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Shumlin To Rely On Payroll Tax Hikes

Gov. Peter Shumlin said increases in the payroll tax will “play a major role” in the public financing system he wants to use to fund single-payer health care.

The public discussion over single-payer has taken a back seat of late to the health insurance “exchange” set to come online in the beginning of October. The new online marketplace, a product of the federal Affordable Care Act, will offer consumers a platform from which to comparison shop from a more strictly regulated slate of coverage options.

But even as the state launches a $6 million outreach campaign aimed at building awareness of “Vermont Health Connect,” as the exchange is being called, Shumlin said his administration still has its eyes on the single-payer prize.

“What (the exchange) does is basically subsidize the current system, so that’s OK,” Shumlin said. “But like most things that come out of Congress, it doesn’t really solve the problem.”

In an interview this week on “City Room,” a public-access cable show, Shumlin said he’s still committed to delivering a publicly financed, universal health care system by 2017. And his administration, he said, is readying a financing plan that will rely in large part on the payroll tax.

“And the question is where do you have capacity in the other taxes — income, sales, room and meals, we all know what they are — to be able to integrate some of those taxes with a payroll tax to come up with a more fair system based upon ability to pay,” Shumlin said. “And that’s the challenge for the Legislature. And for us.”

The “challenge” of developing a plan looks to be falling more on Shumlin than on his Democratic colleagues in the Statehouse, who rejected a plan earlier this year to split responsibility for the development of a public-financing proposal between the legislative and executive branches.

The administration is spearheading that task now, with input from lawmakers, and will present a proposal to the Legislature in January 2015.

Shumlin said there’s no question that the payroll tax will figure prominently in the plan, but that his administration will have to figure out how to avoid the kind of economic disruption that would inevitably accompany a sudden increase in the surcharge on wages.

For companies that already provide health insurance to their employees, Shumlin said, the new payroll tax won’t be terribly jarring.

“Right now as an employer I can tell you that I pay something that I call a health care tax … And for businesses … that are already paying a health care premium ... it’s not a big shock to tell us we’re going to be paying a payroll tax instead of a health care premium,” Shumlin said. “We don’t care what you call it, we’re already paying it.”

The problem with the payroll tax, according to Shumlin, arises when the new surcharge is assessed on Vermont companies that don’t already provide insurance.

“And the question is how to ratchet in the folks that are paying nothing slowly enough so it doesn’t hurt their bottom line,” Shumlin said.

Ultimately, he said that in the single-payer system, the state needs “to have everybody who’s in business in Vermont paying something.”

Shumlin said the job will be a heavy lift politically. But he said he’s convinced the debate is a winnable one.

“Opponents are going to say this will be the biggest tax increase in Vermont history. Fair enough,” Shumlin said. “But it’s going to be the biggest health care premium reduction in American history. We’re just going to swap a health care premium for a publicly financed health care premium.”