurrect it at the state level. On May 28, Republican Governor Phil Scott signed House Bill 696, requiring all Vermonters to buy health insurance or endure the consequences (details of which will be decided in 2019).

Obamacare architect and MIT economics professor Jonathan Gruber (who famously attributed ACA’s success in Congress to the “stupidity of the American voter”) analogized the individual mandate to one part of a “three-legged stool.” The other two components entail prohibiting insurers from raising premiums or denying coverage to Americans with pre-existing medical conditions, and providing subsidies to make insurance affordable.

Beginning in 2014, insurance firms could no longer charge premiums based on an individual’s health status. Rates for say, Clara with a chronic illness like COPD, needing frequent and costly medical care, could not exceed that of Jim in good health. As a result, Jim (likely younger) would need to pay high premiums disproportionate to his minimal use of medical services, motivating him to leave the insurance market.

The individual mandate was designed to prevent the latter, or “stabilize” the insurance exchange in politically correct terms, so that insurers could maintain a wide pool of low-risk, high premium payers like Jim to subsidize the medical costs incurred by the chronically ill like Clara. Referring to this argument, proponents of the Vermont mandate like Rep. Anne Donahue, Republican vice chair of the House Health Care Committee, maintain that imposing an individual mandate is integral to paying for those with pre-existing conditions. She is wrong.

Chris Pope of the Manhattan Institute explained that ACA subsidy provisions (for which 85 percent of persons on the exchange qualify) finance the insurance expenses of low-income Americans and those with pre-existing conditions, whereas the now-eliminated mandate concentrated these costs on a niche demographic. Lower-middle income individuals without employer-based health insurance, such as small business owners and those juggling multiple part-time jobs, disproportionately paid the price. According to a Vermont Joint Fiscal Office report, 78.4 percent of Vermonters that paid individual mandate penalties for the 2015 tax year (total of $6.1 million) made an annual income between $10,000 and $50,000.

Obamacare offered exemptions from the penalty for varying reasons like low income and religious affiliation. Individuals with a household income between 100-400 percent of the Federal Poverty Level received a hardship exemption, provided they bought insurance through a government marketplace. Low-to-middle income Americans did not qualify for this exemption (or Medicaid). For example, a young couple making $65,000 per year would be ineligible, and could be fined up to $1,390 for saving money and thus remaining uninsured.

This mandatory cross-subsidization set up an anti-competitive and inequitable system that attempted to pay for the expensive, long-term medical care of persons with chronic conditions by taxing those that could not afford health insurance. When premiums and out-of-pocket costs (i.e. deductibles, copayments, and coinsurance) vastly exceed the mandate penalty, many forgo coverage. The 2014 Vermont Household Health Insurance Survey shows that Vermonters aged 25-34 years formed the largest uninsured group at 11.0 percent (5.1 percent between 35-44 years and 4.6 percent of the 18-24 age cohort also did not have health insurance). Some could argue that younger Americans do not purchase insurance because they are healthy, but a 2016 Harris Poll indicates that increasingly they cannot afford it.

Economic factors like astonishing student loan debt have set up Millennials to become the first American generation to fare worse financially than their parents. We are lagging behind predecessors in achieving milestones such as buying homes, having children, and saving for retirement. Why, then, are the Vermont mandate’s Democrat sponsors, all the politicians that voted in its favor, and Gov. Scott compelling young Vermonters to purchase unaffordable insurance? As Rep. Warren Van Wyck, one of the sixteen House Republicans to oppose H.696 remarked, “I thought we were trying to attract young people to the state.”

The U.S. Supreme Court upheld the constitutionality of the individual mandate in 2012 for it functions as a tax and hence, falls under Congress’ power to tax citizens. At present, Gov. Scott and Majority Democrats are embroiled in a budget standoff, playing out over a special session, because he refuses to raise taxes on Vermonters. Yet, he enacted the mandate – a health tax – into law with nary a peep of resistance.

The Scott Administration contends that this mandate will keep the number of uninsured Vermonters low, citing Congressional Budget Office data that thirteen million will “lose” insurance by 2027 as a result of the federal mandate repeal. First, recent studies demonstrate that the federal individual mandate had no discernible impact on the proportion of uninsured Americans. Second, the dysfunctional and coercive mandate ravaged American contract law of mutual assent. In its absence, millions of Americans may voluntarily choose not to buy a commodity.

