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Vermont Governor Abandons His Own Single-Payer Plan

2 min readBy: Jared Walczak

Technically speaking, Vermont’s gubernatorial election isn’t finished yet, but universal health care is. A long-awaited blueprint for the state’s planned transition to single-payer, just released, has been termed “detrimental to Vermonters”—not by the opposition, but by the Governor who made single-payer health care his signature issue.

Because no candidate received a majority of votes cast in November’s election, the selection of Vermont’s next Governor is up to the legislature, though there is every expectation that they will grant incumbent Gov. Peter Shumlin (D) a second term. Which isn’t to say that the Green Mountain State isn’t in for a course correction. After two delays in outlining the plan for single-payer, Shumlin finally unveiled the model—which called for an 11.5 percent payroll taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on businesses and up to a 9.5 percent premium assessment for individuals—only to publicly repudiate it.

Shelving his proposal, the Governor explained, “These are simply not tax rates that I can responsibly support or urge the Legislature to pass. In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.”

According to the New York Times, alternative designs were solicited from the Governor’s health care team, but “no one could come up with a plan to offer quality coverage at an affordable cost.” Per the Governor: “As we completed the financing modeling in the last several days, it became clear that the risk of economic shock is too high at this time to offer a plan I can responsibly support for passage in the Legislature. It was clear to me that the taxes required to replace health-care premiums with a publicly financed plan that would best serve Vermont are, in a word, enormous.”

The word is aptly chosen. The proposed “Green Mountain Care” would cost $4.3 billion its first year, rising to $5 billion by 2020 according to the Governor’s own estimates—in other words, about $7,650 per person. And even the high taxes required by the plan were insufficient; even with a ruinous 11.5 percent payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. and public premiums up to 9.5 percent, the program would run a deficit by year four.

That would have been on top of Vermont’s existing corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. , with a top bracket of 8.5 percent applying to all business income above $25,000, and a top individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rate of 8.95 percent. The state already ranks 46th on our State Business Tax Climate Index.

Predictably, advocates of universal health care are incensed, with some demanding that the plan move forward notwithstanding a chastened Governor’s objections. The experience, however, is instructive. Even Vermont politicians recognize that the tax hikes necessary to fund single-payer health care have the potential to spell economic disaster, and that’s saying something.