April 19, 2019

By David Flemming

Those Vermont legislators committed to paid family leave regardless of cost could soon be faced with an unenviable choice. They can either tax extremely low income earners who don’t earn enough to qualify for the benefit (you need to make over $11,000 annually to qualify), or they can exempt low income earners from the payroll tax that funds the program, and instead take an even bigger chunk out of the paychecks of Vermonters making more than $11,000/year.

On April 17, the Senate General Committee heard testimony on the mandatory Paid Family Leave bill from Douglas Farnham, Director of Policy and Tax Department Economist at the Vermont Department of Taxes. Farnham suggested that Sen. Michael Sirotkin (D-Chittenden) and House members who voted for the bill had overlooked the plight of those who don’t have a high enough income to qualify for Paid Family Leave, but would be forced to pay into program anyway.

Senator Sirotkin asked Farnham, “The people who don’t qualify right now, is that a very small number? The threshold ($11,000/year) is very low.” Sirotkin seemed skeptical that paid family leave might not be affordable for some Vermonters.

Farnham’s response was far from reassuring. “We have a large number of low income Vermonters in Vermont. The data is a little bit difficult to get at, because we don’t know their hours and their annual earnings.” Since hours worked may go into determining how much you pay per paycheck, the lack of this information should throw up warning signs to legislators.

Vermont’s Comprehensive Annual Financial Report (CAFR), states that there are 110,024 tax filers who report less than $10,000 a year in income. This is 29.63% of all tax filers. In other words, about a third of all those who earn income in Vermont, and the poorest third at that, will be disqualified from participating the Paid Family Leave program while simultaneously being forced to fund it.

Farnham went on to say that exempting extremely low income workers from the tax would be “extraordinarily complicated.” Meaning that if a revised bill were to include a low-income exemption, the 0.55% payroll tax estimate for everyone else will be even higher, as will be the cost of the bureaucracy necessary to monitor and implement the program.

Wasn’t the purpose of making the program mandatory to generate cost savings? Anything that is “extraordinarily complicated” won’t come cheap.

Given how untenable a low income exemption for paying into paid family leave would be, Farnham concluded by saying that “I have no recommendation for a way to insulate low-income workers from the program.” If Vermont has to harm the poorest among us to pay for a program, that should be more than enough reason to reject a mandatory paid family leave program.

Paid leave advocates are faced with two options that would harm Vermonters in different ways. But there is a third option: reject paid family leave. Recognize that even the nicest sounding legislative “solutions” often harm those they intend to help.

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

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April 18, 2019

by Rob Roper

There has been a steady stream of testimony over the past two years on the proposed $15 minimum wage and the mandatory Paid Family Leave program concluding that they will hurt the Vermont economy – cost people their jobs, negatively impact business, make government more expensive, and negatively impact state GDP. Every indication is that a majority of legislators simply don’t care. Rather than listen to the evidence and reach the logical (dare I say “moral”) conclusion that these things may have sounded like good ideas, but they are clearly not, and move on, they are coming up with emotion-based rationalities to go forward anyway.

The latest expression of this is an Op-Ed by freshman Rep. Randall Szott (D-Barnard) titled, “Toward a ‘Moral Economy’.”  In it he writes, “In much of the testimony on those bills we heard quite a bit about how they would affect businesses and the economy. Such information is important and useful, but I ran for office to consider bigger questions as well,” and opines about “values that don’t fit into a spreadsheet.” That’s all well and good, but his conclusions that inflicting significant pain on a majority of Vermonters because the underlying feeling surrounding these policies is one of “caring” is really twisted.

So, what is the moral role of government and those in power? It is best expressed in the Declaration of Independence, which states (emphasis added):

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed….

In other words, the legitimate functions of government are to keep people safe and leave us alone to pursue our own ambitions as each of us sees fit. Not as government sees fit. We do not elect representatives to make decisions for us about whether or not to purchase insurance products. Their job is to make sure we are free to make these decisions on our own. It is not their job to negotiate a fair wage between employer and employee. Their job is to make sure we are free to reach these agreements on our own, pursuing happiness in accordance with our own vision and convictions. Not theirs.

The wisdom of this can be seen in Rep. Szott’s background. He is a chef with a Masters Degree in fine arts. I have no reason to doubt he is excellent in these endeavors. But what does he know about running, for example, a gas station convenience store in general let alone a specific convenience store dealing with specific challenges? Probably not much and nothing at all respectively. Yet this guy and seventy-six or more people like him have come to the conclusion that making these decisions for us from a position of profound ignorance and lack of expertise is the “moral” thing to do. I don’t think so!