Don’t we have the right to make our own life decisions? Montpelier says no. Our political class finds the clarion call of collective responsibility more seductive than personal liberty. Green Mountain Care Board chairman Kevin Mullin (a former Rutland Republican senator) stressed that everyone needs to contribute – except the mandate adds to Obamacare’s inequities by demanding more from some than others. (Note that adults under the age of twenty-six may remain on their parents’ insurance plans, and thus the healthiest category from higher income strata do not participate in the exchange).

Indeed, cost-effective alternatives to an individual mandate exist. (A) Provide more choice in the form of slimmed down plans with low premiums for catastrophic coverage, which would incentivize the young and healthy to remain in the insurance pool. (B) Create separate and efficient high-risk pools through which greater subsidies could be focused toward tailored medical care (e.g. preventive services) for low income Americans suffering from major chronic illnesses. Maine operates a successful invisible high-risk pool, launched in 2011, which should serve as a model for tending to society’s neediest without arbitrarily taxing some and depriving all of the freedom to choose.

To borrow from a 2008 Obama campaign mailer, “Punishing families who can’t afford health care to begin with just doesn’t make sense.”

– Meg Hansen is executive director of VHFC, a nonprofit committed to free-market reforms in American health care.

{ 0 comments }

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.

{ 2 comments }

by John McClaughry

If there’s anything that is dear to the modern liberal, it’s the principle of progressive taxation – increasingly high tax rates on people as they rise up the income scale.

We’ve always done that with the income tax. In Vermont, we do it with the income sensitivity option to pay school property taxes and the circuit breaker for town property taxes.

Bernie Sanders has always wanted to levy the Medicare payroll tax on all income, instead of cutting the tax base off around the $110,000 level.

So, one would expect liberals to say, why don’t we require health insurance companies to charge premiums based on family income? People making $250,000 a year would pay maybe three times as much as a twenty something making $40,000 a year, for the same health care coverage?

But they don’t, and I figured out why. The first reason is that liberals haven’t really thought of it. But more importantly, some perceptive liberals must have figured out that since income rises with age, and older people have more need for health insurance, they would face very high premiums based on their incomes.

And they vote, so progressively higher premiums will be politically unpopular. The far better liberal idea is to throw old and young voters into the same rating pool, where the wealth transfer from low to high income doesn’t require any declaration of income.

That’s called community rating, or Robin Hood in Reverse.

– John McClaughry is Vice President of the Ethan Allen Institute. 

 

{ 0 comments }

by John McClaughry 

Thomas Gallatin of Patriot Post tells us that “A recently released Justice Department report reveals that an astonishing one in five individuals incarcerated in federal prisons is an illegal alien, which amounts to a $1.5 million bill every day to the American taxpayer. The report notes illegal alien crime statistics from the state of Texas alone between 2001 and 2018 — more than 663,000 offenses were committed, including 1,351 homicides, 7,156 sexual assaults, 79,049 assaults and 44,882 thefts, to name but a few. Acting Immigration and Customs Enforcement Director Thomas Homan also said this week that ‘nine out of 10’ illegal immigrants arrested have criminal records.”
Attorney General Jeff Sessions responded to the report, stating, ‘The illegal immigrant crime rate in this country should be zero. Every crime committed by an illegal alien is, by definition, a crime that should have been prevented. Today’s report is yet another reminder that we must continue this [zero tolerance] policy and help fulfill President Trump’s goals of restoring lawfulness to our immigration system and ensure that immigration serves the good of this country.”
“But despite Trump’s crackdown on illegal immigration,” Gallatin continues, “the number of illegal alien border crossings has steadily climbed. And one of the primary culprits for this increase can be attributed to Democrats and their huge push for lawless “sanctuary cities” that act as giant magnets attracting greater numbers of illegal aliens.” 
Lest anyone forget, that list includes Burlington, Vermont.
– John McClaughry is Vice President of the Ethan Allen Institute

{ 0 comments }

June 12, 2018

By David Flemming

Will your taxes increase or won’t they? As EAI has written on previously, there aren’t any mainstream proposals from the Governor or Legislature that would ensure Vermonters healthy tax rates for years to come. But if we are discussing only 2019, Governor Scott’s proposal is more affordable. By using Game Theory, we can predict that any compromise will fall in line more with what Governor Phil Scott wants and less with what Democratic Leadership has proposed, helping Vermont avoid a government shutdown. Scott has the self-interest and the leverage to stand firm for stable taxes.

