By Brent Addleman | The Center Square

A bill that would prop up Vermont’s child care sector through a payroll tax is going to be vetoed, Gov. Phil Scott said.

The Republican governor said Tuesday during his weekly press conference that he intends to veto House Bill 217. The bill would create a system in which the state’s child care and early learning system would be propped up with funding culled through employee payroll contributions and budget allocations.

Gov. Phil Scott

Scott said he has been focusing on child care during his six years as governor.

“It was difficult,” Scott said of the decision on the pending veto, “but in my seat, you have to look at the cumulative impact of all the taxes and fees that are being raised and look at the health, economic health, the entire state.”

The veteran elected official said the payroll tax gave him pause when considering the bill. The contribution rate from employees under the bill, if enacted, would be 0.44% of each employee’s covered wages and 0.11% of the income of someone who is self-employed.

“In a payroll tax now, the payroll tax itself, especially when we have all the surpluses we have, and there was another way to get there,” Scott said of funding the sector. “The payroll tax itself has been used before in this way, and it opens the door for a lot more. It’s easy year after year. Once the door is open, I guarantee, because it’s just a little bit out of everyone’s pocket, that’ll be going back to the well time and time again.”

The bill would work to increase access to child care, increase equitable access to education for children in prekindergarten, and provide stabilizing financing to child care programs, including the workforce.

The bill calls for a $7.5 million allocation to the Agency of Education in fiscal year 2024 for per diem compensation and reimbursement for members of a committee that would be established to implement the bill. Another $100,000 would be used for retaining a contractor within the program.

The bill, if enacted, would allocate $47.8 million to the Child Care Financial Assistance Program in fiscal year 2024, and $4 million for the Child Development Division to administer the program.

Scott said childcare subsidies in Vermont last year were expanded to 350% of the federal poverty level. That would mean a four-person household, he said, “equates to about $105,000 each year” for a family to be eligible for the program proposed under the bill.

“Knowing we all wanted to go big on childcare this year, I proposed using $56 million in organic ongoing base revenue growth to bring the subsidy up to 400% of the federal poverty level, which would have made us tie for the most generous state in the nation,” Scott said. “That would mean middle-class families with household incomes up to $120,000 a year would have access to support helping about 4,000 more kids than we helped today.

“When the Senate and House appeared to be at a stalemate in May on childcare, my team approached the legislative leadership about a path to get to 450% of that with a 10% rate increase without relying on new regressive taxes.”

Scott said the Legislature then “determined to raise a new tax” and wound up with what the Republican governor called a “regressive payroll tax.” He said it amounted to a “lower-income Vermonter” who is receiving free childcare would then have “to pay a tax so that more affluent families get support” with no added benefit for the lower-income family.