After Facing Criticism, Shumlin's Payroll Tax Gets New Life
The House Committee on Health Care Wednesday afternoon endorsed a plan to pay for $69 million in new health reforms. But its proposal for a payroll tax and soda tax still face stiff criticism from a broad cross-section of lawmakers and special interests.
Hinesburg Rep. Bill Lippert has spent the last nine weeks searching for a solution to his committee’s revenue dilemma. When he arrived for work in Montpelier Wednesday, he hadn’t yet found it.
“And I can honestly tell you that when I came to the Statehouse this morning, I did not have this particular package in mind,” Lippert says.
But by Wednesday afternoon, after numerous consultations both inside and outside of his committee room walls, Lippert put something on the table: Not only does he want the committee to support a version of the payroll tax put forward by Gov. Peter Shumlin, he also thinks lawmakers should create a 2-cent per-ounce tax on sugar-sweetened beverages.
“It seemed to me that we had the opportunity to have a piece of both revenue sources to undergird the priorities of this committee,” Lippert says.
The plan has ratcheted down Shumlin’s payroll tax plan, from .7 percent to .3 percent. But it adds a 2-cent per-ounce tax on sugar sweetened beverages. Those taxes would raise a combined $62 million annually, split roughly even between the two.
The plan has ratcheted down Shumlin's payroll tax plan, from .7 percent to .3 percent. But it adds a 2-cent per-ounce tax on sugar sweetened beverages.
Notably, the proposal – which would also draw down tens of millions on dollars in federal funds – raises enough money to scrap another revenue stream, known as the employer assessment. That tax, created about a decade ago to support Catamount Health, now collects about $17 million annually from businesses that don’t provide health benefits to their workers.
A straw vote ensued, and the plan, which will get a formal vote Thursday, looks poised to pass by an 8-to-3 party line vote.
Committee members hope the elimination of the employer assessment might soften opposition to the payroll and soda taxes. But this controversial revenue plan might not have much of a shelf life.
“And where you’ll see that first impact (of the tax on sugary beverages) is actually at the car dealerships, because people are going to be trading in their sub-compact cars for larger trunk space so they can go to New Hampshire, or New York, and bring back cases of soda,” says Rep. Adam Greshin, an Independent from Warren.
Greshin sits on the House Committee on Ways and Means, which is the next stop on the legislative path for the House Health Committees revenue plan. And as of right now at least, the tax on sugary beverages doesn’t have the six votes it would need to pass through that committee.
Shumlin, too, has long expressed strong opposition to the tax on sugary beverages, a position he reiterated at a new conference Wednesday.
Greshin says imposing $30 million a year excise on taxes on sugary beverages will crush small retail business, especially in border towns.
“And to link that then with the payroll tax, and to use the hook of eliminating the employer assessment I think is trying to get the camel’s nose snuck tightly under the tent while they can,” Greshin says.
Notably, the proposal - which would also draw down tens of millions on dollars in federal funds - raises enough money to scrap another revenue stream, known as the employer assessment.
The House Health Committee’s plan has also served to alienate some of the few business interests that had expressed a willingness to go along with the payroll tax. Daniel Barlow is public policy manager at Vermont Businesses for Social Responsibility. Barlow says that in the current system, businesses that provide quality health benefits are effectively subsidizing businesses that do not.
Barlow says the employer assessment, which collects fees only from companies that don’t offer employee insurance, is one of the only policies that exist to rectify that imbalance.
“The assessment, which has been around for almost 10 years, is a small step toward bridging that gap. And eliminating that is really taking a step backward in health care reform, from VBSR’s perspective,” Barlow says.
The House Health Committee plan would fund number of high-dollar reform initiatives, including the governor’s plan to increase considerably the amount of money doctors are paid to treat Medicaid patients. The plan would also spend $8 million annually to boost state subsidies to lower-income Vermonters now purchasing health insurance at Vermont Health Connect.
“The House Health Care Committee’s proposal today strengthens the health care system of Vermont by prioritizing primary care and access to primary care for all Vermonters,” Lippert says.