What is game theory? Game theory is a tool used to analyze rational choice by taking into account the choices an individual expects others to make. In life, when we make decisions that involve other “players,” we cannot take into consideration every relevant detail, so we must identify the most pertinent details and omit the others. First, we assume that the individuals “players” in the game are not looking to take other players down a peg. Second, we assume each player is seeking the best outcomes for themselves and are indifferent to the outcomes of others. Third, all players have complete knowledge of the situation. If there are 4 “Outcomes,” each player understands exactly what they are, and what the other players would gain from each. Finally, since turn-based games add complexity, it is easiest to demonstrate the usefulness of game theory with a simultaneous game. Both Scott and Legislative Leadership only see the choice the other has made after their own choice has been made.

In reality, there are thousands of individual choices Scott and Leadership will have to make in the coming weeks of negotiation. For our purposes, each will only have to make one choice. Whether to “Raise (Property) Taxes” in 2019 or to have “Stable Taxes.” Scott and Leadership’s past choices have laid the foundation for this current political “game.”

Scott (represented in Blue) has made his position known: he wants “Stable Taxes,” and has promised to veto any legislative proposal to “Raise Taxes.” Therefore, in this model of the game, the Stable Taxes option will be Scott’s “Stay” choice, while his potential to “Raise Taxes” will be his “Concede” choice.

(If the diagrams below are blurry, please click here to download the PDF with the diagrams)

Senate President Tim Ashe and Speaker of the House Mitzi Johnson represent Legislative Leadership and the Democratic majority in Vermont’s legislature. They recently maneuvered a property tax hike against Scott’s wishes. Therefore, Leadership’s (represented in Green) “Raise Taxes” will be Leadership’s “Stay” choice, while Leadership’s “Stable Taxes” will be their “Concede” choice. As we construct our “Matrix” in “Step 1,” giving us 4 “Outcomes.” Off the bat, we know that if both players “Stay” (4th Outcome), we will get a Government Shutdown (Red).

Now, on to assigning “Payoffs” for each outcome. For each of the 4 outcomes, there are 2 “Payoffs,” 1 for Scott (a blue #) and 1 for Leadership (a green #). Payoffs represent the Vermont voters who will vote for/against legislative Democrats or for/against Scott.

For Governor Scott (“Step 2” diagram), the 1st and 2nd Outcomes where he “Concedes” will have a lower payoff than the 3rd and 4th outcomes, where he “Stays” for stable taxes. In the real world, a “stay” move means a veto of a tax increase. The 1st outcome in which Scott and Leadership both “Concede” would be slightly better than the 2nd Outcome where only Scott concedes and gets nothing in return. Therefore, we will give Scott a negative payoff for the 1st and 2nd Outcomes (“-6” and “-8” payoffs) because he would have failed to deliver on his campaign promise to stop rising taxes.

The 3rd outcome where Scott “Stays” for Stable Taxes and the Legislature Concedes is Scott’s best possible Outcome. Though, the 4th Outcome, in which both Leadership and Scott “Stay,” resulting in a government shutdown, isn’t all that much worse for him. Scott can ‘spin’ a shutdown and tell Vermont voters that their Leadership didn’t want to stabilize their property taxes. While voters might not be happy about a shutdown, they are more likely to blame Leadership than Scott. Therefore, the 4th Outcome has a “0” payoff for Scott, indicating he didn’t significantly increase or decrease his chances of getting elected governor again. The 3rd Outcome, in which Scott’s promise of “Stable Taxes” triumphs over Leadership’s plan for Raising Taxes, gives him a “+8” payoff.

