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House Lawmakers Want A Higher Tax On Businesses To Fill Vermont's Budget Gap

House Ways and Means chairwoman Janet Ancel is hopeful that this is the year for lawmakers to consider a new plan to fund education
Angela Evancie
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VPR file
Rep. Janet Ancel, the Democratic chairwoman of the House Committee on Ways and Means, says that when companies don't provide insurance benefits, the state often ends up picking up the tab.

A key House committee has given the go ahead to legislation that would raise taxes and fees on Vermonters by $48 million next year. Democratic leaders say they need the money to bring revenues in line with spending, but critics of the plan say they should have cut the budget instead.

Perhaps the most controversial element of the revenue plan affects businesses whose employees either aren't insured, or whose insurance plans are subsidized by the state.

Companies in that situation already pay about $600 a year, per full-time employee, under what’s known as the employer assessment. The House proposal would increase that fee to as much as $1,000 annually, and raise an additional $8 million a year. 

Calais Rep. Janet Ancel, the Democratic chairwoman of the House Committee on Ways and Means, says that when companies don't provide insurance benefits, the state often ends up picking up the tab through programs like Medicaid.

Since money from the increased assessment will be used to pay for Medicaid shortfall, Ancel says affected businesses will be getting a direct benefit. 

“They have the advantage of having employees who get health care,” Ancel says.

Dan Barlow, public policy manager at Vermont Businesses for Social Responsibility, says most his organization’s member businesses provide employee health plans. But he says the high cost of those plans is driven in part by the fact that private policyholders are shouldering an increasing portion of Medicaid costs.

“You know, it’s frustrating for my businesses to take this seriously, to have this huge cost on their payroll, and then realize part of that cost is also subsidizing competitors who aren’t paying for employee health insurance,” Barlow says.

"It's frustrating for my businesses to take this seriously ... and then realize part of that cost is also subsidizing competitors who aren't paying for employee health insurance." - Dan Barlow, Vermont Businesses for Social Responsibility

Warren Rep. Adam Greshin, however, says the proposal does nothing to encourage the kind of behavior lawmakers are theoretically seeking to promote. Greshin, an independent, says the increased assessment won’t compel businesses to suddenly provide employee benefits.

“Instead it is a penalty on employers who hire uncovered workers,” Greshin says. “And it acts as a disincentive for employers to hire workers who do not have health care coverage or who are covered through some publicly subsidized program.”

Greshin is co-owner of Sugarbush Report, and he says his own business will be impacted significantly by the plan. He says that businesses like his, that rely heavily on a part-time workforce, have no means at their disposal to avoid the employer assessment. 

“We do not have a product, and there does not exist a product, to offer health insurance to part-time workers, to people, for example, who might work 10 hours a week stocking shelves,” Greshin says.

"We do not have a product, and there does not exist a product, to offer health insurance to part-time workers." - Warren Rep. Adam Greshin, co-owner of Sugarbush Resort

The largest component of the revenue bill calls for an increase in mutual fund license fees, which is expected to raise about $21 million a year. It also raises $2 million through an increase in the bank franchise tax, and $1 million a year by requiring people who rent property through sites like Airbnb to pay rooms taxes.

The plan also raises the gross receipts tax on many home-heating fuels to support weatherization projects for low-income households. 

Dorset Rep. Patti Komline says there’s no reason lawmakers need to raise new taxes in 2016. 

“We give out over $300 million a year in grants every year in this state, and I would say we could look at that and ask agencies to prioritize those,” Komline says. “There are places that we can make these decisions that are not painful to people.”

The House is expected to debate the revenue plan on the floor next week. 

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