Rob Roper is president of the Ethan Allen Institute. 

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April 15, 2019

It’s income tax day! And, as such, it makes sense to take a look at who is paying what in Vermont for support of our state government. According to the latest Comprehensive Annual Financial Report (CAFR), those earning…

$300,000 and higher (3841/1.03% filers) paid 26.21% of all Vermont State Income taxes.
$150,000-$299,999  (10,433/2.81% filers) paid 15.35%
$100,000-$149,999 (17,335/4.67%) filers) paid 13.39%
$75,000-$99,999 (20,858/5.62% filers) paid 10.43%
$50,000-$74,999 (36,064/9.71% filers) paid 11.20%
$25,000-$49,999 (65,393/17.61% filers) paid 10.93%
$10,000-$24,999 (56,130/15.12% filers) paid 4.32%
$9,999-lower (110,024/29.63%) filers) paid 0.95%
Out of State (51,274/13.82% filers) paid 7.32%

So, those Vermonters earning over $150,000 a year – just 14,274 people or 3.84% of the income tax paying population (a little over 2% of the total population), are covering 41.56% of the $768,018,119 tab. That’s not a lot of people.

Remember also, that folks earning less than that ($147,000) qualify for income sensitivity on their property taxes, and at income levels lower down the scale qualify for other government benefit programs, such as childcare subsides, Reach Up, etc. Those top two levels of filers don’t.

What’s important to acknowledge here is that these high earners are paying so the rest don’t have to. If the 3841 Vermonters earning over $300,000 suddenly left the state, the burden of picking up their $201,325,567 would trickle down to everyone else. Not a pleasant prospect.

As such, state policy should be geared toward keeping such earners here in state. Perhaps even attracting more of them. Treating high earners like a cash piñata and denigrating them in the process as “greedy one-percenters” or other such epithets is, well, kind of stupid. See New York Governor Andrew Cuomo’s dilemma, “Tax the rich, tax the rich, tax the rich. We did that. God forbid the rich leave.” A lot did leave, and the New Yorkers left behind have a $2.6 billion hole to fill as a result.

Wealthy taxpayers are something we should want to cultivate, not strip mine or hunt into extinction. So, maybe take some time today as you’re filing your taxes to thank the rich. Imagine what your bill would be without them!

Rob Roper is president of the Ethan Allen Institute.

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April 12, 2019

By David Flemming

Many $15 minimum wage advocates like to argue that such a law would put more money in consumers’ pockets, therefore benefiting small businesses. However, Charles Martin, representing the 1500-member Vermont Chamber of Commerce, gave testimony challenging that assumption, at least as to how it will affect small, rural businesses.

Martin used his own experience at his family’s general store to illustrate the impact that a higher minimum wage would have on rural Vermont. He didn’t buy the argument that “people will start spending more because they will be earning more.” He noted that most of his parents’ customers came in once a morning to get a coffee and an egg sandwich. Even if those customers do end up with more money in their pockets after a wage boost, “people aren’t going to start buying 5 coffees and 5 egg sandwiches on their way to work.”

Stores like his will not benefit from increased spending, certainly not enough to make up for higher labor costs, but big box stores might. Stores like Walmart, Target, etc. have the national scale to absorb a wage increase (in fact, many of these stores already pay $15 an hour), and due to their large inventories of products and the nature of their customers, would stand to benefit most from increased spending by low income workers.

Charles Martin, also testified to the unfairness of “a proposal to raise the State’s wage scale by 40 percent over the next few years, when most Vermont businesses will not see equivalent revenue increases to offset such cost pressures.” Nowhere in this legislation are the incomes of small business owners considered. If they are forced to pay their employees more, but revenues do not grow to match that increase, the business owners’ incomes will decrease. And, in most cases, these are not wealthy people.

According to Wallet Hub, Vermont is already the fourth most difficult state to start a business. Raising a small business’ expenses would make small business ownership even more difficult, and would increase the 20% chance that a Vermont startup would fail in the first year due to unforeseen expenses.

Martin said that “natural economic growth” should be the solution to wage increases, not government fiat. While this might not seem palatable to some politicians, “in the case of a small business in a rural town, those wages aren’t enough to have a joyful, carefree life. But if that general store folds, those wages will be nonexistent.”

Our legislators are counting on you to buy a bigger breakfast to support this small business expense hike. Will you do your part?

