2-6-14 – Vermont Chamber Lays Out Good, Bad, And Ugly of 0.7% Payroll Tax

by Shayne Spence & Rob Roper

Betsy Bishop, president of the Vermont Chamber of Commerce, testified in regard to concerns her organization has with the Governor’s proposed 0.7% payroll tax that would ostensibly be applied to reducing the Medicaid “cost shift”. She said there is good, bad, and ugly in the idea… mostly bad and ugly

The Good. “It’s bringing needed attention to the Medicaid cost shift. And there is a recognition that businesses for a very long time have been paying more than what they should be paying,” said Bishop.

The Bad. And this is significant. Bishop makes the excellent point that applying a tax to business to fix the cost shift only shifts shte shift! “It forces employers to continue to pay more than their fair share, just through a different tax,” said Bishop. “So if we believe that the chronic underfunding of state government has shifted more onto businesses, and businesses have been paying more in commercial rates [than they should be paying] If we just make employers pay that through a payroll tax, you actually haven’t fixed the cost shift, you’re still making them pay an amount more than is their fair share.”

And ,the Ugly. Bishop is worried about how the tax will be implemented over time. “Having it dedicated to healthcare is a very scary prospect for many employers,” she said. “This is very concerning to them, especially with the potential that the smallness of the rate of the tax (0.7%) seems like such a small thing when you say it, and raises such a massive amount of money. And when we look at the history of taxes and the history of these dedicated funds, there’s a real concern that we will see that tick up over time.”

Yes, taxes do have a tendency to do that.


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