Senator wants financial answers for health care


BRATTLEBORO -- When it comes to Vermont's push toward universal, publicly financed health care, Windham County Sen. Peter Galbraith is requesting some straight talk.

Specifically, the Townshend-based Democrat says lawmakers need to put forth a plan for financing the massive new care system -- a plan that, Galbraith says, will inevitably lead to "the largest tax increase in Vermont history."

Though his fellow senators on Thursday deleted Galbraith's tax proposals to fund Green Mountain Care, he said residents and businesses deserve answers that, so far, have not been forthcoming.

"Let us be honest with our constituents. If we are not willing to raise $2 billion -- if we are not ready for a payroll tax, for a doubling of the income tax, for a doubling of the sales tax and for a premium tax -- let's say so," Galbraith said. "Pretending we don't know how to raise $2 billion is a poor excuse for ducking a tough decision and a disservice to the people of Vermont."

The state is scheduled to implement a publicly-funded health-care model by 2017, and Gov. Peter Shumlin had been bound by statute to deliver a financing plan more than a year ago. That has not happened, and the governor is taking heat for it -- though Shumlin on Thursday declared that "I'm not reluctant to share anything with Vermonters," reported.

"My problem is that we don't have it right yet, and one thing I've learned about health-care reform in the last few months is it's better to get it right than to pick an arbitrary date or, in my case, have it picked for you and have to meet it," Shumlin said.

The governor said attempts to find the right financing formula have proven difficult. Galbraith, however, disagrees with that assessment.

"Raising the approximately $2 billion needed for Green Mountain Care is a big decision but not necessarily a complicated one," Galbraith said. "In fact, the very size of the amount that needs to be raised greatly reduces our options and therefore simplifies our choices."

He proposed three financial mechanisms:

-- A payroll tax of 11 percent on employers and 2 percent on employees. This is easily the single-biggest revenue generator, raising about $1.45 billion.

-- A 10 percent tax on non-wage income that exceeds wage income. "This is intended to capture income from individuals who live on unearned or out-of-state income but who will be included in (Green Mountain Care)," Galbraith said. "This raises about $100 million."

-- Eliminating a pass-through of federal itemized deductions to Vermont taxes. "The pass-through primarily benefits high-income taxpayers, and most states with an income tax do not allow the pass-through," Galbraith said. "This raises about $65 million."

The senator said he favors heavy reliance on the payroll tax because it "mimics the current system of financing health care where both employers and employees pay premiums. Thus, a payroll tax causes less disruption than any other revenue source."

Furthermore, a payroll tax carries an "implicit federal subsidy," Galbraith said.

"A payroll tax paid by the employer is a deductible business expense to the employer," he said. "Depending on the tax status of the employer, the value of this deduction could range from nothing (if the business were never profitable) to 39 percent. Overall, it is a fair estimate that, if we go with a payroll tax, the federal government will pick up at least 25 percent of the cost to Vermont employers of Green Mountain Care."

The Senate on Thursday revised the bill to remove Galbraith's proposed tax changes, though the legislation (S.252) addresses the possible structure of publicly financed health care in other ways. Sen. Tim Ashe, Senate Finance Committee chairman, told VTDigger that the bill "is the culmination of the work to date ... and perhaps, I think, our best judgment at this time as it relates to achieving the vision of a universal and unified (health-care) system."

Galbraith said the Senate "kept several key provisions of the original bill."

That includes "principles for financing and provisions exempting federal employees and military from having to contribute to the financing as long as they have their federal health care," he said. "The bill also settled the issue of what Green Mountain Care will provide. It is equivalent to the Gold Blue Cross/Blue Shield plan in the exchange."

But Galbraith also continued to argue that, due to the amount of money needed, "it is not hard to come up with a workable plan to finance Green Mountain Care. The hard part is having the political will to do it."