David Flemming is a policy analyst at the Ethan Allen Institute

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April 11, 2019

by Rob Roper

Everyone understands that raising the minimum wage from today’s rate of $10.78 to $15 an hour will have an inflationary effect on the overall costs of goods and services. However, some sectors of the economy will be impacted more than others. Legal fees, for example, probably wouldn’t change much as a result of the new policy, but the home and healthcare of senior citizens could change a lot.

This week the family owner/operator of several senior citizen facilities testified before the House General Committee about what the wage increase would do to their businesses and their customers:

“If S.23 is enacted, the annual budget impact on our facilities will be:

  • In 2020: $212,641 in the first year (plus payroll taxes and workers’ comp)
  • In 2021: $246,525 for a cumulative impact of $459,167 (plus payroll taxes and workers’ comp)
  • In 2022: $297,769 for a cumulative impact of $756,936 (plus payroll taxes and workers’ comp)
  • In 2023: $363,319 for a cumulative impact of $1,120,255 (plus payroll taxes and workers’ comp)
  • In 2024: $390,080 for a cumulative impact of $1,510,334 (plus payroll taxes and workers’ comp)

Given that these care facilities are subject to state staffing requirements that dictate the number of licensed employees we have per bed, cutting hours or employees to meet the budget is not an option. An additional problem is that Medicare and Medicaid provide a majority of the revenue into the businesses, and these payments are “fixed” and not set to increase at a rate that would cover the wage increase.

So, where’s this money going to come from? The folks who are dependent upon nursing home care — often people living on fixed incomes themselves — or their families. If the legislature decides to cover these costs through increased Medicaid payments, the taxpayer will be on the hook. The other alternative is that these facilities and others like the close, leaving seniors out in the cold.

Rob Roper is president of the Ethan Allen Institute. 

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by John McClaughry

Last week the House passed a bill that raised taxes on the wrong people to support a worthy cause for, in large measure, the wrong reasons.

Back in the 1970s Vermont’s community action agencies, created to wage the war against poverty, hit upon the idea of weatherizing drafty homes of low income families. This didn’t defeat poverty, but it improved living conditions. It produced, hopefully, energy savings, that the weatherized families could spend on other things. It also allowed the community action agencies to offer low-skill jobs and thus incomes to mostly marginally employed young men with time on their hands.

In 1990 federal anti-poverty funds for weatherization were declining, and Gov. Madeleine Kunin wanted to find some new money to keep the program alive. The result was an act that laid a gross receipts tax on all heating fuel.

When the Senate debated this bill, the advocates said that free weatherization would lower the fuel bills of the poor, and the money they saved would end up in their pockets. The critics observed that a decade of savings (recently estimated at 30% of annual fuel costs) could easily finance the weatherization, without imposing higher fuel costs on other households and businesses. The advocates prevailed 18-12.

The critics back then presciently observed that tapping a new tax base would inevitably invite partisans of the program to push to increase rates whenever their program felt it needed more money. Of course they were right. In 2016 the tax on heating oil and propane was switched to two cents per gallon; the gross receipts base was retained for natural gas (.75%) and coal (1.0%.)

Now, after three years, the House wants to double the two cents per gallon tax rate for heating oil and propane to four cents per gallon, bringing in an additional $4.6 million. That would, the program manager says, enable weatherizing 400 more homes, and make the LIHEAP heating assistance funds go further.

Let’s agree that weatherizing drafty homes is a sensible thing to do. After a raggedy beginning in the 1970s, the local agencies have considerably improved the quality of their services. The question is, who should pay for it?  All taxpayers?  All heating fuel users? Or the people who benefit, paying over time out of their ongoing fuel savings?

The economically sensible solution is to finance weatherization at least in part out of the savings it produces. The VA, FHA and commercial lenders offer Energy Efficient Mortgages that allow homebuyers or refinancers to pay for weatherization out of the resulting energy savings. But the fuel tax advocates want to tax all homeowners and businesses to pay for other people’s energy savings, and let those other people pocket the dollars saved.

The businesses that use lots of natural gas – like OMYA in Florence – rightly see the fuel tax as making them less competitive. Many legislators opposed the fuel tax increase because it’s regressive. Gov. Scott said “It hurts the people we’re trying to help.” Speaker Johnson, though, sidetracked Rep. Cynthia Browning’s (D-Arlington) amendment to put the burden on high income earners – not a good solution, but at least not regressive. The House approved the fuel tax bill 81-60, suggesting that a Scott veto could be sustained.

