Editor’s note: This commentary is by Willem Post, a retired engineer, who now writes about energy issues, currently specializing in energy efficiency of buildings and building systems. He is a founding member of the Coalition for Energy Solutions.
[N]o wonder Democrats waited until after the elections to release the single-payer bombshell onto Vermont’s already struggling households and businesses. A Republican governor would have been elected and even more Democrats would have lost seats to Republicans.
Montpelier folks are on a socialist, single-payer health care ego-trip, pursued by the governor, to solve the “health care problem,” just as they came up with the state centralizing the financing of public education to solve the “education problem,” which led to much higher taxes than predicted, but did not improve educational and societal outcomes.
Politicians declared it a success anyway. With Republicans controlling the U.S. House and Senate, no subsidies can be expected to financially support single-payer in “pioneering” Vermont.
Solving the “health care problem” apparently involves imposing two new taxes totaling $2 billion per year, for starters.
1) Medical payroll tax to raise about $1 billion:
This tax will be in addition to the present payroll taxes, such as the FICA taxes, etc.
This new tax will be 8 percent of Vermont’s $11.7 billion payroll to raise $936 million per year. Vermont’s total payroll is much greater, about $16 billion-$18 billion (depending on the counting), but it looks like the difference, $4.3 billion-$6.3 billion, is exempt for various, more or less nefarious, reasons. Legislators should look into the $4.3 billion-$6.3 billion exemption.
Single-payer will have co-pays and covers only 80 percent of medical expenses. The other 20 percent would need to be covered with supplementary insurance.
The tax is supposed to replace present health care premiums paid by employees and employers.
• Will employers also pay 8 percent?
• Will the 8 percent be divided 4 percent employee and 4 percent employer? This appears to be reasonable.
• Will all employers, large and small, be required to contribute to single-payer?
• Will all government employees, policemen, firemen, education, medical personnel, etc., be part of single-payer, or will they keep their expensive fee–for-service plans?
2) Medical income tax to raise about $1 billion:
This new tax will apply to households with annual incomes greater than $50,000. The tax is imposed to adhere to the principle of “ability to pay,” says Shumlin,
The tax rate will start at a not-yet-determined percentage for households with incomes greater than $50,000, and the rate will be capped at 9 percent. That means about 50 percent of all Vermont households will pay the tax.
Remember, this new tax is in addition to any income taxes these households already pay, plus, for employees on a payroll, in addition to the above new medical payroll tax.
Retirees not on any payroll will not pay the medical payroll tax, but will be required to pay the medical income tax.
Example: A two-person household, both retired, over 70 years old, with a gross household income of $200,000.
• Existing annual state income taxes about $11,500 in 2014
• Existing Medicare premium $104.50 per month per person, doubled to $209 because of “high income,” $5,016 in 2015
• Existing AARP supplementary premium $100 per month per person $2,400 in 2015
• Existing real estate taxes (school plus municipal) $10,500 in 2014 (town of Hartford)
• New medical income tax, 9 percent of $200,000 = $18,000 per year, or 9 percent of $160,000 taxable income = $14,400 per year.
Shumlin’s gross income is $1 million per year. Will he pay 9 percent on that, or will he have so many deductions that his taxable income is much smaller?
Retired people who already have Medicare and AARP should not have to participate in single-payer.
The outcome will be many:
• Higher-income, tax-paying households, such as two-person households with two retirees, will likely escape to less-socialist, “less-tax-happy” states, or, even worse, not come to retire in Vermont.
• Lower-income households, which will pay little in taxes, will likely move into Vermont from other states to cash in on single-payer. Vermont, the welfare magnet, just as Norway is in Europe, except Norway is rich.
Some Vermont history and facts
Vermont’s government has been growing its footprint in the Vermont economy during the past 10-15 years, but the private sector part of that economy, burdened by various taxes, fees and mandates, is being hollowed out and is barely growing.
Vermont’s government has been growing its footprint in the Vermont economy during the past 10-15 years, but the private sector part of that economy, burdened by various taxes, fees and mandates, is being hollowed out and is barely growing.
In 2000, the Vermont population was 609,000. The budget was $2.2 billion. Fourteen years later, the Vermont population is 623,000. The fiscal year 2015 budget is $5.59 billion, a $3.39 billion increase, for a population increase of 14,000 people. This is irrational, unsustainable idiocy.
Basically, there has been zero net job growth in Vermont since 2000. For the decade 2010-2020, the state itself forecasts 69 percent of all jobs created will likely pay less than $20 an hour, i.e., below a livable wage, especially considering the Vermont cost of living index of 120 vs. the U.S. index of 100, and the higher Vermont tax burden per person vs. the U.S. tax burden per person.
Vermont Yankee employs about 600 people with good, steady, secure pay and benefits. Vermont needs to duplicate such companies 100 times by making its business climate attractive for such companies, to finally increase living standards. Hint: EB-5 is not the answer.
Vermont has become one of the most-socialized, heavily subsidized, not-for-profit states, which has led to reduced economic growth, reduced ability to pay taxes, recurring budget deficits, and adverse economic and societal outcomes, i.e., the people cannot pay all the state and local taxes, fees and mandates, and support all the “off-the-books,” quasi-government organizations, etc., such as the 5 percent mandated Efficiency Vermont surcharge on electric bills, etc.
Vermont’s mean real household income is just a few percent greater than of the U.S. Ergo, Vermont households, whose real incomes have decline since 2000, have had to skimp and scrape, i.e., be “energy efficient” and reduce other expenses to get by. Politicians often point out how “energy efficient” Vermonters are.
In such an environment, it is total madness to impose $2 billion in new taxes on Vermont’s economy that has a growing government sector percent and a shrinking, less profitable, private sector percent, which has had hardly any real growth for the past five years.
The cost of living index
Vermont has a cost of living index 20 percent higher than the U.S. cost of living index, plus Vermont has a tax, mandated fees, etc., burden that is much higher than the U.S. average, and Vermont also has a lower real household income than the Northeast average.
The impacts of taxes (federal, state and local) are not accounted for in the cost of living index. The cost of living index is highly representative, as it covers the incomes of the upper 20 percent of U.S. households, which is about 60 percent of all U.S. household income.
Real household incomes declined
Here are the real (inflation-adjusted) mean household income declines of the bottom 60 percent of U.S. households:
3rd quintile -8.4 percent since peak year in 2000
4th quintile -11.1 percent since peak year in 2000
5th quintile -15.9 percent since peak year in 1999
This website also shows how the top 5 percent of households has fared so much better than the rest.
