VBR and Vermont Chamber Release Statement on Payroll Tax

Business Organizations Oppose Payroll Tax
Claim as Bad Public Policy at Any Rate

3.16.15 – (South Burlington, Vt.) Today the leadership of two major statewide business organizations released a joint statement in opposition to the Administration’s proposed payroll tax on businesses.

“Vermont’s current fiscal picture is complicated,” stated Lisa Ventriss, President of Vermont Business Roundtable. “On the spending side, Vermont has had years of growth in planning, designing and responding to increasing demands for services; real needs which, in many cases, had their roots in the Great Recession of 2007-2008. The biggest area of build-out has been in health care; accelerated by the Shumlin Administration’s desire to create a first-in-the-nation, single-payer health care system. According to the latest data from the Joint Fiscal Office, since 2008 the state fund appropriation has increased 56 percent and appropriations to the Agency of Human Services (which includes all things health care) has increased 30 percent. Annualized over time, those are growth rates of 7 and 4 percent, respectively.

On the revenue side, and during that same time frame, personal income revenues increased 2.4 percent and the state’s workforce population (25-64 years) grew by 0.3 percent. To put a finer point on it, employment levels in the Burlington labor market have grown over 4 percent; in the rest of Vermont, employment levels have shrunk and are in negative territory. Economic recovery has been uneven across Vermont, population growth is virtually stagnant and incomes are rising too slowly.

Now, the Shumlin Administration has asked the Legislature to adopt a payroll tax in order to reduce the Medicaid cost shift and raise reimbursement rates for health care providers. In exchange, the Administration has guaranteed that payroll taxpayers will see a commensurate reduction in their health insurance premiums. The original proposed tax of seven-tenths of a percent holds no one harmless. For example, the University of Vermont, which ranks 50th among all states in state appropriations for higher education, would see a new tax bill of $2 million. That kind of hit means tuition hikes and layoffs. National Life Group would pay an additional $500,000 and Sugarbush Resort would pay an additional $75,000 in taxes. Whether any reimbursements will come close to these levels is an open question.

“For many small businesses – the vital engine to Vermont’s economy – the imposition of a payroll tax of any amount will, quite literally, wipe out their already slim margins,” stated Betsy Bishop, President of Vermont Chamber of Commerce.

“The Administration has recently added some sweeteners to the proposal by eliminating the employer assessment for businesses not providing health care, and reducing the payroll tax rate from seven-tenths to half that rate, in the hopes of easing the sting. But the underlying problem still exists: Vermont’s government is still living well above its means. This kind of structural problem cannot be solved with taxes, and likely cannot be resolved in one budget year. In fact, FY17 projections show a deficit of $48 million,” said Bishop.

The business community is unconvinced by these financing proposals. “A payroll tax, even at a reduced rate, is bad public policy in a barely growing economy and will likely have very adverse, unanticipated consequences,” said Ventriss. “Sound fiscal policy requires stability, equity, adequacy, simplicity, transparency, neutrality, competitiveness and low cost of administration. It should also do no harm to the economy in the process. The Shumlin Administration’s payroll tax for health care does not meet these tests and should not be passed, regardless of the rate.”

Finding lasting solutions to Vermont’s fiscal challenges requires bipartisan cooperation, strong executive and legislative leadership and a willingness by all stakeholders to discuss numerous options. Public engagement and understanding will be vital to finding such solutions; however, many Vermonters are insulated or held harmless from the implications of voting decisions relative to taxes. This lack of personal investment leads to a public disconnect around sound tax policy and people “vote to spend other people’s money.”

News of impending deficits in FY 17 and FY 18 underscores the need for a long-term plan that will take a systemic approach to balancing the state budget, provide for those in need and allow Vermont’s businesses to create badly needed jobs and flourish. Ultimately, these debates are about more than simply numbers. They are about adhering to a policy of living within our means.

The Vermont Business Roundtable is a nonprofit, nonpartisan organization of chief executive officers of Vermont’s leading private and nonprofit employers, representing geographic diversity and all major sectors of the Vermont economy. The Roundtable is committed to sustaining a sound economy and preserving Vermont’s unique quality of life by studying and making recommendations on statewide public policy issues. www.vtroundtable.org.

 The Vermont Chamber of Commerce represents every sector of the business community throughout the state. With approximately1,500 members that employ more than 45,000 people, the Vermont Chamber of Commerce is a statewide, private, not-for-profit business organization in Vermont. Its mission is to create an economic climate conducive to business growth, and the preservation of the Vermont quality of life.

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