Saturday, April 2, 2016

April 2, 2016 Legislative Update

Legislative Update

Representative Anne Donahue

April 2, 2016


What counts as a tax increase? In fact, what counts as a tax?

We grappled at least indirectly with those questions in the past two weeks.

Fees are defined as not being taxes, because they come only from those who use a particular service, and pay only for the cost of that service.

For example: You want to be licensed in a certain profession. That profession is regulated in order to ensure your qualifications. Since you are the one benefiting by becoming licensed, your fee pays for the state’s cost in oversight of the licensing process.

It could be argued in the opposite direction. The reason for professional oversight is for public protection, so why isn’t the public at large paying for it, through taxes?

That is the policy decision that is made each time we, as a state, decides to pay for services through either a tax or a fee.

Every year, a third of all of the fees charged by the state are reviewed to ensure they are keeping up with inflation and still covering the costs of the service. This year, it was the Department of Motor Vehicles’ turn for increases.

Motor vehicle fees have a broader reach than just paying for the services of the DMV itself. We pay for our entire state portion of the transportation budget through contributions (mandatory ones) from those who use the roads, rather than from taxpayers as a whole.

There are three sources: the gas tax, the motor vehicle purchase and use tax, and motor vehicle fees.

These fee increases are nickel and diming us to death: a lot of items only going up a dollar a two, but all adding up to real money. It totaled about $10 million in fee increases, many of them in the range of a 20 percent increase.

That would be a whopping amount for a one year increase but in fact, most of these fees were last raised in either 2002 or 2012. Spread over the amount of time, they were in the range of two to three percent increases, very much in line with inflation.

For that reason, I voted for the transportation funding bill this past week. The increases made sense, and the DMV money raised goes directly into maintaining the roads we drive on.


I did not look kindly, on the other hand, on this year’s general fee bill. It included one whopping fee increase (by 233 percent) that was not remotely related to the actual cost of regulating the business at issue: mutual funds.

We raised it for one reason only: there was a deficit in the state budget, and someone noticed that our fee was much lower than other states around us.

So how did we get away with calling this tax a “fee”?  We simply changed the law, and passed language that exempted that specific fee from the statutory definition of a fee.

It always sounds easy to raise a tax (or supposedly, a “fee”) on a faceless big business. The fact is, businesses don’t pay taxes. Only individual people pay taxes… because one way or another, the money being raised is going to be passed on down through to the consumer.


Speaking of taxes, after getting through with this year’s big tax bill the week before (including an increase in the tax on your heating fuel), last week we also addressed education and the property tax.

The rate increase will be small this year, but regrettably and unnecessarily, it will still be an increase. Last year, we promised relief by requiring towns to come up with their own local money if they went above a pre-set growth percentage. Earlier this year, the legislature wimped out and mostly repealed it. That drove everyone else’s share of the property tax back up again.

So we will be finishing up yet another legislative session without reforming the education taxation system that has vexed us all for so many years.


There are times when the competing values in a piece of legislation leave one in a no-win situation, and those are the votes that can leave you second-guessing yourself long after the roll call is over and done.

So it was for me on a small amendment to the annual state budget.

Ambulance services around our state are mostly run by local communities, and they don’t break even on the reimbursement from health insurance. Towns often pick up the deficit (meaning, of course, your local property tax.)

The recent increase in the number of Vermonters on Medicaid has had a really negative impact on these services, because Medicaid (that is, the state) reimburses at about 40 percent of the cost of services. In effect, this is a cost shift from a state obligation (general fund taxes) to local property taxes.

Our general fund budget, however, is already outpacing our economic growth rate, and we can’t sustain further increases. While we ought to have stepped back and re-prioritized the state’s overall spending, that wouldn’t solve the immediate problem that was before us as we voted on the budget.

Some creative financing had been done to propose a fix. It’s something that actually is well known by its nickname, Medi-scam, as a way to artificially get federal money to pump up our budget.

It works by increasing the Medicaid rates paid by a medical service, a cost that is shared by the state and the feds. We pull in the federal money, but we don’t actually pay the state share. We create the state share by raising the money through a tax on that medical service provider (called a “provider tax.”)

For example: Say an ambulance ride is currently reimbursed by Medicaid at $100. The state increases the rate to $150. Of the extra $50, $25 comes from the feds and $25 has to come from the state. So we set a service tax of $25 for the ambulance, and use the tax to pay our $25 share.

End result: the ambulance “nets” an increase of $25 thanks to the federal share (minus some administrative overhead, of course.)

We do it for hospitals and nursing homes… why not ambulances?

From a policy perspective, it’s a really bad way to raise money. Sooner or later, the feds are going to cut off this spigot. And even if it is revenue neutral, it does increase the size of the state’s budget as a whole.

Finally, we have to remember that “federal” money is just another source of funds that ultimately comes from our pockets.

On the other hand, as a member of the Health Care Committee, I’ve been getting pleas from ambulance services around the state about the desperate state of their budgets, and the pressure being put on towns.

So I voted in support of the ambulance amendment (despite not supporting the budget as a whole.) But I’m still not sure it was the right decision.


I was pleased and grateful to see the Transportation Committee include a bill I introduced, within its larger annual transportation budget policy bill. It requires the Department of Transportation to develop short and long term measures to address safety at the Quechee Gorge bridge.

The bridge has become a suicide “hot spot.” Contrary to common assumptions, if a suicide is prevented, 90 percent of the time the individual does not simply turn to another means of death. Creating obstacles to suicide literally does mean saving lives.

If we had a particular traffic intersection or stretch of road where 10 deaths had occurred over the past ten years, we wouldn’t question the need to evaluate safety protections. We have lost 10 Vermonters since 2006, mostly young people, to the easy access and “no turning back” risks presented at the Quequee Gorge bridge. There are easy and low cost ways to intervene, and we need to take those steps.


Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email ( for me; for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

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