Class Conflict
Does Vermont coddle the Middle Class?
Gov. Jim Douglas thinks so, and he may have a point.
No, the governor didn’t use those words. But take a look at his budget message of last Tuesday and some of his other recent proposals.
“Maintaining coverage for the greatest number of people will mean scaling back benefits for some,” he said in his speech to the Legislature.
At that point, he was talking about health benefits. But the same theme echoed throughout the speech: In order to protect the services and subsidies that go to the poor, Vermont would have to cut back on those services and subsidies for the not-so-poor.
And while some of those not-so-poor are very low income, many are not. In both tax and social policy, Vermont provides benefits to thousands of people whose earnings are close to – or higher than –the middle of the income spectrum.
For instance, a family of four can get health care assistance in Vermont if its total income is under $68,400. That’s way above the poverty line for a family of four ($21,834 in 2008). It’s even higher than the median household income in the state (about $66,000) before the Recession started.
Then again, it’s less than the median income in Vermont for a family of four. That’s was $71,382 a couple of years ago, one of the highest in the country. Still, by any reasonable definition, a family of four living on $68,000 a year is neither poor nor low income. It’s right there in the middle.
Meaning, at least according to conventional assumptions, it ought to be able to support itself. After all, this is America, the richest country in the world and the one that created mass affluence. Shouldn’t moderately affluent people pay their own bills?
Nor is health care the only example. A large family – two parents and six children – can get state help winterizing its home if its income is higher than $74,000. In all, Douglass said, “nearly one-third of our population receives services from the State… Since the beginning of the decade, overall spending for human services has more than doubled – a growth rate of three-and-a-half times inflation.”
Conventional assumptions, to be sure, ought to be challenged from time to time. As it happens, most Americans no longer live better than their counterparts in many other countries, partly because those counterparts don’t have to pay separately for health care at all. And in this country, health care has gotten so expensive that it could pose a heavy burden even on the moderately affluent.
Still, the case made by Douglas and other economic conservatives is not frivolous. If nothing else, they are asking a legitimate question: In a culture that values (or at least claims to) self-reliance, where should the line be drawn between personal and social responsibility?
Despite the claims of some of his liberal critics, Douglas remains a moderate, not one of those ultra-conservative Republicans who believe – as Newt Gingrich proclaimed in 1995 as he prepared to become Speaker of the U.S. House of Representatives – that government ought to do little more than defend the country and print money. Douglas proposed expanding several state programs in his speech, and did not call for abolishing any.
But he does want to save money, mostly by cutting services to middle-income and even some affluent people and by raising their taxes.
Again, he didn’t put it precisely that way. No sane politician is going to say, “I want to raise the taxes of middle-income and upper-middle-income homeowners.”
But that would be the result of Douglas’s plan to alter the “income sensitivity” provisions of the statewide school property tax. Instead of all households with income under $90,000 protected from paying more than 1.8 percent of their incomes on that tax, those earning between $60,000 and $75,000 could pay as much as 2.25 percent; for households between $75,00 and $90,000, the limit would rise to 3.5 percent.
Of course that might not be a tax increase if local school districts froze their budgets, as Douglas proposed. But they don’t seem likely to follow his advice. Either way, families who earn $90,000 a year, even big families, are in the top 20 percent of all earners. By any definition they are affluent. Why do their property taxes need to be subsidized?
Democrats claim that income sensitivity is not a subsidy, but a method of linking taxes to each taxpayer’s “ability to pay.” It may be that, but it is also a subsidy; whatever the homeowner saves on property taxes because of income sensitivity is made up for by funds from other taxes, mostly the income tax.
And that tax, in turn, is disproportionately paid by upper-income earners. When economic conservatives, including Douglas, complain that Vermont is a high-tax state, what they really object to is that it’s a high-tax state for high earners. Lower and middle-income Vermonters – even those up near the $90,000 range – pay little if any more in state and local taxes than do their counterparts in many other states, especially in the Northeast. But because the state tax structure is relatively progressive, the wealthy pay a bit more. Among other things, they are subsidizing, through income sensitivity, the affluent as well as the poor.
Unless income sensitivity is altered, then, there might be renewed pressure to raise taxes on the very wealthy to help make up for what the merely affluent don’t pay in property taxes. Douglas adamantly opposes any such tax increase. In fact, he wants last year’s small hike in taxes on the wealthy rolled back.
This debate, then, is, among others things, a class conflict. Not the traditional version in which the workers with their pitchforks storm the banks. Not even the more recent brand in which the bankers with their lobbyists and their pseudo-think tanks storm the government and the media.
This class conflict is more nuanced, more interesting, and perhaps necessary. It’s all about precisely who qualifies as “middle class,” who in that middle class deserves tax breaks and government services, and who will pay for them. A healthy debate as long as it does not degenerate into a situation in which everybody is trying to protect his/her own government benefits and tax breaks at the expense of everyone else.
It would be irresponsible to leave this discussion without noting that some of Douglas’s proposed budget cuts would hurt the very poor. For instance, he noted that Vermont’s Medicaid system allows an “unlimited number of emergency room visits” by recipients. “Capping ER visits that do not result in hospitalization at 12 per year will bring Vermont more in line with peer states – saving money to preserve this benefit for everyone in the system,” he said.
No doubt it would. Not only that, but it’s a good bet that some of those emergency room visits, being unlimited and free, aren’t really necessary. But those unlimited visits also probably help explain why Vermont is regularly designated the healthiest state in the union. The most obvious consequence of reducing health care services for the poor is that the poor will become less healthy.
Tags: Jim Douglas
