Gov. Phil Scott intended for his weekly press conference to be another rant against what the Legislature might do on housing reform. His basic message: Give me the bill that I want.
Which isn’t how things work when you have divided government, and the Dem/Prog supermajority has just as much claim to a mandate as the Republican governor. There’s give and take. There’s compromise. It’s called governance.
Eventually, the subject of Tax Commissioner Craig Bolio’s ill-fated trial balloon came up. You know, the one where he wanted to defer an unidentified bunch of school expenses for an unspecified number of years in order to artificially reduce property taxes this year? Yeah, the one that was shot down right quick by Treasurer Mike Pieciak due to concerns about what that kind of borrowing to pay for ongoing expenses, not any kind of capital investment would do to the state’s credit rating.
Scott, a fiscal conservative all his political life, seemed rather blasé at the prospect of triggering a credit downgrade that might hurt state finances for years if it bought him some short-term tax relief.
Sometimes when you’re a political appointee, you have to say stuff in public that you’ve been told to say. I’d like to think that’s what Tax Commissioner Craig Bolio was doing on Friday when he had the stones to approach the House Ways & Means Committee with a scheme that should never have seen the light of day.
Giving him the benefit of the doubt, Bolio was sent by his superiors to propose a painfully belated, half-baked plan (to call it a “plan” is being generous) that amounted to what Ways & Means chair Rep. Emilie Kornheiser later called a “payday loan.” Without the benefit of the doubt, I’d have to conclude that Bolio is unfit to hold a fiscally responsible position.
The idea, in short, was to reduce this year’s high property tax increases by deferring expenses over the next several years. Hey, let’s put our public schools on the layaway plan! What could possibly go wrong?
I wonder how Gov. Phil Scott would react if a Democratic or Progressive legislator made such a suggestion. Somewhere between “conniption” and “aneurysm,” I’m guessing.
It’s a good thing that Vermont’s left-leaning advocacy organizations are so inured to disappointment, because it’s about to happen again.
On Thursday, a coalition of groups announced they are banding together to promote a surtax on the wealthiest Vermonters. The Public Assets Institute estimates that a 3% surcharge on incomes over $500,000 would raise about $100 million to help meet Vermont’s needs, a substantial boost to the bottom line at a moment when we need serious public investment across a number of fronts.
Nice thought, but it ain’t gonna happen.
Gov. Phil Scott is against it. The Democratic Legislature has a long and storied history of aversion to broad-based tax increases for one or more of the following reasons: They’re afraid of being labeled as tax-and-spenders, which is a laugh because Republicans beat that drum constantly anyway; the fat cats who’d usually support Republicans are open to the Democrats because the VTGOP is so batshit; and/or their bloated caucuses include a substantial number of centrists who wouldn’t back a wealth tax.
This proposal might get a polite hearing in 2024, but that’s about all.
At his press conference yesterday, Gov. Phil Scott offered a mixed message to the state Legislature. He seemed to be holding an olive branch, but whether he’ll use it as a peace offering or a weapon remains uncertain.
His topic was the budget, and the differences between his plan and what’s on the table in the Statehouse right now. He cautioned against squandering our historic federal windfall, by which he means spending it in ways he doesn’t like. But he offered some praise for Senate budget writers on one important point:
I heard in Senate Appropriations yesterday they are concerned about creating cliffs by funding new programs with one-time money that will be difficult to address in the future. I couldn’t agree more.
It’s a point he’s made before. Use the one-time money for one-time investments, not to create or sustain programs that will remain on the books after the federal tsunami recedes.
I’ve got no beef with that concept. But the governor expresses none of that concern when it comes to cutting taxes. We’ve got the money right now, thanks to all the economic activity generated by all those federal dollars. We can afford some tax relief now, but any tax cuts we adopt this year will remain on the books indefinitely.
This graph is wonderful news for those who think Vermont’s economy needs to grow. (It is, as I’ve written before, very bad news for our housing supply.) The pandemic has made our state the most desirable in the nation for affluent Americans.
More desirable than our famously low-tax neighbor, New Hampshire. More desirable than the Sun Belt or the tax havens of Texas and Florida. We’re Number One, baby!
It’s too soon to tell if this dramatic shift will continue. But if it does, then it’s time to rethink our policies across the board, from taxation to education to broadband to economic incentives.
Senate Finance Committee chair Ann Cummings is a mixed bag. She’s not the most imaginative or energetic policymaker; she barely bothers to campaign and waltzes to re-election every two years. She’s one of the many veteran senators with a very well-developed sense of entitlement.
On the other hand, she knows her stuff. That’s nothing to sneeze at when it comes to issues as complex as taxes and state revenue.
