Sep 06, 2016Vermont Business Magazine
With a major turnover in political leadership in Montpelier this January, the Montpelier-based Public Assets Institute issued a policy paper today called "A Framework for Progress: Investing in Vermont’s people, infrastructure, and good government." The specifics include eliminating school property taxes for all primary residences and basing all residents’ school taxes on income, publicly-fund health care, institute a carbon pollution tax and re-work the transportation fund to pay for infrastructure, increase "rainy day" funds equal to at least 15 percent of the budget (currently capped at 5 percent), eliminate business tax breaks, and add two years of college to public education.
The general proposals are:
- Ensure that work pays and all Vermont families can meet their basic needs.
- Make smart, evidence-based investments in programs and infrastructure.
- Restore public confidence in state government by improving and promoting good governance, including efficacy, fairness, and transparency.
The detailed proposals in the 10-page report include:
- Increase the state minimum wage and state Earned Income Tax Credit (EITC) to ensure working families have a livable income (the amounts were not specified);
- Use unemployment compensation funds to support workers who stay on the job with reduced hours. With such a strategy, called work sharing, employees maintain skills and employers avoid the costs of retraining workers. Vermont has a limited Short Time Compensation Program that could be expanded to help prepare for the next recession;
- Increase future financial security by opening state-administered retirement plans to everyone. Large publicly managed retirement systems typically get better returns on their investments than individual account holders. A state-sponsored retirement plan open to all Vermonters could encourage saving through automatic deductions and would maximize the value of those savings;
- Advance better cost containment and public funding of health care. Specific recommendations for health care reform are beyond the scope of this report. But Vermont should continue on the dual track laid out in 2011: controlling costs and publicly funding health care.
- Add two years to public education. Understanding that education should start when children are 3 or 4, Vermont is launching universal pre-kindergarten in the 2016-17 school year. But public education also needs to extend at the other end. Vermont should include at least two years at a Vermont public college or university as part of the public education system, with funding through the Education Fund, which currently covers pre-K education. To avoid increasing property taxes on Vermonters’ homes, this should be done either by increasing General Fund support to the Education Fund or through income-based school taxes;
- Fund transportation in ways that are both financially and environmentally sustainable. Repairing and upgrading roads, bridges, public transport, and airports creates jobs and strengthens the economy by increasing the efficiency of moving people and goods. Such improvements require sustainable revenue streams, but taxes from the sale of motor fuels are declining as drivers turn to more fuel-efficient or electric vehicles. Improved energy efficiency is essential to addressing climate change, and a carbon pollution tax also will help to reduce gasoline and diesel consumption. But this means the Transportation Fund will need a comprehensive revenue overhaul that coherently meets both goals: reliable funding and reduced carbon emissions;
- Increase rainy day funds and make them easier to use. Vermont maintains stabilization reserves for the General Fund, Transportation Fund, and Education Fund. But each reserve is capped at 5 percent and used only in emergencies. A larger, more usable Rainy Day Fund would improve Vermont’s ability to manage fiscal volatility and maintain critical public services during recessions. Experts recommend rainy day funds equal to at least 15 percent of the budget;
- Eliminate school property taxes on primary residences. Two-thirds of Vermont homeowners pay school taxes based on their income rather than on the value of their homes. But the school funding system is still regressive. Vermont could make the system fairer and simpler by eliminating school property taxes for all primary residences and basing all residents’ school taxes on income;
- Avoid business tax incentive gimmicks. Studies demonstrate the ineffectiveness of tax breaks to encourage job creation. Tax breaks typically benefit individual established businesses, but local start-up companies—often with little tax liability—lead the way in creating new jobs.34 Money for tax breaks to individual businesses would be better spent on infrastructure improvements and workforce training benefiting a broad range of businesses.
“Vermont needs to take charge of its future again,” said Paul Cillo, president and executive director of Public Assets. “Our leaders need to bring energy and a sense of purpose to making Vermont a state that works for everybody. We can’t afford not to invest; the economy won’t get stronger on its own.
“There are limits to the private sector’s ability to provide essential public services. The federal government recently announced it was reducing reliance on private prisons because of the cost and problems with the quality of the services. And we’ve all heard the uproar over EpiPen price increases. Government still has a big role and responsibility in improving Vermonters’ lives. For instance, the report recommends that the minimum wage be high enough to support a family, and that affordable, high-quality child care is available to all who need it.
“Elected officials also need to make smart investments that benefit all the state’s residents. And policymakers can rebuild Vermonters’ faith in their government by restoring its capacity to do its job.”
Public Assets Institute is a non-profit, non-partisan organization based in Montpelier that believes Vermont should be a state where all communities thrive and the economy works for everyone. Toward that goal, it conducts research and analysis on state tax, budget, and economic policies.
The recommendations in A Framework for Progress are offered to further the public debate this fall and into the next legislative session. They focus on actions elected officials can take now to deploy public resources more effectively to serve the common good. The list is neither comprehensive nor exclusive. But these policy changes would provide a solid foundation for restoring our infrastructure, bettering the lives of low- and moderate-income Vermonters, and improving the policymaking process itself.
A Framework for Progress is a companion document to Public Assets’ State of Working Vermont report, released in December, which provides the data and analysis behind these recommendations.
Source: Public Assets Institute 9.6.2016. http://publicassets.org/library/publications/reports/framework/ (link is external) Public Assets Institute is a nonprofit, nonpartisan organization that promotes sound state budget and tax policies that benefit all Vermonters. More information at www.publicassets.org