Editor’s note: This commentary is by Wendy Wilton, who has been treasurer for the City of Rutland since 2007. She was a candidate for state treasurer in 2012.
[G]ov. Shumlin has proposed to moderate the cost shift of Medicaid and Medicare by implementing a 0.7 percent payroll tax to be paid by employers. The soonest this tax can be implemented would be July 1, 2015, if the Legislature agrees to his proposal. The governor expects this tax to raise about $90 million from the state’s annual payroll of $13 billion in wages earned by Vermont’s 300,000 workers, including those who work for the state.
Typical of Mr. Shumlin’s proposals, it sounds good at first but a closer look at the details reveals the devil in the mix.
First, the Green Mountain Care Board will be approving health insurance rates this spring for calendar year 2016 enrollment before such a tax proposal can be approved by the Legislature. This makes it impossible to incorporate new revenues into the rate review. Employers would possibly be paying this tax in July without any economic benefit until calendar year 2017.
Second, the cost of the employer tax will fall heavily on Vermont’s property tax and income taxpayers for public employees who work for federal, state and local government to the tune of $16 million or 18 percent of the total anticipated payroll tax revenues.
It would be more honest and fair if the governor and Legislature would scrutinize the state budget and find $90 million in cost savings to make up for their poor financial decisions of the past.
The tab for the payroll tax for the state employees will be about $2.8 million based on a $400 million payroll, $5.9 million for the state’s teachers and other pre-K to 12 educational employees, based on a payroll of about $850 million, and $2.1 million for the state’s municipal employees with a payroll at $311 million. The payroll tax for the state employees will have to be found in the state’s General Fund and payroll tax for school and municipal employees will fall on the shoulders of the property taxpayer. Altogether that’s $11 million to be collected from the state and local coffers that must be raised by tax dollars, somehow.
For my community, the City of Rutland, this is $73,000 for the municipal employer and $200,000 for the school that is not in either FY 2016 budget. These amounts represent wages and benefits for four full-time employees. Any government entity, including the state, will need to decide if they will cut positions or raise taxes to pay the tax.
Federal employees working in Vermont earn about $441 million annually resulting in a payroll tax of $3 million which will fall onto those who pay federal taxes (I know that includes me). Vermont’s state’s colleges and university payrolls will yield about $2 million, which will increase their budgets and boost tuition and state funding requests.
The Legislature and the Shumlin administration knew when they passed Act 48 Medicaid and Medicare enrollments would increase and this would result in lower reimbursements overall, worsening the cost shift. They also know that nearly one in five Vermont employees works for local, state or federal government resulting in tax increases to fund a payroll tax. It would be more honest and fair if the governor and Legislature would scrutinize the state budget and find $90 million in cost savings to make up for their poor financial decisions of the past. If the governor and Legislature had not increased the state budget beyond the rate of economic growth in the last few years, the money would be available in a surplus to provide the reimbursement support that is badly needed without a new tax.
