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Early next year, Gov. Shumlin (D) will unveil a long-awaited financing plan for his proposed single-payer health care system. At least, that’s the expectation. Shumlin has so far defied the law requiring him to explain how Vermont will raise the roughly $2 billion in taxes needed to fund single-payer, blowing through a January 2013 deadline imposed by the legislature.
But the plan may be in for further delays.
It turns out a lot of the heavy work in putting together Vermont’s single-payer financing plan was done by MIT economist Jonathan Gruber, a primary architect of Obamacare who is best known these days for boasting the law passed thanks to the “stupidity” of American voters and praising the lack of transparency in the process.
For good measure, Gruber mocked the concerns of one Vermont resident at a legislative hearing regarding single-payer, asking whether the individual’s remarks had been written by his “adolescent children.” The remarks were from a former two-term state senator.
Gruber has apparently become an embarrassment for the Shumlin administration, which is why it decided not to pay Gruber the rest of his $400,000 contract. But it’s going to be hard to place much credibility on the analysis provided by a man who admires deception in getting health reform legislation passed. Perhaps Shumlin will use the controversy as an excuse to start from scratch, pushing the finance plan even further down the road.
Eventually though, Vermonters will have to be told where the $2 billion is coming from, and the obvious answer is going to be from their wallets.
Although the governor has failed to release details about what the final financing plan will look like, state Senator Peter Galbraith apparently revealed the outline of the Shumlin financing plan this summer; it includes a premium, based on income, of up to nine percent, plus a five percent payroll tax and a two percent gross receipts tax.
Even if the details have changed in the meantime, those numbers give us some insight into how much this is going to cost Vermonters.
According to the Bureau of Labor Statistics, the average salary in Vermont is about $44,000. Adding the premium to the payroll tax equals 14 percent, which comes to $6,160 for the average salary. That compares to a Silver-level insurance policy available for about $5,200 for a single person in 2015, or $4,600 for a Bronze-level plan.
It gets much, much worse though for small business owners, who will now have to endure a massive gross receipts tax. A rough estimate indicates a small business owner might typically earn between five and 15 percent of the business’ total revenue. Therefore, a shopkeeper taking home 10 percent and making the average income in Vermont would have total receipts of about $440,000, for which he or she would owe $8,800 in additional taxes.
Some small businesses earn even lower margins, of course. In the restaurant industry, income of 2 or 3 percent of revenue is the norm, which means a 2 percent gross receipts tax would push many businesses into unprofitability.
According to the Small Business Administration, there are about 78,000 small businesses in Vermont, employing 158,000 people, about half of the state’s total employment. It’s not difficult to see how small business will be devastated once the Shumlin administration starts handing those business owners a new yearly tax bill of nearly $15,000 ($6,160 plus $8,800).
And that tax bill is on top of other state and federal taxes, of course.
The final Shumlin plan may look different from what was outlined this summer, but the money will have to come from somewhere. Whatever scheme the governor finally offers, it’s clear Vermont’s economy can’t survive it.