Don’t cut off your nose to spite your face

Nearly half of the governors—23 and counting—have decided to end federal supplemental unemployment benefits for workers in their states. Evidently, they never heard the old adage: Don’t cut off your nose to spite your face. In these bizarre times, I guess we have to be grateful that Governor Scott was raised with more common sense.

Despite the pandemic—with the business shutdowns, layoffs, school closures, illness, and all of the other things that kept so many people out of work—personal income in Vermont actually grew in 2020. It rose to $36.56 billion from $34.50 billion the previous year. That was a 6 percent increase—the biggest since 2006—and all of the growth was due to unemployment benefits and to refundable tax credits.

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Simplicity, equity, and let’s-just-call-it-what-it-is.

Those were among the key reasons the Vermont Tax Structure Commission recommended recently that the state abolish the homestead property tax and move to an income-based school tax for all resident homeowners.

We support the Commission’s recommendation. We also urge everyone, but especially policymakers, to read the final report. It addresses many persistent questions that have swirled around education funding for almost 25 years.

A lot has already been said about last week’s shootings of six Asian women and others at spas in Atlanta—that it was shocking but not surprising, that it was the predictable result of a year of hate spewed by political leaders, that it doesn’t have to be totally racially motivated to be a hate crime and can in fact be the product of racism and misogyny and fetishization all at the same time, that it was the result of lax gun laws that allow the violent to act on their worst impulses.

There’s also been an understandable look back at systemic racism against Asians in the U.S., from the massacres in Wyoming and Los Angeles and the Chinese Exclusion Act to the internment of Japanese-Americans in the 1940s.

All this can seem far removed from Vermont. Asian-Americans made up less than two percent of Vermont’s population, with two-thirds living in Chittenden County according to recent Census data.

How much income does a person need to live? The Joint Fiscal Office’s January release of its biennial Vermont Basic Needs Budgets and Livable Wage report answers this question. Unfortunately, it reminds us that not all Vermonters are able to meet their basic needs.

In 2020 livable income levels for full-time workers ranged from nearly $13 an hour for people without children in rural Vermont to nearly $42 an hour for a single parent with two children in the Burlington area – about $27,000 and $87,000 a year respectively.

Benefit cliffs are a real problem. The term is used to describe the predicament people get into when earning more income makes them ineligible for certain public benefits. Their income goes up, but then they fall off a benefit cliff.

“Benefit cliffs’ is also one of those technocratic terms that’s hard to get excited about. But that could all change if enough people read just a short section of the Final Report of the Vermont Tax Structure Commission. It cuts through all of the usually confusing information and describes clearly the reality of a problem that needs fixing.

I can’t improve on the report by paraphrasing, so I’m quoting it at length below.

The president is calling for unity, as the transfer of presidential power in Washington has been anything but peaceful over the past few months. Here in Vermont the soon to be released Tax Structure Commission’s report provides a real-world example of what united policy development looks like.

The Vermont Tax Structure Commission, established by the Legislature in 2018, is putting the finishing touches on their draft report recommending changes to the state’s tax system. The Commission has three members, two appointed by the Democratic legislature and one by the Republican governor, each with different tax backgrounds. They have been working together over the last two years analyzing the state’s tax system and developing long-term recommendations to make it “more fair, more sustainable, and simpler.”

Over the past year Gov. Phil Scott has recognized that many Vermonters needed help to meet their basic needs during the pandemic. His administration deserves credit for applying the power of state government, with the help of billions of dollars in federal aid, to meet those needs.

The governor acknowledged in his Budget Address today that many Vermonters were struggling even before the pandemic. Our State of Working Vermont 2020 report notes that many Vermonters—especially Black and brown Vermonters, low-income Vermonters, and Vermonters with disabilities—had not recovered from the Great Recession when the pandemic-driven recession began last year.

Federal aid has helped thousands of Vermonters and Vermont businesses make ends meet over this last year. It also allowed the state to spend money on things that have historically received inadequate investment, such as affordable housing, higher education, and child care. But instead of cautioning that this is one-time money that shouldn’t set the standard for budgets to come, the governor and Legislature should chart a course to continue to meet not only Vermonters’ basic needs, such as food, but also those needs that it took a global pandemic to reveal and address.

Federal stimulus funds clearly have been a godsend for Vermont and other states. Through the first round of relief—direct payments to state government, supplemental unemployment benefits, or aid to businesses—more than $5 billion flowed into Vermont to help fight the COVID-19 pandemic and to offset some of the economic damage it has caused.

And we learned this week, thanks to all of this federal aid, that Vermont will be collecting hundreds of millions more in tax revenue this year and next. But before we assume the crisis has passed, we need to ask: Hundreds of millions more than what?

As the legislature gets into full swing this month, dealing with the impacts of COVID-19 on Vermonters will be at the top of the list. At the end of 2020, Washington approved another round of pandemic relief, adding more funds and extending the spending deadline for the federal aid sent last spring.

Vermont expects up to $2.5 billion from this new round of aid, with $1.8 billion accounted for so far. The aid includes funds for businesses, broadband investments, food, COVID-19 response, and other priorities. The new money extends a number of programs slated to expire including federal unemployment insurance and food programs, as well as additional health care support to test, trace and vaccinate Vermonters. About $650 million of that will be subject to legislative oversight.