But that didn’t seem to be the case during a Thursday committee hearing. Quite the opposite; she was shockingly uninformed on one of the biggest financial issues facing state government in 2021. I couldn’t believe it at first, but then she did it again.
The subject was S.59, a bill introduced by Sen. Cheryl Hooker and four other senators. The bill is an attempt to address the glaring shortfalls in the state teachers’ and public employees’ pension funds — an issue brought to the forefront by Treasurer Beth Pearce this year. After having defended the funds throughout her tenure, she started ringing the alarm bell on funding shortfalls and advocating substantial changes.
The Dem-dominated Legislature now faces a choice between finding a big new pot of money for the funds, and imposing pain on two of the party’s most important constituencies. S.59 opts for the former; it would add a 3% income tax surcharge on Vermonters with incomes of $500,000 or more, and devote the revenue to filling the hole in the pension funds. Sen. Ruth Hardy, a member of Senate Finance and an S.59 co-sponsor, presented an initial look at the bill. It didn’t go well.
Pearce’s pivot has been the unexpected policy story of 2021 (so far). She’s been making the rounds of relevant legislative committees, laying out the problems and presenting lawmakers with the unpleasant policy choice described in the previous paragraph. On February 4, she offered her pension testimony to Senate Finance.
One week later, Cummings made it clear she didn’t have a clue about Pearce’s position or the status of the pension plans.
Best: Gov. Scott, great lighting, busy but effective background. Worst: Pretty much everybody else.Extra demerits for “Redshift” Cummings and “Tiny” Hooper.
Vermont’s Emergency Board, an obscure but highly influential entity, held its twice-yearly meeting Tuesday afternoon to receive an updated revenue forecast from state economists Tom Kavet and Jeffrey Carr. Or, as the governor dubbed it, “The Tom and Jeff Show.” (The E-Board includes Gov. Phil Scott and the chairs of the Legislature’s four “money commitees” — House and Senate Appropriations, House Ways & Means, and Senate Finance. All of whom are women, it should be noted.)
Their report is posted as a downloadable file on the Legislative Joint Fiscal Office website. It’s recommended reading; it’s full of economic information beyond the basic tax projections. Video of the E-Board meeting available here.
Considering the pandemic and all, the news is astonishingly good. The new outlook for FY2021 predicts a very slight dropoff in total revenue, about $20M in all. That’s peanuts compared to earlier dire predictions. For FY2022, which begins in July, the new forecast predicts $77M in additional revenue. Carr and Kavet also predict a big increase in revenues for FY2023.
(Now, if you’re concerned about the federal deficit, it’s not all good news. Since 2018, deficit spending has gone from 105 percent of GDP to 135 percent. Covid relief is one driver of the increase; the other is the Trump tax cuts of 2017.)
How can this be? One simple explanation: A tsunami of federal recovery funds. And with Democratic control of the presidency and Congress, Carr and Kavet expect at least one more big infusion. (President-elect Biden has proposed a $1.9 trillion relief package.) So far, federal relief funds to Vermont account for a stunning 20 percent of the state’s gross domestic product.
“Without the federal money, I’d be declaring a five-alarm fire on Vermont’s economy,” said Carr. “We’re all Keynesians now. If we throw enough money at a problem, we can mitigate the damage in the aggregate.”
Best: Durfee, meh background but great lighting, sharp business apparel. Worst: Tie between The Invisible Mattos and Breakfastin’ Jim Masland.
A major study of Vermont’s entire tax system, two years in the making, had its debut Friday morning before the House Ways & Means Committee. The panel recommended wide-ranging reforms, each of which would be a very heavy political lift. These include shifting education funding from property tax to income tax, eliminating virtually all exclusions from the state sales tax (which would mean a lowering of the tax rate), imposing an annual registration fee on electric vehicles to replace lost gas-tax revenue in the coming transition to electric transportation, and replacement of the Telephone Personal Property Tax with a comprehensive levy on all telecommunications.
The Tax Structure Commission’s report was labeled a “draft.” It wasn’t made clear how much work remains, and how many changes might be made, before a “final” report is released. (The report can be accessed through the Ways & Means website.)
Commission member Deb Brighton began with a cheery reminder of the typical fate of tax-reform panels. “Every five years or so, the Legislature decides it wants a fresh, hard look at taxation,” she noted. Left unsaid was the fact that these reports are usually consigned to a dusty shelf, because real tax reform means a whole lot of sacred cows get whacked. In light of this SIsyphean history, one can easily conclude that this report is also destined for the dustbin of history.
