Commentary: The Legislature’s Final Four (April, 2015)

by John McClaughryJohn McClaughry

The Vermont legislature has entered the final four weeks of its 2015 session. The House has passed its appropriations, tax and health care “reform” bills, and the Senate is now well along in its consideration of those measures. It’s too soon to predict how differences between the two chambers will be resolved, but the outline of their likely product is emerging.

The legislature will send the Governor a balanced General Fund budget, they will keep the three statutory reserve funds filled to required levels, and they won’t cheat on the required $300 million transfer to the Education Fund. That’s good news.

To close a $113 million budget gap, the House turned aside $53 million that the Shumlin administration wanted, above and beyond what it got last year. This is referred to as a “cut”, but it is only a “cut” from desires and expectations, not from last year’s spending level.

The House also threw in $24 million in “one time funds”, $5 million of it from a rainy day reserve fund, and $1.5 million in effect from the Transportation Fund.

The House proposal to cap income tax deductions will squeeze an estimated $35 million out of taxpayers who itemize deductions, unless lots of them cut way back on charitable contributions to avoid it.

The Governor won’t get his new 0.7% payroll tax, but he’ll fight to get some payroll tax that can be jacked up later. His argument for instituting a new tax is “to reduce the Medicaid cost shift, and thus reduce rising health insurance premiums”.

The legislature has become wary of such claims – especially from Peter Shumlin, who also wants the payroll tax proceeds to finance his Green Mountain Care Board’s further ventures into government-run health care. Speaker Shap Smith remarked that this sleight of hand proposal “poisoned the well” for the payroll tax, and Senate Finance Chair Tim Ashe has said it’s not likely to move in the Senate.

Unless deterred by a popular uprising, the legislature may also impose a new tax on “sweetened beverages”. This revenue grab started out supposedly as a way of fighting Attorney General Sorrell’s campaign against obesity.

The tax advocates’ original proposal of $1.44 tax on a sixpack of sugar-containing soda – called by some “Vermont’s latest gift to New Hampshire” – will be reduced to perhaps 36 cents per sixpack, but the advocates now want to apply the tax to diet soda which people drink to avoid obesity. The Senate may well turn thumbs down on the whole idea, which even the Governor, eager as he is for health care spending, still opposes.

In a similar vein, the legislature may expand the 6% sales tax to vitamins and dietary supplements, which people take to maintain their health, as well as adding 25 cents a pack more on cigarettes, which people use to damage their health.

There will be at least a one cent increase in the base non-residential school property tax rate that feeds the Education Fund. This will be the fifth rate increase in five years.

More importantly, the House-passed education bill will for the first time in Vermont history force school districts to consolidate into regional education districts resembling waste management districts, and most likely controlled by “stakeholders”, not citizens.

Also for the first time in history, the state will impose an annual spending increase cap on all school districts. The proposal to lower educational costs by expanding parental choice never even got a hearing in the House, and won’t in the Senate. Instead, the House bill consciously restricts choice and protects monopolies, as it lurches toward creating a One Big School System controlled from Montpelier.

The ineptly named health care “reform” bill will not include allowing businesses and individuals to purchase insurance outside the failed Vermont Health Connect. Instead, it will strengthen the Board’s already sweeping authority to hammer independent doctors and clinics, in order to protect the “system” of higher-priced hospitals and their owned practices.

With the action switched to the Senate, the militant left, led by the Vermont State Employees Association, came out in force Saturday in a Statehouse “Fight Back Rally” to oppose all spending “cuts”, demand higher taxes on “the wealthy”, and wage war on “inequality”. If the legislature rejects their demands, that will be about as much as friends of limited government, lower taxes, less centralized control, better economic prospects, and more freedom are likely to get this year. It’s not much.

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

 

 

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