On to Legislative Leadership’s payoffs (“Step 3” diagram). We assume that Ashe and Johnson are not able to get the legislative votes required to override a Scott veto because there are enough Republicans in the House to block a veto override. The 1st and 3rd Outcomes in which Leadership concedes to Scott’s plan for “Stable Taxes” will have lower payoffs than the 2nd Outcome where they “Stay” for Raising Taxes. The 2nd Outcome is the only one in which Leadership has a positive payoff. If Leadership can “Stay” for higher taxes and Scott concedes, this is the best possible scenario for Leadership, giving them a payoff of “+8” for the 2nd Outcome, and proving that Scott must bend to their will.

 

Finally, “Step 4.” While voters might be willing to give Scott the benefit of the doubt in a government shutdown because Scott was standing for lower taxes, they would probably not do so for a Legislative Leadership that wanted to pay down the pension fund, a scenario that would do nothing for stabilizing taxes in the short term. For this reason, conceding to Scott’s plan for higher taxes (3rd Outcome, payoff= -2), gives Leadership a ‘less-negative’ payoff than “staying” than for a tax increase and a government shutdown (4th outcome, payoff= -8). If Scott makes Democrats accept “Stable Taxes,” the blame can be diluted across the legislature and have little effect on the election in November.

Regardless of what Leadership chooses, Scott will always choose to “Stay” for “Stable Taxes, meaning Leadership will never to able to pick from the 1st or 2nd Outcomes. These outcomes are ‘greyed’ out in “Step 4”. Leadership must choose either the 3rd or 4th outcomes. In order to avoid a government shutdown (4th outcome, payoff=-8), a rational Leadership will choose the 3rd Outcome, with a payoff of -2. This makes it the Leadership’s best interest to choose the best political outcomes for Scott, the 3rd outcome, giving Scott a +8 payoff and Leadership a -2 payoff. In game theory, Scott’s self-interest to make the same move every time regardless of what the other player does is called a “Dominant Strategy.” While having a Dominant Strategy may sometimes mean choosing from two bad alternatives, Scott’s dominant strategy gives him the clear advantage here.

You may have been able to guess the outcome of this game without using this process. But what happens when you add in hundreds of players in dozens of interdependent “games” going on simultaneously in Montpelier? Mastering game theory can reduce your tax uncertainty by helping you to predict the outcomes of political games like this.

– David Flemming is a policy analyst at the Ethan Allen Institute

{ 0 comments }

June 12, 2018

by Rob Roper

The 2015 “net neutrality” rules passed by the FCC in 2015 are now officially dead. When the Trump administration announced that it would eliminate the Obama-era policy there was much tearing of garments and gnashing of teeth here in Vermont. Our legislature even went so far as to pass a law creating a state version of net-neutrality that would punish Internet Service Providers (ISPs) that do not continue to operate under the repealed rules by disallowing the state to contract with such ISPs, although it’s not clear how the Vermont rules would be or could be enforced.

However, opponents of the 2015 rules argued that to regulate the internet under a 1934 law as if it were a telephone company was a ridiculous mistake that would deter innovation and discourage critical investment in building out and expanding broadband networks. It very quickly appears that these critics were correct, and Vermont is ground zero for evidence.

In a recent op-ed by FCC chairman Ajit Pai he cited an example from the Green Mountain State:

For instance, recently I heard from a rural broadband provider in Vermont called VTel. VTel wrote to say that “regulating broadband like legacy telephone service would not create any incentives for VTel to invest in its network. In fact, it would have precisely the opposite effect.” The company went on to say that it’s now “quite optimistic about the future, and the current FCC is a significant reason for our optimism.” Indeed, VTel just announced that it has committed $4 million to upgrade its 4G LTE service and to begin rolling out faster mobile broadband that will start its transition to 5G, the next generation of wireless connectivity. (Our job is to protect a free and open internet)

Let’s hope our legislature is paying attention and that their actions don’t damage this kind of much needed investment in our future.

{ 0 comments }

June 11, 2018

by Chris Campion

Vermont, fresh off the news that the state’s idea of fixing its legacy of opposition to business and economic growth is to pay people to stay there, now has at its disposal other states’ models for economic growth that actually seem to work.

