by Rob Roper
When Democrats won super-supermajorities in both chambers of the Vermont legislature in November’s election, they brought with them a host of legislative priorities that come with massive price tags for Vermont taxpayers. While debate over these ideas tends to be siloed in committee hearings, it is important to take a look at them together to understand just how much new and ongoing spending these legislators have in mind – and how they expect us to pay for it all.
The Clean Heat Standard (S.5). $300 million per year “carbon tax”. This law would force dealers of fossil heating fuels (oil, propane, natural gas, and kerosene) to buy “clean heat credits” in order to sell their products. The credit is essentially a carbon tax on fuel dealers that will be passed along to customers. The revenue from the credits would go to fund things like low-income home weatherization and subsidizing heat pump installation. To fund these projects at the scale required by the Global Warming Solutions Act the Scott Administration estimates the total cost of heat credits over the first four years of the program would be $1.2 billion, causing an increase in home heating fuel of roughly 70¢ per gallon, or on average (assuming 700 gallons of heating oil per year) a de facto $500 carbon tax per household.
Universal Childcare. $279 million per year. For nearly two decades Vermont has been ratcheting up state government’s role in childcare from birth to five with an eye on the ultimate prize of incorporating four new grades into the public school system. This year they expect to make a big jump in that direction, and the RAND Corporation was hired to do an in-depth study of what it would take to fulfill the wish list of Let’s Grow Kids. Short answer, an additional $279 million in new taxes. This number is too big for any one pool of money, so it would have to be broken up with the biggest chunk coming from a new 1 percent payroll tax ($196 million), and some combination of an increased sales tax (from 6 to 8 percent), an expansion of the current sales tax to services, a dedicated sales tax on services of 10 percent, and/or a tax on soda to make up the other $83 million.
It is important to note that this is a year-one estimated cost. The expectation is that the annual cost to maintain this program would grow faster than the rate of inflation, more in line with the growth rate of k-12 public education spending.
Paid Family Leave (H.66). $116 million per year payroll tax. Governor Scott successfully vetoed a Paid Family Leave bill in 2020, but now it is back. As with its predecessor, this would be a mandatory program for all employees paid for with a new 0.58% payroll tax (total: $116 million), automatically deducted from everyone’s paycheck.
The bill would allow an employee to take up to twelve weeks (three months) of paid leave in a 12-month period for the birth of a child, to care for a sick family member or their own health, or to grieve the death of a loved one (limited to two weeks). One wonders what the fatality rate will be for favorite aunts during deer season as a result of this bill.
It is also important to note that S.66 states, “Notwithstanding subsection (a) of this section [setting the 0.58 percent tax rate], the General Assembly shall annually establish the rate of contribution for the next fiscal year. The rate shall [emphasis added] generate contributions in an amount equal to the sum of the projected amount necessary to provide benefits pursuant to this chapter during the next fiscal year plus a reserve equal to at least nine months of the projected benefit payments for the next fiscal year plus the projected cost to administer the Program during the next fiscal year….”
So, no, that 0.58% payroll tax number isn’t going to be that low for very long. As high as $116 million is, this is just the camel’s nose under the tent that mandates future spending increases. Expect the cost of the program and the payroll tax rate supporting it to explode very quickly.
The bill has 103 sponsors – more than enough votes to override a veto.
Single Payer Healthcare Redux (H.156). ($2.5 billion plus?) As with its doomed predecessor this version of Single Payer Healthcare would be financed by a payroll tax levied on all employers and a tax on self employment income, and an income tax surcharge, and by whatever other means necessary as may be determined by the General Assembly.
Although H.156 doesn’t spell out what the program would cost, Governor Peter Shumlin’s attempt at single payer died in 2014 when the year-one bill came to $2.5 billion requiring an 11.5 percent payroll tax plus a 9.5 percent income tax surcharge. The cost of healthcare has only gone up in the intervening decade. Unlike the original bill, full implementation of H.156 would phase in over three years instead of all at once, but this is still a very short time-frame to ramp up that much taxing and spending.
These are just the big-ticket items. Vermont taxpayers will also be subject to the usual “death by a thousand cuts” (although “cuts” is probably not the best choice of words while discussing Vermont tax policy), as other pet projects move forward, and programs until recently funded by federal emergency funds need to be extended with state tax dollars — or ended.
One example of this is the universal free school meals program, which federal funding supported during the Covid pandemic. That funding ended last summer, and Vermont taxpayer picked up the tab to extend it for another year to the tune of $29 million. Now legislators want to make the program permanent – with Vermont tax dollars.
Another is the housing program that currently pays for about 2800 homeless to live in hotels. Federal funds for that program are set to run out, so the Vermont House Appropriations Committee just voted to allocate $21 million of Vermont tax dollars to keep it afloat through June of this year.
$21 million here, $29 million there…. It begins to add up!
Keep in mind that of Vermont’s roughly $8 billion annual budget, roughly $6 billion is paid for with federal dollars, and of that $6 billion about half is “one-time” emergency funds. Vermont taxpayers (apart from the fact that we all pay federal taxes) are only required – so far – to pony up a little more than $2 billion of all that spending – and that is tapping us out. According to WalletHub, in 2022 Vermonters lives under the 4th highest state tax burden in the country. If the Democrats pass their agenda, just wait til 2023.
Rob Roper is a freelance writer who has been involved with Vermont politics and policy for over 20 years. This article reprinted with permission from Behind the Lines: Rob Roper on Vermont Politics, robertroper.substack.com