"Green Mountain Care is biggest and most-expensive project ever undertaken by the state of Vermont," he told his colleagues. "It is an undertaking on the order of magnitude of creating from scratch a public education system or the Social Security system. To pay for Green Mountain care, Vermont will have to enact the largest tax increase in Vermont history, but it is a tax increase that will save Vermonters money. Overall, Vermonters will save more in premiums and expensive services (such as emergency room care for the uninsured) than they will pay in taxes."

In other legislative news related to Windham County and its lawmakers:

-- Windham County Sen. Jeanette White said the Senate's health-care bill, which received final approval Friday after the Thursday vote that sparked Galbraith's comments, is "aimed at getting more information as we move toward our health-care reforms."

"Many of us continue to believe that the governor remains committed to the goals of the reform, but that we need to be ready to act once specific proposals are made," White, a Putney-based Democrat, said. "When the governor makes proposals for a financing package, a benefits package, etc., we need to be in a position to act. That means that we will have to have done a fair amount of work before that. That is what this bill does. It also will help us to maintain better oversight as the changes take place."

-- The House on Thursday worked well into the night to debate a proposed $1.44 billion state budget for fiscal year 2015. Lawmakers rejected higher income-tax rates for so-called "top earners" but endorsed a 92 percent tax on the wholesale costs of e-cigarettes.

The plan calls for an overall 3.8 percent spending increase. Rep. Dick Marek, D-Newfane and a member of the House Judiciary Committee, was among the 91 lawmakers supporting the proposal on Thursday.

"This is a budget which moves Vermont forward in so many ways," Marek said in comments recorded by the official House journal. "In a year when we have focused real attention on the human and economic costs of opiates in all our communities, it makes a new investment of $10 million in opiate treatment and $600,000 for crime victims. It will help not only those it directly assists; it ultimately will help every Vermonter."

Rep. Mike Mrowicki, D-Putney, called it a "modest budget with no new broad-based tax and a less-than-expected increase in the state education tax."

That was a reference to a proposed 4 cent bump in the statewide school levy, which is down from initial projections of a 7 cent increase.

Ten House members representing Windham County voted in favor of the proposed budget on Thursday, with two -- Rep. Mike Hebert, R-Vernon, and Rep. Tim Goodwin, I-Weston -- casting votes against it.

-- Mrowicki, a member of the House Human Services Committee, said the proposed tax on e-cigarettes is a "first step" but argues that more regulation also may be needed for the devices.

"Some are used as a smoking-cessation product, but it is important that Vermonters understand the health risks," Mrowicki said. "The chemicals used in these products contain nicotine and other poisonous neurotoxins. They are dangerous to users and highly dangerous to children."

Mrowicki said the number of children who have been poisoned by e-cigarettes is "soaring."

"With refills now being sold in bulk, if left accessible (to) children, the liquid in these products can be fatal. Even a tiny amount of these often fruit-flavored chemicals, taken by children, can be toxic with vomiting and seizures resulting," he said. "The chemicals used in these products are not currently regulated by federal or state law, and we are looking at ways to limit use and raise the flag with warnings about the dangers."

-- Rep. Valerie Stuart, D-Brattleboro and a member of the House Education Committee, defended the Legislature's controversial move toward consolidating school governance in Vermont.

Stuart said H.883 was approved by her committee on a 10-1 vote and has received support from the state Board of Education.

"The bill proposes to transform Vermont's education system by streamlining Vermont's 60 supervisory unions and realigning our 282 school districts into 30 to 60 districts so that superintendents will have fewer school boards to report to and less-redundant administrative tasks to do," Stuart said.

"The bill charges state Secretary of Education Rebecca Holcombe with creating and managing a design team to work with local school boards to determine how best to combine districts so local concerns will be honored and addressed," she added. "According to Holcombe and many other education leaders, larger district units will stabilize education leadership and create an environment in which schools can innovate."

Mike Faher is the political beat writer at the Reformer. He can be reached at or 802-254-2311, ext. 275.


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