And maybe those models correlate to the political leanings of the individual states.  In a recent CNBC article, they built a chart that shows one-year change in employment (in aggregate and by industry), and the Trump vote margin.  In what can only be a surprise to Vermont’s political leadership, states with low or negative Trump margins (meaning they didn’t vote for Trump) tend to show weaker job growth compared to the states that voted for Trump.

Now a host of reasons exist for why and how jobs get created, and correlation does not equal causation, but when you see some consistent patterns, it just might be an indication that something is consistently wrong with the direction Vermont’s been going in, for decades, in terms of its economy.

Overall, Vermont is at the worst part of the 4 quadrants.  The voting results are obvious, but the economic gains in total job growth are almost the worst in the country.  Only one or two states have worse economic results, but Vermont is in there, vying for the lead in the worst of the worst.

Vermont leads the way! To an economic backwater.

But if you look at specific industries, Vermont does manage to become the leader.  The last placeleader, mind you, but the leader.  To wit:  Manufacturing – Vermont, in dead last.

Best of the worst!

Construction:  Nearly the worst.  But don’t worry, Vermont is striving to lead the way in negative job growth in this category!

We’re constructing the worst economy in the country. In that, we’re #1!

But take heart, taxpayers.  There’s some good news for Vermonters amidst all the bad.  Government jobs are increasing!

Nowhere to go but up for taxpayer-supported jobs!

And if you’re interested in a high-paying, lucrative career waiting tables or manning chair lifts at the ski resorts, the sky’s the limit!

Vermont almost leads the way in tip-related employment.

This is the type of data that Vermont’s Department of Labor carries, but doesn’t publicize much, other than the unemployment number as a stand-alone.  Why?  Because Vermont’s unemployment rate is low, primarily due to Vermont’s decreasing labor participation rate, a rate that’s ticked up a bit in the last year or two.  But it went on a steep dive from 2009-2016, which seems to inexplicably coincide with a prior administration’s term.  It’s almost as if incentives were put in place for a specific number of years that encouraged people to drop out of the labor force, and now those incentives are gone.

It may be that the state doesn’t need to pay people to participate in Vermont’s economy.  It could be that, absent the 8-year overhang of higher taxes, a higher regulatory burden, and a demonization of the profit motive, Vermont’s animal spirits rise again.

Now if Vermonters could only keep the politicians from trying to help them, maybe there is a path forward, out of the economic quagmire.

{ 3 comments }

June 8, 2018

By John J. Metzler

UNITED NATIONS—In the midst of an expanding American economy, record low unemployment rates, and buoyant consumer confidence, the Trump Administration has inadvertently planted the seeds of a global commercial slowdown and political showdown.  The steel and aluminum tariffs slapped on imports from our key Transatlantic trading partners, not to mention neighbors Canada and Mexico, have created a looming danger.

Free Trade must be Fair Trade as the President always stresses.  He’s right.  America has indeed been taken advantage of by an uneven playing field and fast and loose rules.  Trade deficits, as this writer has always stated, pose not just an economic danger but a national security risk as well.  I’m totally on board here.

Tariffs offer a feel good solution to a far deeper commercial malaise. The tariff taxes pose  another unseen tax on consumers which will raise prices in the name of protection for our domestic industries and workers.

Though the original intent of the tariffs were aimed at the People’s Republic of China, as it turns out, the brunt of the trade showdown will affect America’s key political allies in Western Europe and North America.  And this is OK?

The European Union’s Jean-Claude Junker characterized the tariffs as “protectionism, pure and simple.”  Given that the Europeans wrote the book on protectionism centuries ago, I take this comment with a wry smile.  But not to digress.

When the whole showdown started in March, the feeling was that our closest trading partners in Europe and Canada would gain a reprise.  There appeared there would be a “cut out deal” for NAFTA partners Canada and Mexico.  But the policy pendulum swung back with the recent announcements that Canada, Mexico and the Europeans would indeed be slapped with tariffs.

Happily Argentina, Brazil, and South Korea have been spared from the steel sanctions.

Canada whose steel and aluminum exports to the USA last year reached $12.8 billion will soon slap tariffs on a corresponding sum of American trade.  Canadian Foreign Minister Chrystia Freeland lamented, “This is the strongest trade action Canada has taken in the post-war era…this is a very strong Canadian action in response to a very bad U.S. decision.”

