On March 30, 2016

Vermonters deserve a Taxpayers’ Bill of Rights

By Rob Roper

The Vermont House Ways & Means committee just passed out a $48.3 million package of new or increased taxes and fees. The list includes the fuel gross receipts tax that will add two to three cents to every gallon of home heating fuel, a new application of the 9 percent rooms and meals tax to private rentals done through such sharing programs as AirBnB, and a 25 percent hike in the bank franchise tax.

On the fee side, the state will rake in an additional $10.5 million from folks renewing their drivers’ licenses and registering their vehicles, etc. at the DMV. The biggest item is a $20.8 million increase in the fee to sell mutual funds in Vermont. This sets a very bad precedent, as a fee is supposed to raise only enough money to cover the costs of regulating the entity paying the fee. It is not supposed to generate revenue for the general fund as this “fee” hike does. 

Keep in mind, this $48 million is on top of last year’s $30 million in general fund tax increases, which included such delights as $11 million worth of increases to income taxes, adding the six percent sales tax to some, but not all, sweetened beverages, and the truly creative application of the rooms and meals tax to snacks purchased out of vending machines.

Montpelier has a serious spending problem, and it has demonstrated that it cannot restrain itself.

These large and all too regular tax increases are part of what’s been called a “structural deficit” brought about by the state spending money at a faster pace (roughly 5 percent annual increases) than the economy can generate revenues (roughly 2 percent annual increases). Given that Vermont has a very low 3.7 percent unemployment rate and still can’t keep up with Montpelier’s appetite for cash, it’s obvious that it’s the spending side that’s got to give.

One solution that would be a tremendous help to overburdened Vermont taxpayers would be the passage of a Taxpayers’ Bill of Rights (TABOR). 

Colorado passed such a law in 1992 that said, in a nutshell, state spending could increase year over year only by the rate of inflation plus population growth. Any revenue generated over and above that amount had to be – by law – returned to the taxpayers in the form of a rebate. Of course the bureaucratic entities of Colorado’s state government howled bloody murder and declared it the end of the world, but…

In 2006, Matthew Ladner, then of the Goldwater Institute, did a study on poverty throughout the country which revealed some interesting results of Colorado’s TABOR. First of all, Ladner discovered that, “Colorado’s economy has been exceptionally strong. Between 1995 and 2000, Colorado ranked first among all states in gross state product growth and second in personal income growth.” What’s more, he found that after instituting TABOR, Colorado was able to reduce the number of children living in poverty by a whopping 26.9 percent – the best record in the nation.

How can this be? The best policy to unleash economic growth and broad-based prosperity is to restrain government – and vice versa. Here in Vermont we have the vice versa. The myriad taxes, large and small, that are continuously raining down from Montpelier onto our citizens and businesses are as demoralizing as they are costly.

Consider the decision to add the sales tax to some sweetened drinks. Seems like a small thing, but it is a nightmare for hundreds of small business owners struggling to comply with unclear definitions applied to scores of products, and facing fines if they mess up.

Consider the 25 percent rise in the bank franchise tax. Doesn’t affect me, so who cares. Right? Well, Chris D’Elia, president of the Vermont Bankers Association, predicted the increase would likely lead to “job cuts, less lending and reduced charitable giving by those banks,” according to an interview with Seven Days. Think of that when you can’t get a loan or your favorite local charity loses a sponsor for the big, annual fundraising event.

And consider all the taxes that have been discussed and bypassed, but will surely be back on the table when the next hundred million hole appears next year: the bottled water tax, new taxes on satellite television services, expanding the sales tax to services, the two cent per ounce excise tax on sugary beverages, and, of course, the half a billion dollar a year carbon tax. How do you plan for the future when you’re constantly worried about what tax is coming next?

This has to stop. And this is why the next governor and the next crop of legislators need to make passing a Taxpayers’ Bill of Rights a top priority for January 2017.

Rob Roper, Stowe, president of the Ethan Allen Institute

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