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October 10, 2012

The Fact Checker: Would Single-Payer Health Care Result in the Largest Tax Increase in Vermont History?

Factchecker-trueCLAIM: “Montpelier is keeping a $5 billion secret. Why? Because the truth will result in the largest single tax increase in state history.”

 — Television commercial from conservative super PAC Vermonters First

FACTS: So what’s the secret? The super PAC Vermonters First is referring to the state’s current annual health care expenditures, including private insurance and federally funded programs, which total $5 billion. If Vermont moves ahead with a publicly financed universal health care system, residents would pay taxes instead of insurance premiums to cover the cost.

No one knows, however, just what state taxes will be raised or on whom. That’s because the Shumlin administration is keeping the financing plan under wraps until after the election. 

William Hsiao, the Harvard professor who created the blueprint for Vermont’s single-payer system, proposed funding it by raising state payroll taxes by 10.9 percent on employers and by 3.6 percent on workers. The business community reeled at Hsiao’s suggestion, and the Shumlin administration went mum, leaving the financing mechanism unresolved.

Act 48, the single-payer law passed in 2011, does spell out that funding will come from a combination of federal and state taxes. The Shumlin administration is counting on several hundred million in subsidies through the federal Affordable Care Act — aka Obamacare. It’s also seeking waivers to roll Medicaid and Medicare funding into the new system, which together in 2010 amounted to more than $2 billion. The Shumlin administration hopes to save $400 million to $700 million a year by eliminating administrative costs, fraud and abuse, and by improving chronic care and tackling malpractice reform.

Vermonters paid $1.86 billion in 2010 for private insurance and under single payer, those expenditures would be covered by state tax revenues — specifically “adjustments to the income tax, a payroll tax, consumption taxes, provider assessments, employer assessments” or other revenue sources, according to Act 48 language.

SCORE: As currently envisioned, single-payer health care would in fact result in the largest tax hike in state history. Not even the creation of a statewide property tax under Act 60 was as much. What’s missing from the television ad is context. Vermonters may begin paying for health care through taxes rather than insurance premiums, but that doesn’t mean they’ll pay more overall. The exact amount won’t be known until Shumlin releases his rate plan next year. Still, it would represent the largest new tax and, for that reason, we rate the claim “True.”

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