France’s Finance Minister Bruno Le Maire was less gentle, “Global trade is not a gunfight at the OK Coral.”

Washington’s tough approach to its closest friends and trade partners comes at a curious time.  The brinksmanship may be a tactic in turbulent  U.S. trade negotiations with Beijing. President Trump has rightly focused on the totally imbalanced and unfair China trade but has veered into side disputes with just about everybody else.  Is such posturing with Europe part of a grand strategy dealing with the bigger issue of the U.S./China trade deficit of $375 billion in 2017?

Put in less arithmetical terms, China sells the USA four times as much as Americans buy from the People’s Republic.

American trade teams negotiating in Beijing played commercial hardball regarding the deficit;  Commerce Secretary Wilber Ross visited to present planned tariffs on $50 billion in Chinese exports unless China would buy more American products.  Beijing’s state-run media blustered back, “Let them prepare for an epic trade war.”

Uncertainty and unease will pervade markets for American exporters too as we tip toe round the tariff issue hoping to avoid the minefield of a trade war.  American consumers and companies would naturally be affected and not in particularly positive ways.  For consumers the lack of choice would likely lead to higher prices.  No question that there’s a price to pay to protect American jobs, many people are willing to share the burden to do so, but I’m not so certain these people actually realize the depth of the dilemma and the hollowing out of our industrial base.

For business the challenge is compounded.  What will the tariffs be?  Will Washington switch policy in six months?  Shall American agricultural produce exports be blocked from the China  market?

The sanctions have faced stiff criticism from many U.S. exporters and Republican lawmakers.

Facing a “trade war” the United States will make a stand at the upcoming G-7 Summit in Canada.  Here amidst the splendid St. Lawrence River in the Quebec’s Charlevoix region, the leaders of Canada, Japan and the European power economies France, Germany, Italy and the United Kingdom shall come together with the U. S. at a particularly awkward time.

We are not just talking about trade and markets here, but political relationships and shared partnerships, and enduring friendships with each of the Summit participants.  Let’s not endanger that.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations: Germany, Korea, China.

{ 2 comments }

by John McClaughry

Last week the US Supreme Court gave a partial victory to Colorado baker Jack Phillips, who had  declined to make an artistic cake for a gay wedding based on his strongly held Christian beliefs. Apparently Phillips was perfectly willing to sell cakes off the shelf, but wouldn’t employ his artistic talents to make a cake glorifying a union that he believed to anti-Christian. Instead of choosing another cake artist, the gay couple ran to the Colorado Civil Rights Commission, who found that Phillips had unlawfully discriminated against them.

The Court found not that Phillips had a right to refuse based on his Biblical beliefs, but that the Civil Rights Commission exhibited religious bias in issuing its order, exemplified by a member who likened Phillips beliefs to supporting human slavery and Holocaust genocide.  That left open the  Phillips’ persecution by a commission that kept its collective mouth shut and just issued the order.

Justice Clarence Thomas, concurring, argued that Phillips had a right not to be an active participant in the gay marriage celebration. He invoked Court precedents that tolerated white supremacist expression, and concluded that the Court should have held that “States cannot punish protected speech because some group finds it offensive, hurtful, stigmatic, unreasonable, or undignified.”

You don’t have to share Jack Phillips’ religious views to believe that the state should just leave him alone, and the couple should engage a baker who supports their preferences, or doesn’t care either way.

John McClaughry is vice president of the Ethan Allen Institute.

{ 2 comments }

by John McClaughry

Gov. Phil Scott and the Democratic-controlled legislature are well into crunch time over the FY2019 state general fund budget and the related education finance bill.

The governor obviously takes very seriously his 2016 campaign pledge to hold state General Fund spending to a growth of 2.36% a year, and to oppose – and veto – any increase in tax rates. However the actual homestead school property tax rates are not set each year by the legislature and the governor. They are determined district by district based on each district’s spending per equalized pupil. The total tax dollars thus raised, when added to other specified revenue sources, must add up to the sum of all the voter-approved school budgets.

