If you ask, “Is Vermont more affordable today than it was before the start of the 2013 legislative session?”
Well consider this. Total state spending has increased every year since 2008. This year the state budget grew by 4.23%. Couple this with; $70 million in increased property taxes, $50 million in gas and diesel tax, employer assessment ($11 million) to fund the new health insurance exchange (Vermont Health Connect) among a host of other fees.
The answer is simply – No, Vermont is not more affordable.
The continued inclination, by elected officials, to increases spending runs afoul of 0.2% population growth stagnant household income trends and chronic (10-15%) poverty.
NFIB/VT Leadership Council
NFIB/Vermont needs your help! You must engage in the process. If you are interested in serving on NFIB’s Leadership Council here in Vermont contact Shawn.Shouldice@NFIB.org.
The NFIB Leadership Council is a diverse group of Vermont small business owners who are dedicated to NFIB’s mission: To promote and protect the right of our members to own, operate and grow their businesses. The Leadership Council is a volunteer group of key activists who are relied upon to provide input and counsel on public policy and issues affecting small business; volunteer to testify, speak to the media and be an active voice for NFIB.
The close of the legislative session ended with mixed results for Vermont’s small businesses in terms of tax policy. Ultimately, a final budget agreement was reached that did not include hikes to the meals, candy, beverage, clothing, dietary supplements, bottled water, cigarettes, snuff, manufacturing, mortgage interest deduction, and income taxes.
Helping to mitigate this motivation to raise taxes was an eleventh hour report that Vermont’s tax receipts for April came in much higher than expected. Secondarily, the impact of the Federal ‘sequestration’ was re-evaluated and not going to have nearly the impact on Vermont as initially claimed. NFIB fully expects that these taxes and then some will be up for debate again in the next session.
Income Tax Reform
Speaker Shap Smith and Senator Tim Ashe (Chittenden) are leading the charge for income tax reform (including deductions) that they argue is revenue neutral - by lowering the taxes of 200,000 Vermont taxpayers and increasing the taxes of about 14,000 Vermonters. Since there are 359,885 filers in Vermont; NFIB is curious about how their plan will affect the other 145,885 Vermont taxpayers. The Speaker has said that his tax committee will get back to work on this over the autumn months so they are ready to go next January.
Cloud Computing Tax
Disappointingly, a tax on cloud computing was implemented by the Legislature in the final days. The moratorium on cloud computing taxation had been in place since last year. The moratorium essentially exempted cloud computing services and its proposed extension had the strong support of Governor Peter Shumlin, but required legislative approval. Legislators aren’t really sure how much money this will raise, but moved to implement the sales tax nonetheless.
Property and Gas Tax
The two major tax increases implemented by the legislature that will have the strongest negative impact on Vermont’s small businesses were the rise in property taxes and the gas tax increase. Vermonters will see a 5-cent increase on residential property and 6-cent increase on non-residential property/commercial property. The increase came after a large majority of local school districts voted affirmatively for school budget increases on Town Meeting Day – but if it were only that simple. Vermont property tax system is indiscernible by more than maybe five people. School spending increased this year alone by 5.07% (to nearly $1.5 billion), the number of enrolled students declined by 1,029 (down from 94,144 in 2008 to 87,260 students today).
Under the current statewide property tax system, the legislature is required to set education funding levels based on what local school districts are spending. This has led many legislators to call for reform to the system. As a result, during the last few days of the session, the Legislature passed a provision that would begin to lower the 125% threshold penalty school districts face when their per-pupil spending exceeds the state average. Although, they hope that this adjustment will encourage school districts and local voters to show greater spending restraint, it isn’t likely to amount to much at all.
On May 1st, Vermonters began to see the price they pay for gasoline rise by 5.9-cents as a result of the well-publicized gas tax increase passed by the Legislature and signed by the Governor. The diesel tax will also be increasing by 2-cents per gallon in the coming weeks. The combined taxes on fuel are estimated to raise an additional $50 million in revenue over the next two years; allowing Vermont to draw down Federal matching funds and help cover the cost of maintaining Vermont’s transportation infrastructure.
Legislative Staff to have Access to your Tax Filing
A last moment effort by the Senate Finance Committee, chaired by Senator Tim Ashe, an amendment was added to the tax bill that will authorize the Joint Fiscal Office (JFO) to access individual tax filings.
NFIB/VT believes debate about appropriate tax policy is in order, but the debate should not occur based on individual taxpayer’s filings.
This is bad public policy:
- It does not require JFO to request filings in the aggregate, so nothing prevents JFO from requesting your personal tax filing so long as the Tax Department redacts your personal information.
- It does not protect a taxpayer’s identity. Most tax filers can quite easily be identified within the first three or four pages of a filing simply by looking at the entities that the filer is connected.
- Nothing in the bill explicitly requires the protection of a person’s connection with the tax filing.