The most recent tax panel, the Blue Ribbon Tax Structure Commission, delivered its report in 2011. Many of the TSc’s bullet points are strikingly similar to the BRTSC’s. The earlier panel’s fate was partly a matter of realpolitik, but each commission, coincidentally, faces competition from a natural disaster. The Blue Ribbon report was issued less than eight months before Tropical Storm Irene devastated Vermont. The new report, need I say, comes in the middle of a pandemic and resultant economic devastation.
Any tax reform is a complicated, time-consuming process. When it has to compete with a natural disaster, it has almost no chance of getting through. Not that this report is doomed. Just that I’m not sanguine about its chances, even though reform is badly needed.
From the Public Assets Institute’s “State of Working Vermoint 2020”
An income tax surcharge — permanent or temporary — is a political nonstarter in Vermont. It was one of Lt. Gov. David Zuckerman’s major proposals in his bid for governor, and look what it got him. I am fully confident that a wealth tax would fail to draw anywhere near a majority in either the House or Senate Dem/Prog caucuses, let alone escape Gov. Phil Scott’s ever-ready veto pen.
But it’s a really good idea, and it’s a real shame we’re not taking it seriously.
First of all, Vermont needs new revenue. We’re threatened with huge budget cuts unless the federal government comes to our rescue. And even if it does, we need major public-sector investment on climate issues, broadband, housing, and higher education. Among many others. Even Scott acknowledges the need for these investments, but then he shrugs his shoulders and says we just can’t do it.
Second, the wealthiest Vermonters, just like the wealthiest Americans, have benefited tremendously from federal and state tax policies that cater to their interests. Zuckerman based his call for a temporary wealth tax on the fact that top earners really cashed in on Trump’s 2017 tax cuts. The lite-guv simply asked them to pay a share of that bounty for the greater good of the state.
But even before Trump, the system was rigged on behalf of the wealthiest. Ronald Reagan started this ball rolling, and it’s just gotten worse and worse since then. The above chart, taken from the Public Assets Institute’s “State of Working Vermont 2020” report, shows the result of these decades of an unbalanced economy and tax system. From the report:
Over the last four decades, there has been a dramatic upward redistribution of income in Vermont and across the country. In 2019, the top 20 percent of Vermont households received almost half (48.4 percenty) of the income earned in the state. The top 5 percent of households got 20.7 percent. Average income for the top 20 percent of households had increased more than 8 percent since 2007, after adjusting for inflation. For the bottom 20 percent, average income was down more than 7 percent.
And that’s just the income part of this equation. It doesn’t address taxation, which is generally very regressive at the federal level and in the vast majority of states.
PolitiFact came into existence 13 years ago, with a simple mission: Try to discern the factual basis, or lack thereof, underlying statements and claims from political candidates. Dig through the bullshit, uncover the facts, and determine the truth.
It’s a great idea, but it’s very tricky in practice. It assumes that there is an absolute truth buried under the mountain of political bullshit. But what if there is no such truth? In the political arena, “facts” and “Ideology” are tightly interwoven. For instance, Vermont tends to rank near the bottom of the 50 states, or near the top, depending on what’s being measured. If you tried to determine where Vermont “really” ranks, you’d be dancing into a minefield.
In recent years, VTDigger has been part of the PolitiFact network, generating its own fact-checking pieces in an effort to help voters sort through political statements. Its latest effort, unfortunately, illustrates how PolitiFact-style analysis can lose sight of the truth in its search for “facts.”
In last week’s Digger debate, Lt. Gov. David Zuckerman floated his proposal for a temporary wealth tax aimed at the top five percent of earners — those who reaped the most benefit from the 2017 Trump tax cuts. The revenue would fund one-time investments that, Zuckerman says, would more than pay for themselves in economic growth.
Scott counter-claimed that Zuckerman’s “wealth tax” would reach all the way down to households earning $159,000 or more, which he characterized as “middle class.”
Well, as I pointed out in my debate blog, Vermont’s median income is $60,000, a long way from $!59K. Also, if your definition of the “middle class” reaches all the way up to the 95th percentile, there’s something wrong. Unless you’re saying the “middle class” includes everyone between the fifth percentile and the 95th.
“Think about two teachers, married teachers,” Scott said. But according to a 2019 Digger article, the average teacher salary in Vermont is a touch over $60,000. It’s possible for a teacher to earn $80,000, but it’s very uncommon.
Scott indulged in some misleading rhetoric, in other words. And yet, somehow, Digger concluded that Scott’s argument was “True,” the highest possible rating.
And the headline on the story was the real whopper: “Would Zuckerman’s wealth tax on the top 5% impact the middle class?”
The answer to that question is clearly, unequivocally “No.” And Scott’s claim, as restated in the headline, would properly be evaluated as “False.”
The Vermont Political Observer. 