Last year the governor (enthusiastically) and legislature (unhappily) agreed to grab more than $40 million from various accounts and reserves, and put that into the Education Fund to produce a slight reduction in homestead school property tax rates. That was effectively an internal loan that has to be repaid this year.

On May 1, two weeks before adjournment, the governor unveiled a sweeping new plan for curbing education spending and keeping homestead property tax rates flat.

His plan promises to deal with a financing gap of $236 million over the next five years. It proposes to appropriate between $44 and $58 million in one-time funds to replenish the now-depleted reserve funds and keep the homestead property tax rates flat for the coming year. The governor has apparently forgotten (again), that in his 2016 campaign he promised “We need to stop using one-time money to plug reoccurring budget holes.”

The administration’s plan promises “nearly $300 million in savings” over the five year period. Reviewing the governor’s projections, the respected, nonpartisan Joint Fiscal Office fairly concluded that “the administration’s 5-year outlook is a mathematical exercise only: their analysis does not indicate specifically how this ‘gap’ will be closed.”

The big ticket in the administration’s proposal to save the $262 million is “increasing student to staff ratios” in Vermont schools, ultimately (and supposedly by attrition). This is mathematically attractive but not credibly achievable unless the state seizes control of the schools.

When the administration floated the idea of imposing fines on school districts that didn’t meet its 5.75 to 1 ratio test, it vanished within about two days. In truth, nobody can accurately predict just how districts would react to the mandate and associated penalties, and thus how much spending would be saved.

A special education law enacted earlier this year could – possibly – produce some savings, but no one knows how much, because no one knows how the school districts will choose to make use of new flexibility, and how often service reductions will be challenged by plaintiff lawsuits.

Establishing a statewide teachers’ health insurance program could, depending on its terms, produce savings, but no one knows what the terms of such a program would be. The governor also plans to spend some of those savings, if any, on preschool, state colleges, and technical education.

What this comes down to is whether to put $34 million (or $58 million) from available one-time revenues into the Education Fund to keep homestead school property tax rates flat, and rely mainly on mandated student to staff ratio increases to produce enough “savings” to keep them flat for five years (Scott’s proposal); or letting the homestead property tax rates rise by maybe two cents to reflect increased school budget spending, while using much of the one-time revenues to pay down the enormous long-term liabilities ($2.4 billion) of the teachers’ retirement and health benefit funds (the Democratic proposal).

To their credit, the Democrats have worked conscientiously to be fiscally responsible. They rightly believe that the governor’s projection of marvelous “savings” over five years, essential to holding the line on homestead school property taxes, is speculative at best. They also responsibly oppose, as Scott himself did two short years ago, using the one-time funds to hold down tax rates for one more year. Their recommendation for using those funds is to slightly but symbolically reduce the liabilities of the teacher retirement funds.

The problem the Democrats face is that most homeowners badly want property tax relief, and are not very receptive to appeals for sound fiscal practice. It is after all election year, and if Scott’s proposal prevails, his strong suit in November will be that “he stopped rising school property taxes.”

At this writing, the resolution of the school finance issue, and thus the vetoed budget, has not taken shape. What does seem almost certain is that the terms of any resolution this month will produce exactly the same problem next year, when there’s no reason to believe that  significant  one-time funds will appear to cover another Education Fund shortfall.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

{ 2 comments }

About Us

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.
Read more...

Latest News

Health insurance mandate a step backward for Vermont health care

By Meg Hansen “If a mandate was the solution, we could solve homelessness by mandating everybody buy a house,” then-Democratic presidential candidate Barack Obama quipped in a 2008...

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....

Your Taxes, Game Theory and the Shutdown

June 12, 2018 By David Flemming Will your taxes increase or won’t they? As EAI has written on previously, there aren’t any mainstream proposals from the Governor or...

End of “Net Neutrality” Already Benefiting Vermonters

June 12, 2018 by Rob Roper The 2015 “net neutrality” rules passed by the FCC in 2015 are now officially dead. When the Trump administration announced that it...

Vermont: The Hapless Blue State

June 11, 2018 by Chris Campion Vermont, fresh off the news that the state’s idea of fixing its legacy of opposition to business and economic growth is to pay...

Video