Peter Shumlin, governor, wanna-be Senator, and Trump-like landowner, is about to unveil his financing plan for Vermont’s version of single-payer. That he’s unveiling it almost 2 years after the law he so proudly signed into existence required that it be presented is beside the point. He doesn’t need to follow the law, much less the laws he himself enacted. This is single-payer, you see, and since Dear Leader President Obama himself has made a virtual mockery of Obamacare, in terms of basically making stuff up as you go along, and re-writing/re-interpreting vast provisions of the law that would have likely guaranteed a failure of its passage had those changes seen the light of day while it was being rammed through Congress, well, let’s just say Peter’s got a role model for how to get things done. Whether we want them done to us or not seems of little consequence to Vermont’s Budgeter-In-Chief.
As has been noted, Shumlin’s plan requires a massive increase across a broad spectrum of taxes, including both payroll and income taxes. It’s been estimated that an additional $2.2 billion in taxes are needed to fund Vermont’s single-payer program.
If we grant the rumor to be true, that there will be an 8% payroll tax, and there will be an income tax increase, well, how much of an income tax increase would be required to cover the cost? Leaving alone, for the moment, the future impacts of expected revenues if you jack tax rates through the roof. There’s a good chance that those paying the highest rates will not stay in Vermont.
So: Total income tax revenue projections for 2014 were $738 million (page 5 of the state’s budget projections), projections which have run into the cold brick wall of reality in recent months. But even if we assume those revenue projections to hold, how much in additional revenue would be needed to hit the estimated target of $2 billion to $2.2 billion? Given some of the other proposed taxes on the table, it would require roughly $1.7 billion in additional income taxes.
As a place to start, in 2012, Net Income taxes paid was $578 million. The state’s breakdown by bracket is unavailable for 2013, but I’m assuming the same spread will apply in terms of how much each bracket pays as a percentage of the total net income taxes. If we assume a 2014 total income tax revenue projection of $738 million, as the State has, that’s a 27.5% increase from 2012. Granted, that’s a two-year span, but that’s an enormous increase for such a short period, and highlights the fact that the state’s revenue assumptions are likely to be flawed at the core.
But taking that one step further, if you add a 9% increase in income taxes for $50K and up filers (as VT Digger is saying is likely part of the financing package), that only nets you $796,696,542, an increase of $58MM. Which is somewhat shy of the $1.7B target. About $900 million shy.
So what tax rate would it take to cover the $1.7B?
Here’s the revenue model with a 9% increase for $50K and up filers – again, a net revenue increase of $58MM:
So if 9% won’t get us there, what percentage will? Oh, just something slightly more – like 147% more:
Given the price tag for single-payer, it’s pretty clear that there’s not enough money in the state to pay for it, which is why Shumlin has held off talking about it until he was well clear of the last election – an election he almost lost.
Which begs the question: Would Shumlin be governor today if he kept his promise to tell Vermonters how he planned to fund this program? Given the financial impossibilities of the financing model, there must either be significant and permanent federal monies available that are as yet being withheld, or this single-payer ship is going to sink like a stone – and Shumlin did not see fit to tell Vermonters the realities they would face under the law he so proudly enacted.