Bill that would tax health care insurers, hospitals set to pass in House

first_imgby Anne Galloway March 23, 2011 In the end, the House Dems, despite the best persuasive efforts of a Progressive and an independent representative, were good foot soldiers who did the speaker’s (and the governor’s) bidding: They refrained from straying too far outside the box they were given to work in.The threat of a minor insurrection, in the form of income tax increases on upper-income Vermonters, was handily put down at the Statehouse on Tuesday ‘ apparently long before the legislation in question, the miscellaneous tax bill, was brought to the House floor.Lawmakers, largely along party lines, voted 90-47 to raise $24 million in taxes on health care providers and increased the statewide property tax rate by one penny.The Ways and Means proposal deviated from Gov. Peter Shumlin’s revenue plan via one crucial tradeoff ‘ instead of raising $3.66 million through a provider tax on dentists, lawmakers increased cigarette taxes by 27 cents a pack to generate the same amount of money.In a press conference the same day, Shumlin criticized the move. ‘It seems illogical to me to ask factory workers to pay 27 cents more for cigarettes, then to tell dentists who refuse to serve Medicaid patients they’re off the hook,’ the governor said. He argued that the dental tax would have been used to reimburse dentists at a significantly higher rate when they take Medicaid patients .The miscellaneous tax bill, which goes to third reading on Wednesday, includes $7.25 million in taxes on hospitals, $2.81 million on nursing homes, a $140,000 increase in levies on home health agencies and a 0.8 percent ($10.72 million) claims tax on all health insurers ‘ self-insured companies and the state’s three major insurance companies, Cigna, MVP and BlueCross BlueShield of Vermont. House Republicans oppose the ‘provider tax’ and say it will drive up health care premiums for insured Vermonters.Most of the afternoon session on Tuesday was devoted to a handful of amendments to the bill, only one of which passed. Lawmakers struck a $1 million giveback provision to taxpayers in supervisory unions that met the Challenges for Change targets. Several representatives said the measure was unfair because it rewarded schools that cut budgets at the expense of the rest of the school districts.THE SURTAX LEAD BALLOONThe small group of lawmakers who openly planned to float an amendment for an income tax increase on Vermont households that earn more than $137,301, only garnered 23 votes. The initiative would have raised about $27.7 million in revenues that supporters wanted to use to shore up human services programs for the elderly, developmentally disabled and the mentally ill that have seen funding reductions at a time when caseload pressures are up.Rep. Paul Poirier, I-Barre City, and Rep. Chris Pearson, P-Burlington, initially formed a beachhead of support among a group of liberal Dems, but that base eroded in part as a result of a bait-and-switch tactic that pulled critical support away from the tax amendment and gave party members who had supported the surtax an opportunity to save face with the leadership.Lawmakers were told that the House Ways and Means Committee would be offering an income tax restructuring bill, based on the recommendations of the Vermont Blue Ribbon Tax Structure Commission, later in the session, and that then would be the time to present income tax increase proposals.‘We have a governor who has taken a no-tax pledge, but I as a legislator didn’t take a no-tax pledge. Is it too much to ask (the richest Vermonters) to pay 1.5 percent more? That’s the question before us.’ ‘ PoirierBut such a bill, lawmakers, lobbyists and other statehouse mavens said, is unlikely to make it out of House Ways and Means this session, and it would be even more difficult to pass a bill that shifts the income tax structure from taxable income to adjusted gross income if the measure included a tax increase.If that prediction bears out, lawmakers who said in remarks on the House floor that they would vote for an income tax increase associated with such a bill are unlikely to get a chance at a second bite of that apple.Tomorrow, meanwhile, two amendments will surface on third reading of the bill. Rep. Suzi Wizowaty, D-Burlington, will propose a $1 per-pack increase on cigarette taxes, and Pearson will pitch an 27-cent per gallon extraction tax on bottled water that could raise as much as $27 million (about 99 million gallons of Vermont water is sold out of state).Neither amendment is expected to pass given the current party entrenchment on the issue.On Tuesday Poirier and Pearson regaled the House members with statistics about stagnating income growth for low-income and middle class Vermonters; 70 percent increases in real household income for the wealthiest 5 percent over a 30-year period; the $190 million in tax breaks the state’s richest 5 percent will receive in fiscal year 2011 thanks to the extension of the Bush era tax cuts; the $263 million in state budget cuts over the last three years; and the 10 percent reduction in the state workforce since 2008. To no avail.‘We’re at a point where there are no more low hanging apples left in the tree, and we’re standing on step ladders,’ Poirier said. ‘We’re down to people issues, and people look to the Democratic Party and the Progressive Party to protect them. I know this is hard. We have a governor who has taken a no-tax pledge, but I as a legislator didn’t take a no-tax pledge. Is it too much to ask (the richest Vermonters) to pay 1.5 percent more? That’s the question before us.’Pearson told lawmakers that human services budgets have been cut for four years and that further reductions in programs are ‘unconscionable.’‘I believe it’s important that we begin to ask how much more we can cut,’ Pearson said. ‘In trying economic times, it’s appropriate for us to have a discussion about where you draw the line, and I think it’s appropriate to ask neighbors to help out to protect programs in these tough times.’The surcharge proposal would have affected the top three income tax brackets. An additional 1 percent tax (a total of 8.8 percent on taxable income ‘ after deductions) on joint filers with incomes of $137,000 would have cost those families $264 more on average; a 1.5 percent increase on taxable incomes above $209,000 (a total of 10.3 percent) would have cost those families $1,593 more on average; a 2 percent surcharge to taxpayers married filed jointly who earn more than $373,100 a year (a total tax of 10.95 percent) would have cost those households $14,469 more on average.The response from the chairs of House Ways and Means, House Appropriations and the Speaker? Now is not the time.‘The right time to take up that issue is when we look at income tax restructuring,’ said Rep. Janet Ancel, chair of House Ways and Means. In the Democratic caucus held before the vote, Ancel said she has sympathy for the income tax increase proposal, and she said she supported a surcharge bill that passed the House two years ago that was altered in the Senate.Ancel’s committee has taken extensive testimony on the Vermont Blue Ribbon Tax Structure Commission’s recommendation to broaden the tax base and lower tax rates, but it has yet to shape a bill of its own, and it’s anyone’s guess whether legislation will emerge in this session. Ancel said, ‘I can’t say for sure we’ll vote it out of committee.’House Speaker Shap Smith points to the looming federal cuts to the Low-Income Heating Assistance Program as a reason for delaying passage of an income tax hike now. He says it would be imprudent for the state to raise taxes before leaders know how big the hole is going to be. He said when Congress is set to meet the next Continuing Resolution deadline (April 8), the state should have a better handle on the scale of the federal funding reductions. He acknowledged that there could be ongoing CRs through the summer. ‘We don’t really know what challenge is in front of us,’ Smith said.Federal cuts would come on top of a Vermont Joint Fiscal Office budget gap estimate of $35 million for fiscal year 2013. Anne Galloway is editor of vtdigger.orglast_img