A recent bureaucratic “Report” recommends expanding Vermont’s sales tax to include food, groceries, electricity and clothing to… help the poor! The Vermont Tax Structure Commission (VTSC) argues “broadening the tax base” will be easier for government, and more equitable than current exemptions because sales tax revenues will be redistributed “equitably” to the poor. Unsurprisingly, the method of “equitably” calculating and disbursing this massive revenue increase is unstated.
Sales taxes are inherently regressive. VTSC acknowledges this quite openly (p.22):
Sales taxes are by their nature regressive…. This means that including groceries and other necessities, as we recommend, adds to regressivity. However, we do not make this recommendation in isolation. We note the vital importance of protecting low-income households from bearing any additional burden, and in Chapter 5 we recommend a comprehensive review of the income, transfers, and taxes for low-income Vermonters to ensure that… no one is bearing an undue burden of taxation relative to their resources….
But this monstrous report offers nearly zero policy ideas to “equitably” redistribute the money to the poor, blithely offering:
In particular, we believe there are more efficient ways to protect low-income Vermonters from the burden of a sales tax on necessities, and more effective ways to promote public goods than exemptions from the sales tax…. A significant portion of the new revenue resulting from the broadened sales tax would be deployed to strengthen and rationalize the distribution system to support lower-income Vermonters, and to make sure that no one is harmed by the tax changes…. [I]t is important to find a mechanism to distribute these payments on at least a monthly basis, and bi-weekly would be even better. (pp. 11, 12, 40)
But the “particulars” are unstated; the “mechanism to distribute” is unknown (though “important to find”); there is no “distribution system to support lower-income Vemonters,” let alone one that can be monetarily “rationalized.” The tax-and-spend double-speak a-la-COVID translation is: “There are more efficient ways to protect poor people from taxes than exempting them from tax.” It literally says that.
The Real Problems, Hidden
In contrast, the Center on Budget and Policy Priorities Reports:
Existing credits and rebates designed to offset the sales tax often fail to provide significant relief for many low-income families. To offset fully the sales tax on food for the low- and moderate-income families on which it imposes a significant burden, a credit or rebate should meet two tests. First, it should be available to all poor and near-poor individuals and families who are exposed to the tax. Second, it should be large enough to offset the sales tax on a family’s grocery purchases. None of the seven states now administering sales tax credits or rebates meet these two tests. (p. 30)
The report then lists numerous additional inefficiencies of credit programs.
Vermont’s latest tax restructuring proposal addresses neither of these concerns — it offers no substantive plans to fairly redistribute sales taxes on food. But there is endless justification of how this plan will help the government:
By trying to use the sales tax as a tool to encourage community goods, and exemptions from the sales tax for necessities as a tool to protect low-income Vermonters, the legislature puts itself in the position of having to decide what’s necessary, and what’s good, and what’s not. Food is a necessity; is soda? Is candy? Does the legislature want to be in the business of making judgements about what’s necessary if it doesn’t have to? Clothing is necessary; is a $50 hat? ….The legislature is charged with making these difficult and important distinctions when necessary, but all other things being equal, it is probably better to reduce subjectivity in the tax code when possible. (p. 84)
But all things are most definitely not equal — these proposals would create inequities while increasing bureaucratic administration costs. The VTSC Paper (packed with subjective “climate change tax policy”) also advises expanding Vermont’s sales tax to education and most services. It draws distinctions between which classes of healthcare providers will be taxed (much like soda versus celery). Frighteningly, it “puts the legislature in the business of making judgements [sic] about” who gets money, how much, and when.
State Money-grab from the Poor
Vermonters tightened their belts under COVID; their state’s bureaucracy expanded its belly, and is hungry for “broadened revenue streams” to save Vermonters from their impoverishment. The VTSC is optimistic about it’s amorphous plan:
In general, we conclude that exempting broad categories of necessities is not an efficient way to protect low-income Vermonters from the financial burden of paying a sales tax on necessities…. (p. 68).
(Get that, again? — government should tax food, because not taxing food is not an efficient way to protect people from… taxes on food. Go ahead — read it, that’s what it says.)
Vermont’s Progressive Majority consistently transfers money inefficiently from one group to another, always enlarging the government bite. Now they wish to tax bread, to “feed the poor.”
Let them tax cake!