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Milk Tax

12/02/08 5:55PM By John McClaughry
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(HOST) There's an old saying that if something walks like a duck - it probably is one. Commentator John McClaughry thinks the same principle might apply to something that may not be called a tax - but looks very much like one.

(MCCLAUGHRY) Even before the new legislature convenes in January, Vermonters may face a new tax on milk.

A 1991 law gave the five-member Vermont Milk Commission the power to levy an "assessment" on fluid milk distributed to Vermont retailers. You don't need to be a dairy economist to figure out that this "assessment" is a disguised consumer tax. Not only is it a tax, but it's a tax that no legislator ever voted to impose. It will be levied by a wholly unaccountable state board.

The Commission initially proposed to levy a tax of 38 to 50 cents a gallon. More recently it proposed to set the tax rate month by month, but there's no reason to believe it won't on average be in the same range.

Under the Commission's draft proposal, when a milk processor distributes a gallon of milk to a Vermont retail store, the processor would be required to pay the milk "assessment" to the Commission. This raises the cost to the retailer. So the retailer has little choice but to raise its price to its customers by at least the same amount.

Not so, says the Commission.  It declares that retailers would keep prices level, and just absorb the "surplus profit margin" out of what the Commission believes to be their unjustifiably high margins on milk sales. When retailers pointed out in public hearings that they would be forced to pass the tax on to consumers, the milk commissioners thought up another brilliant solution to that problem: the commission could impose price controls on retail milk sales.

What will become of this money extracted from consumers who buy milk in Vermont? The Commission will pay it out to farmers, both in and outside of Vermont, based on the quantity of their milk that was sold in Vermont stores. The Commission expects the average farm would receive $5,900 in 2009.

Let's be clear here. The Milk Commission's proposal is a new milk tax, levied by an unaccountable public body, with the proceeds handed out to the milk producers, whether they need it to stay alive or not, and the workings of the scheme will be mostly invisible to the consumers who get stuck with the tax.            

Vermont's surviving one thousand and fifty dairy farms are an important asset to the economic well-being, landscape, and character of this state. But the survival and prosperity of our dairy farmers ultimately ought to depend upon what Vermont farmers have historically done well: quality, innovation, efficiency, and persistence - not on advocating for hidden taxes that hammer their neighbors who consume their product.
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