Shumlin Administration Working To Resuscitate Payroll Tax

Mar 10, 2015

When lawmakers broke for Town Meeting recess last week, a key House committee looked poised to endorse a 2-cent per-ounce tax on soda and other sugar-sweetened beverages to pay for about $34 million in new health care reforms.

But the Shumlin administration has worked hard in the intervening days to remake the case for the governor’s payroll tax proposal. And a revised version of that payroll tax plan looks to have new life in the House Committee on Health Care.

Chief of Health Care Reform Lawrence Miller presented a revamped version of Shumlin’s original plan Tuesday afternoon. He says this latest iteration is designed to address concerns raised not only by lawmakers, but by members of the business community.

“We heard over last couple weeks from employers who were unhappy that if a payroll tax goes through for health care, that they’d still be paying the employer assessment,” Miller says. “And many employers feel like that’s double-dipping.”

That “employer assessment,” formerly used to fund Catamount Health, is paid by employers that don’t offer health benefits to their workers. It amounts to about $500 per employee per year, and raises about $17 million annually.

One of the proposals Miller floated Tuesday would do away with the employer assessment, and cut Shumlin’s original payroll tax proposal in half, from .7 percent to .35 percent.

Miller says that package would net enough new revenue to pay for the governor’s plan to boost Medicaid reimbursement rates. Shumlin says increasing the amount doctors are paid to treat Medicaid patients would benefit businesses by relieving upward pressure on private health insurance premiums.

The House Committee on Health Care has come up with its own set of reform initiatives. While they’re similar to the governor’s, they differ in some areas. The House, for instance, would spend less than Shumlin on boosting Medicaid rates, and more than the governor on assistance to lower-income Vermonters now buying insurance through Vermont Health Connect.

The plan to do away with the employer assessment and initiate a .35 percent payroll tax wouldn’t fund all of the items on the House’s wish list. But it would get them well on their way. And it might also serve to move them away from a tax on sugar sweetened beverages, which Shumlin opposes strongly.

One thing is clear – both House lawmakers and Shumlin want to raise new revenues for health care reforms. And after nine weeks of suspense, some major decisions over which revenues will be used to pay for those reforms could come in the next day or two.

Those decisions of course won’t be anything close to final. And the Senate will begin to put its mark on the health care legislation after the House completes its work later this month.