Tom Pelham, former Finance Commissioner in the Dean Administration, and Tax Commissioner in the Douglas Administration had to say on the topic;
“In this dash for cash, exposing Vermont’s taxpayers to higher risks that tax return privacy will be breached or its content politicized is reckless. There is so much private information on any return that legislative staff and legislators should not have access to it. Though a name, address or social security number can easily be redacted, other details on a tax return, from charitable contributions, to health savings account, investment and student loan data, to rental or farm property specifics, to school district code and property tax data, to proprietary corporate information, that in our small and intimate state of Vermont, the probability of relating even a well redacted tax return to a specific tax payer is very high.
“Senator Ashe’s ill-considered last minute change broadening access to tax returns will end badly. Once the first breach of taxpayer confidentiality occurs, Senator Ashe and those crafting and implementing the MOU his legislation mandates should be prepared to suffer the same unforgiving penalties as currently apply to Tax Department employees.”
NFIB/VT opposes releasing tax filings to legislative staff; the Vermont Tax Department is fully equipped to provide appropriate tax filing analysis to the legislature at their request.
Flexible Work Schedules
One of the most significant pieces of legislation from a labor perspective, to make it through the legislature this session was the ‘Equal Pay’ bill, H.99. This bill attempts to remedy the gap in wages women face in the workplace. NFIB/VT supports the underlying bill, however, we have concern about the so-called ‘flexible work schedule’ provisions included in the bill. The new law will require employers to formally consider flexible work schedule requests made by employees up to two times per year. Although employers will be given a fair amount of latitude to deny a flexible work request, small businesses are now burdened with additional paperwork and the potential legal exposure this law will create. NFIB/VT opposed the flexible work schedule provision due to the burden it will place on small business owners.
Reach-Up Time Limit Approved
During the final days of the session, the final budget bill included a slightly modified version of Governor Peter Shumlin’s proposal to begin putting a five-year limit on the length of time Vermonters could receive benefits through Vermont’s Reach-Up welfare program. Vermont had been the only state in the nation that did not have a limit on welfare benefits, so the fact the legislature agreed to some limits was significant. NFIB/VT did not take a position on this legislation.
During the closing days of the session, the Legislature also approved S.14, a bill that would require about 2,600 non-union, state employees to pay mandatory ‘agency fees’ to unions for benefits they receive in collective bargaining negotiations and representation during labor grievances. The legislation requires that the non-union employees pay up to 85% of full union dues. Opponents of the legislation argued that it unjustly compelled non-union employees to essentially provide financial support to unions they have chosen not to join. NFIB/VT monitored this legislation as it has been a vehicle for mandating child care workers to join a union.
There was several important labor issues discussed during the legislative session that were not ultimately enacted. It is widely believed that many of these issues will come up for debate again next session when the legislature returns in January. A few of the issues include: mandatory sick leave, which would require employers to give 56 hours of paid time off annually; increases to the $425 maximum weekly unemployment benefit currently in place; self-employment assistance, which would allow self-employed individuals who are attempting to start a business to continue to receive unemployment benefits for a certain period of time; various issues related to unemployment insurance and worker’s compensation, including changes to short time compensation rules and changing the length of time a claimant can take to appeal a discontinuance of benefits.
Health Care Reform
Funding to operate the Vermont Health Connect (the health exchange) will be borne by small businesses with fewer than 50 employees. Currently, the Employer Assessment raises about $10 million dollars. Legislation passed this year will broaden the definition of who pays the assessment – projections are that $18 million will be raised from this tax. NFIB/VT vigorously opposed this tax and called for its repeal when the legislature repealed the Catamount Health Plan.
NFIB/VT has continued to express strong concern over the uncertainty surrounding this issue - implementation of the exchange (Vermont Health Connect), out of pocket costs, premiums, benefits and how the single payer plan will be financed. Vermont Health Connect continues to be a work in progress - as the Department of Vermont Health Access (DVHA) develops the site it has become clear that federal subsidies intended to provide assistance to low-income Vermonters will fall short. To cover these shortfalls, the legislature is working on various ways to extract additional revenue from Vermont taxpayers.
Employer Assessment (aka Catamount Assessment) – Rep. Paul Poirier (Barre City) led the charge for the repeal of this tax. Unfortunately the Senate disagreed saying they needed the nearly $18 million to fund the operation of Vermont Health Connect (the exchange).
Single Payer Financing - Is there a financing plan?
Governor Peter Shumlin announced a proposal to form a new nine-member committee to create the long awaited single payer financing plan. NFIB/VT is confused, since the State of Vermont has already funded a study conducted by UMass ($300,000) and by Harvard professor Dr. William Hsiao to tell us how it will be funded. NFIB/VT is very concerned that the taxpayers have paid for not two but now three “studies” to determine how the single payer plan will be financed.
In January 2013, the Shumlin Administration submitted an outline for financing which called for approximately $1.6 billion in new taxes to finance a new healthcare system but did not go into detail about the funding specifics.