Douglas warns he won’t accept payroll tax

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(Host) Governor Jim Douglas, on Thursday gave his strongest warning yet that he won’t accept a payroll tax to finance health care reform.

The governor stopped short of threatening to veto the bill that just passed the Senate. But he made it very clear that he thinks a payroll tax is unacceptable, and will hurt the state’s businesses.

VPR’s John Dillon reports:

(Dillon) Like most controversies in the Legislature, the big battle on health care reform is over money – specifically how to raise the funds to cover those without health insurance. The governor wants to raise taxes on insurance premiums. The Senate bill would set a three percent payroll tax on companies that don’t cover their workers.

Douglas says that method hurts businesses, and the people who work for them. He predicted – quote — “economic devastation” if the payroll tax is imposed

And the governor says it’s not just companies that are affected by the Senate plan. He points out that employees who don’t have health insurance will also pay the three percent payroll tax.

(Douglas) “This is all about the people of Vermont who can least afford to be taxed. I want to tax the insurance companies. The senators want to tax the working poor.”

(Dillon) Senate leaders reject that argument. They say that those workers who do have to pay the tax will get a huge health care benefit.

Senate President, Peter Welch, a Windsor County Democrat, says it’s fundamentally more fair to raise money from companies that don’t provide insurance, than to raises premium taxes on everyone.

(Welch) “Under the governor’s proposal, he would exempt Wal-Mart basically, and make the businesses that are very generous in providing health care insurance pay more. So it really comes down to simple question of fairness. Do we ask those employers who are already paying to pay more, as the governor doe? Or do we ask those businesses who are paying nothing to contribute a modest amount to the cost of our health care system. That’s really the bottom line.

(Dillon) Health care was on the mind of more than just politicians in Montpelier. About 100 citizen activists roamed the halls on Thursday and buttonholed lawmakers to make the case for universal coverage. Among them was Linda Maloney, an Episcopal priest from Enosburg Falls. Maloney believes health care should be financed either through an income tax or payroll tax.

(Maloney) “The payroll tax has the advantage that we could get something going rather quickly. I think the need is very great and very urgent. I don’t think that the tax on premiums – that has no future at all. It only raises the cost on people who are already struggling to pay.”

(Dillon) Although both sides are now very far apart on health care reform, Governor Douglas and Democratic leaders say they’ll try to negotiate a compromise.

For Vermont Public Radio, I’m John Dillon in Montpelier.

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