For two years, Gov. Peter Shumlin avoided revealing what Vermonters can expect to pay for his proposed single-payer health care system. When he finally did in mid-December, the cost was too much, and Shumlin announced he would abandon his single-payer efforts for the 2015 legislative session.
But Peter Galbraith, a two-term Democratic state senator from Windham County, had earlier given a glimpse at those costs with legislation to finance Act 48, the Vermont law that would have created the new health care system.
Although his bill never became law, the senator had a clear picture of what Vermonters should have expected when Shumlin, a fellow Democrat, revealed his single-payer financing plan, a plan that would have attempted to collect $2.6 billion from 630,000 Vermonters.
“If you do it on the sales tax, it would require a sales tax of 30 percent. If you do it on the income tax, you would have the bottom rate be 15 percent and the top rate be 30 percent. That would make the top effective tax rate in the state of Vermont about 73 percent,” Galbraith said.
Galbraith Prefers Payroll Tax
According to Galbraith, high income taxes are highly impractical, making the only real options a payroll tax, mandatory premiums, or a combination of them.
“If you want to raise $2 billion, there’s only a couple of ways you could do it. One is to have a payroll tax, which would be painful, but would more or less track how health care is paid for now,” Galbraith said.
Galbraith’s plan proposed an 11 percent tax on employers and a 2 percent tax on employees, which he said aligns with current health care expenses for business.
“I think that’s the only way you practically could do it. All taxes are going to be very steep, but a payroll tax as a practical matter would work, because, for most people, it wouldn’t actually be different from what they’re already doing.”
Not So Practical?
The practicality of Galbraith’s proposal was sharply disputed by others, however.
According to state Sen. Joseph Benning (R-Lyndonville), Galbraith’s plan didn’t take into account Vermont’s expected demographic changes.
“Vermont has a shrinking workforce, meaning the number of workers contributing into the payroll tax will decline,” said Benning, thus requiring increases in the payroll tax rate.
More Financing Options
Another option — one Galbraith doesn’t like — is mandatory premiums.
“If you just used premiums, every Vermonter not excluded from Green Mountain Care—and my proposal would have excluded seniors—would have to pay $5,200 dollars. That’s about $20,000 for a family of four.”
For Vermonters who find such costs unacceptable if not impossible, Galbraith suggested a possible combination approach that would raise $500 million from each of four major sources.
“If you used each source, you’d have a payroll tax of 4.25 percent, a public premium of $1,325, a 7.5 [percentage point] increase in marginal [income] tax rates, and a 5.75 [percentage point] hike in the sales tax — so, the sales tax rate would be 12 percent. … All of these ideas are very difficult to sustain,” he said.
Darcie Johnston, who runs Vermonters for Health Care Freedom, says the level of taxation Galbraith is discussing and which would be needed to adequately fund a single-payer health system would be economically ruinous.
“Everybody’s leaving who can, or they’re planning to leave,” Johnston said before Shumlin announced he was abandoning his plan. “Single-payer health care is a prescription for rationing care.”
Johnston noted businesses located in Vermont that also operate in nearby states were looking at moving out altogether if single-payer passed. “The best economic development plans for New York and New Hampshire would be for Vermont to pass single-payer,” Johnston said.
Galbraith says the extreme taxes required by Green Mountain Care may explain why Shumlin hid his plans for so long.
“The governor wasn’t prepared to do a payroll tax at the level I proposed.… So either you do mandatory premiums or you do an increase in the sales tax … or a big increase in the income tax. I don’t think he finds any of them politically palatable, which is why we haven’t had a plan.”
Bruce Parker ([email protected] ) writes for Watchdog.org, where an earlier version of this story first appeared. Reprinted with permission.