Lurking behind the fuel tax bill is the compulsion of many legislators to show the world that Vermonters are bravely taxing carbon fuels to combat climate change.  Rep John Bartholomew (D-Hartford) told the House that “this is an important bill that begins to address the challenges presented by climate change… The time to find easy and inexpensive solutions to climate change passed long ago.”

Perhaps the most pungent analysis came from Statehouse Headliner journalist Guy Page: “Many climate-minded legislators seem fixed on remedies that most impact older, rural and low-income Vermonters: fossil fuel divestment of the state’s already challenged pension funds; direct carbon taxation that would fall most heavily on poorer rural Vermonters; subsidizing solar power and electric vehicle infrastructure favored by the wealthier; and now, doubling what fuel dealer Shane Cota calls ‘the warmth tax’”.

Instead of doubling the fuel tax on heating oil and propane and increasing by a third the tax on natural gas, legislators should shelve the fuel tax, leave the menace of climate change at the door, go back to drawing board, and work out something economically sensible that asks the beneficiaries to pay at least part of the cost, and is not a regressive tax on everybody else.

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

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by Rob Roper

If we really want to save the planet from climate change, the real solution is to ban the internal combustion engine. I bring this up because, I am told by two legislators in a position to know, that this was a serious topic of debate last week in the House Energy & Technology committee.

What sparked the conversation was testimony by Jon Erickson, the “David Blittersdorf Professor of Sustainability Science & Policy” at UVM. (Yes, there is such a thing. This is not a belated April Fools post, as much as it might sound like one.) The committee was lamenting the fact that Vermont has failed pretty miserably at meeting the emission reduction goals set out by the legislature, and someone asked what would have to be done if we seriously intend to meet those goals. Answer: ban the internal combustion engine.

Well, it might be the only policy that could get anyone to ride David Blittersdorff’s proposed, taxpayer-subsidized train from St. Albans to the Global Foundries campus in Essex, so perhaps that’s why his endowed professor pushed the concept. Although, without a cab ride from Essex to Burlington or Williston, you’d really be stuck in the middle of nowhere when you got off that train, so maybe not.

I’m left shaking my head. This is the most bizarre legislative session I’ve ever experienced. There is serious talk of making Vermonters pay reparations for slavery, the annual joke bill banning plastic bags is now poised to become law, a legislator voted against the $6.1 billion budget because she thinks it will lead to “planetary collapse,” the chairman of the Transportation Committee doesn’t own a car… so, who needs the internal combustion engine anymore!

How do you take all this seriously — except for the fact that these people are spending $6.1 billion of our hard earned money to actually do these things. It’s as if we came across a group of college kids getting all politically philosophical while eating pizza, drinking beer and doing bong hits late night in the dorm and decided, what the heck, let’s let these people run our state! What could go wrong?

Rob Roper is president of the Ethan Allen Institute.

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April 5, 2019

By David Flemming

Andrew Torre recently made the rather astonishing claim that it is not the common man that has denigrated socialism – since he would benefit by it – but the wealthy minority that doesn’t want its wealth tampered with, and the common man has foolishly swallowed the propaganda.” Torre claims true socialism, is “not Stalinist,” but “advocates that people equitably share in the wealth, as they equitably share in the political realm through their vote.”

Let’s take Torre’s argument to its logical conclusion. Say 51% of Americans agreed to redistribute the wealth equally to everyone. 9 in 10 of us might benefit from such a “democratic redistribution” at first, but not for long.

It is easy enough to imagine a future where the wealth is evenly distributed to all Americans. But to get to that future, the changes we would need to make would be catastrophic.

In such a future, we can’t distinguish between hard workers and lazy workers in our brave, new egalitarian world. Such a system would have to provide “economic security” to those “unwilling to work,” as Alexandria Ocasio-Cortez so eloquently put it in her Green New Deal. This situation mirrors the one in Venezuela currently, and the one that occurred in Russia a century ago.

For a few years after the 1919 Russian Revolution, so long as you were members of the Proletariat class, you happily accepted the farmland and property confiscated from the wealthy by the Communist Party. But once these poor farmers began turning over all of their crops to the party, and receiving whatever handout the Party deemed appropriate, they stopped working so hard. This forced the party to lay down quotas enforced at the point of a gun. Even the threat of violence was not enough to increase production from those “unwilling to work,” and millions of Russians died from starvation.

