Daily Archives: April 18, 2015

No more listening and learning

After his humiliating near-defeat at the ham-fists of Scott Milne last November, Governor Shumlin said the result was “a very clear message to this governor to listen, learn, reflect, be more inclusive.”

Sounded good. But if he ever meant it, he’s all done with that wimpy crap now. On Friday, Shumlin was a guest on The Mark Johnson Show; it was a full-on display of his least endearing qualities. He stuck to his rhetorical guns; he sidestomped inconvenient questions; he refused to acknowledge any mistakes or failings; he contradicted himself with blind insouciance; he belittled those who disagree with him.

It was pretty damned awful. Perhaps it was understandable, since he spoke with Johnson directly after House Speaker Shap Smith’s appearance, in which he openly differed with Shumlin on the way forward for Vermont Health Connect. Shumlin has set two deadlines for VHC to hit designated performance targets, at the end of May and October; Smith says May is the only one that matters. And he said so, repeatedly, on live radio, mere minutes before Shumlin stepped to the mic.

And when the mic went live, here’s what the Governor had to say.

On the subject of Auditor Doug Hoffer’s report on VHC, which related a litany of bureaucratic and IT horrors:

No big surprises. Frankly, I’ve been saying, we’ve been saying since the exchange went up it’s been a huge disappointment.

Yeah, well, a few days before it went up, you used the infamous phrase “nothing-burger.”

Technically, I suppose it’s true that Shumlin has consistently expressed disappointment. But he’s also consistently expressed optimism that everything’s under control and a fix is just around the corner. He has made promises and set deadlines, and failed to meet his own performance marks every time. He has doused his own credibility with gasoline and set it afire.

I don’t think that’s a surprise to any Vermonters that are frustrated by the exchange.

This is one of Shumlin’s tiredest tricks: positioning himself as shoulder-to-shoulder with us Vermonters, sharing our aspirations and frustrations. Man Of The People. Hey, he likes to hunt and fish and drink Budweiser down at the Legion hall.

Problem is, it comes across as completely phony. It doesn’t convince anybody, no matter how painfully earnest his voice gets.

So really, the Auditor’s report reflects what we’ve been saying all along. It’s a helpful document, but we have dealt with the issues that he reported. That’s what audits tend to do; they look back instead of forward.

Perhaps true, but misleading. Hoffer’s audit focused on several independent reports evaluating the VHC process and recommending changes. Many of those changes were not made. Indeed, some previously identified problems continue to bedevil VHC and may prevent it from becoming fully operational.

ImNotWrongThere’s a bigger, more fundamental issue with Shumlin’s statement. He hates admitting he was ever wrong or uninformed. Trouble is, we’ve heard it before and we’ve stopped believing it.

What he should have said: “The Auditor’s report is a troubling document, revealing a number of failings by me and my administration. I apologize for the difficulties we have caused thousands of Vermonters. We are doing everything we can to correct our mistakes and do better from now on. I remain confident that Vermont Health Connect will become fully functional and serve Vermonters as we intended.”

Back to the real interview. For several minutes, Johnson tried to pin the Governor down on the real import of the two deadlines, May and October. What emerged was a kicking-and-screaming acknowledgement that there’s only one real deadline, and it’s the end of October.

I’m saying if those two functions don’t work by November, the deadline I laid out in a press conference a month ago, whenever it was, we are gonna look at whatever other options we have.

Well, actually he gave two deadlines. What would happen, Johnson asked, if the change of circumstance function isn’t working by the end of May — Shumlin’s self-selected deadline? Would the contractor get more time to fix it?

I’m not going to speculate on it not working. My job is to make it work.

That’s wrong on two counts. First, Shumlin himself has been talking about what will happen if it doesn’t work. And second, he’d be an irresponsible administrator if he didn’t have contingency plans.

Johnson, a bit taken aback by Shumlin’s assertion that he wasn’t “going to speculate on it not working,” replied “You’ve got to give the people some idea of what you’ll do if it doesn’t work.”

I did. I said if the change of circumstance is’t workin’ and if you can’t sign up folks for re-enrollment in November, we’re gonna make that decision together, we should move on if it doesn’t work.

Okay, so now he did do the very thing he just denied he had done. And he conveniently deep-sixed his own May deadline, opening a line of retreat for possible use on June 1.

Finally, Johnson asked if November was the real, actual deadline. Shumlin said “Yes.” Johnson pointed out that “The Speaker says it’s May.”

I don’t see this as a test of dates. I see this as a challenge to make the exchange work the way we all wish it to work for all Vermonters.

Well, it wasn’t the Speaker’s idea to set dates; it was the Governor’s. Now he doesn’t want to talk dates. And in downplaying May 31 in favor of October 31, he has deepened the divide between himself and Smith.

All in all, it was a performance that echoed the worst of pre-election Shumlin — the overweeningly self-confident Master Of His Domain and ersatz Man Of The People. I guess he’s done all the listening he wants to do, and he didn’t like what he heard.

Surgery with hammers

So the House passed a tax bill including a measure that will make Vermont’s income tax system more progressive by capping itemized deductions at 2.5 times the standard deduction. Since affluent taxpayers benefit from deductions far more than low earners, the deduction cap will (modestly) increase their taxes.

That’s a good thing. And of course the Senate can’t leave it alone.

Sen. Tim Ashe, D/P-Chittenden, chair of the Senate Finance Committee, wants to take a more “surgical” approach [to tax deductions].

… In a Senate Finance Committee bill he introduced on Tuesday, Ashe proposes three changes: A cap on mortgage deductions (to be determined, but between $12,000 and $15,000); a 3 percent minimum income tax; the elimination of charitable deductions and the creation of a 5 percent income tax credit for donations of over $5,000 made in Vermont.

Tim Ashe is a very smart man. He should consider developing a personality if he wants to run for higher office, but he’s got a lot of good ideas — such as wanting to take a comprehensive look at how our tax structure works and doesn’t work.

But “surgical” is a misnomer in this case. Using tax deductions and tax credits to influence public behavior is inherently inefficient.  Those tax breaks are almost always marginal and have little to no effect on most financial decision-making by individuals and businesses. This is especially true of state tax policy: Vermont’s deductions are worth far less than the federal ones, and their impact is feebler and harder to measure.

Don’t believe me? Well, when was the last time “tax implications” were a decisive factor in a purchasing decision?

Sure, it’s a factor, but the benefits are dwarfed by the costs. We’d be far better off if we stopped trying to micromanage how people use their money and created a much simpler tax system.

Still don’t believe me? Okay, let’s take a popular and very direct tax incentive: the sales tax holiday. Yes, it encourages people to buy goods on a given day — but most of those goods would have been purchased anyway, sooner rather than later. The tax holiday concentrates that purchasing in a single day, but it creates little or no additional demand. The state foregoes sales tax revenue for very little real effect on the economy.

Still don’t believe me? How about this: even when a tax incentive has an effect, it has even greater side effects. Take, for example, the mortgage interest deduction: it has encouraged home ownership — which may or may not actually be a good thing, especially in an age of greater mobility — but it gives the biggest tax breaks to those who need them least. A rich guy owning a million-dollar home and a country estate will get a whole lot more benefit than a median-income family scratching out a mortgage.

The mortgage interest deduction’s unintended consequence: We are all subsidizing the mansions and playgrounds of the wealthy.

Ashe’s ideas for a “surgical” approach seem okay, I guess, but I’d much rather take the House’s approach of a simple deduction cap. Let’s stop pretending we can steer our economy through the tax code. Let’s have a bias for simplicity when considering changes to our tax code.