2-9-15 – Major Deterrence: A Payroll Tax Over a Bridge Too Far

by Chris Campion

Recently, the (somewhat) recently-anointed Chief of Health Care Reform, Lawrence Miller – an un-elected, politically-determined position that impacts every single Vermonter in the critical area of health care – publicly defended the governor’s plan to raise taxes on Vermonters to pay for health care.  This seems somewhat contrary to what Shumlin originally opposed back in 2011, when he argued against the payroll tax increase as outlined in William Hsiao’s plan for single-payer in Vermont.

As Shumlin advised Vermonters then, and was very true to his word on, he felt that he didn’t need to put forward a funding plan, because why should a governor worry about how to pay for massive new entitlements?  From the 2011 VPR article:

(Interviewer John Dillon) The Shumlin administration is working with legislative leaders on a single payer bill. The governor said the bill will probably not include a funding plan.

(Shumlin) “I don’t think it needs to. I think we first need to pass the cost containment mechanism that will work. We all know that it’s going to get paid  for. The question is are we going to design that’s going to cost less and be more affordable for Vermonters. And that’s the hard work.”

Ah, the old “cost containment” angle, and the governor actually says that “we all know it’s going to get paid for”.  I wonder – did he know it’s not going to get paid for?

Now flash forward to a few years down the road from 2011. After single-payer is passed, Shumlin ignores his own imposed deadline for providing a funding plan.  He pushes it off for as long as humanly possible, until after the gubernatorial election, which he only won by a few thousand votes against a weak Republican candidate.  Good science argues that there’s no correlation here.  Ahem.

Then Shumlin says single-payer funding is DOA, because there’s not enough money in Vermont to support it.  Even though anyone with a glance at the state’s budget and revenues knows that you can’t slap $2.2 billion in additional taxes on existing $5 billion budgets and think that, hey, the money will just come from somewhere.

Where, you might ask?  From Another Payroll Tax Plan!  

And here to defend it is the state’s Health Care Reform Chief, a position which seems to be less about reforming anything than just raising taxes to minutely address the existing cost-shift, which has been the reason commercial insurance rates have risen so much.  The existing version of single-payer, Medicaid, does not cover costs, and why doctors often refuse it as a reimbursement, because no business can long operate at a loss.  As Shumlin, himself a shrewd businessman, surely understands.

But let’s see how Major Deterrence addresses the cost increase on the increasingly hapless Vermont businesses that, despite the state’s best efforts, still manage to keep their doors open here:

Some lawmakers worry the payroll tax will make Vermont seem less open for business.

Vermont’s Health Care Reform Chief Lawrence Miller said it’s hard to see how a tax of less than 1 percent would be a major deterrent.

“It is still coming from businesses who are coming from the sources of commercial insurance, it’s also being doubled with federal dollars and really being applied very strategically to make sure those premiums are reduced,” Miller said.

Well, if you’re already rated one of the highest-taxed states in the country and one of the least business-friendly states to do business in, maybe it becomes a little easier to see how deterrence actually works.  It could be that the companies that have moved out of state, or decided not to expand here, have already been deterred.

Claiming that, somehow, businesses will now be paying twice for coverage that they’re already paying more for because of the cost shift is somehow an incentive to support an increase in cost in the form of a payroll tax is a gargantuan level of an assumption to make.  People and businesses have memories.  If the state raises taxes on one aspect of their business, and tells them that they’re going to lower the costs for their insurance premiums on the other, let’s just say that there’s some well-founded skepticism on the parts of the people who sweat, bleed, and build in this state.  The only guarantee is that taxes will go up, and new taxes will be applied.

Not only does this payroll tax not fully cover the cost-shift (even if one assumes that jacking taxes on businesses won’t have a collateral effect, in that some of them will decide to reduce payroll, leave the state, etc, so that $90 million revenue projection is a huge guess, at best), we get the “Hey, the fed is matching the dollars!” argument.  Clearly this argument is made by people who have lived far too long in the state bubble, where dollars that come from the magical federal spigot are somehow not tax dollars taken from and piled onto the backs of the people who work for a living in Vermont.  Oh, and the Medicaid unfunded liabilities gap is in the trillions.

Miller also says greater reimbursement rates might attract more health care providers to work outside Chittenden County where the percentage of Medicaid patients is higher.

It might not have that effect, too – because those reimbursement rates will continue to be shaky and indeterminate, due to yet another patch slapped onto the sinking hull that is the SS Single-Payer.  The simple truth is that if you’re going to put all care recipients into one big pool, then every recipient is going to have to pay….what’s the phrasing we hear so much about?  Oh yeah, that’s right – every recipient is going to have to pay his or her fair share.

That includes those people currently receiving care under the cost-shift.  And that problem cannot be solved at the state level, by uncovering previously-hidden tax revenue and telling Vermonter that it’s going to “fix” the cost-shift, and access to health care in Vermont.  It will do neither of those things, and it will make it harder for Vermonters to be employed in a state that already sports one of the highest tax burdens in the country.

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