History is replete with countless such wealth confiscation schemes that benefited the majority for a few years, but which saw living standards for all fall drastically in the decades following. If American millenials were to overthrow our current system, my generation could live it up for a few years on stolen wealth. But we would make our children and our children’s children pay dearly for that choice.

America’s wealth is not sitting in storehouses, inviting envious workers to take it. It is fueling philanthropy, funding products that make everyone’s lives easier, and creating the conditions for even the poorest Americans to earn incomes Torre might consider ‘excessive.’

Unlike Torre, who has beheld the benign excesses of capitalism, one woman has seen the wounds of socialism firsthand. Representative Stephanie Murphy (D-Fla.), a Vietnamese immigrant recently called capitalism “the system that built us the greatest nation and the greatest economy in the world…it is not the moment to undo the whole system and embrace something (socialism) that Americans have spent blood and treasure fighting to save other countries from.”

93% of 2012 American adults with parents whose lifetime incomes were in the bottom fifth of lifetimes incomes earned higher incomes than their parents. Does Torre really think poor Americans are gullible enough to bet their children’s futures on a system designed by an enlightened few that lacks feasibility in the real world?

At its worst, capitalism fosters consumerism. At its best, capitalism brings millions out of extreme poverty.

At its best, socialism means lower qualities of living. At its worst, socialism creates the conditions for dictators like Stalin to come to power. Far from being “foolish” for rejecting socialism, America’s poor live with more wisdom than Torre could possibly imagine, making the daily sacrifices necessary to push their children ahead.

David Flemming is a policy analyst at Ethan Allen Institute

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April 3, 2019

by John McClaughry

Michael Bielawski of True North Reports reported last week on a study by Johns Hopkins University and the University of California at Davis, that determined that California’s strict gun control laws had no measurable impact on gun violence or deaths in the state.

The study examined the decade after the state’s 1991 implementation of comprehensive background checks. The act required that all gun sales including those between private individuals must go through a licensed dealer. Another provision was that shotgun and rifle purchasers must wait for 15 days while the background check is processed.

Researchers compared annual gun suicide and homicide rates for the subsequent decade with data from another 32 states which didn’t have such gun legislation. The conclusion from the study was that there was “no change in the rates of either cause of death [homicide or suicide] from firearms through 2000.”

The study’s summary said “The simultaneous implementation of [these] policies was not associated with a net change in the firearm homicide rate over the ensuing 10 years in California. The decrease in firearm suicides in California was similar to the decrease in non-firearm suicides in that state. Results were robust across multiple model specifications and methods.”

Writes Bielawski, “The findings are contrary to the popular notion among gun control advocates that universal background checks are a life-saving tool.”

Alas, no amount of evidence seeps through to Vermont’s mindless gun control activists.

John McClaughry is vice president of the Ethan Allen Institute

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April 2, 2019

by Rob Roper

The Vermont House last week voted 81-60 to double the tax on heating fuels from 2 cents to 4 cents per gallon, and to impose a gross receipts tax of 1.0 percent on the retail sale of natural gas and 1.5 percent on the retail sale of coal. The money raised (an estimated $4.5 million) would be used to increase funding for Vermont’s low income weatherization program.

This action been described by opponents as a “back door Carbon Tax” on fossil fuels.

Supporters of the fuel tax increase are arguing it’s technically not a Carbon Tax because it’s a tax on volume of fuel (gallons) not carbon output (tons released), and that this is increasing an existing tax, not creating a new one. But more disturbing than this semantic jujitsu used to justify (in some cases) a broken campaign promise to not support a carbon tax is the twisted logic that it’s okay to double the tax because fuel prices fluctuate and, therefore, consumers won’t notice.

The scheming goes because the market price for home heating fuels fluctuate, sometimes considerably, the state should use this opportunity to take MORE money out of their constituents’ pockets. If your bill spikes by fifty cents or a buck a gallon, you won’t notice us skimming off another two cents, right?

Yes, this is what they’re saying. And with a straight face! It’s like arguing when your neighbor gets socked with a big medical bill it’s a good time to pick their pocket. From a position of sheer deviousness, I guess they’re probably right. But morally?…

This justification was offered in committee, and on the floor of the house, most aggressively by Rep. George Till (D-Jericho), and can be seen here in this video by Rep. Mike McCarthy (D-St. Albans at around the 1:00 minute mark. Apparently McCarthy’s constituents aren’t buying it!

Rob Roper is president of the Ethan Allen Institute. 

 

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