Fight brews over tax hike proposal

BRIDPORT — Addison County lawmakers on Monday warned that the Legislature and Gov. James Douglas appear to be on another collision course this session, this time on the issue of taxes.
Having already overridden Douglas’s veto of same-sex marriage legislation, lawmakers said they are again coming to loggerheads with the governor on whether Vermont should raise additional revenues to shore up a looming fiscal year 2010 budget deficit.
As the Addison Independent went to press, the House was considering a three-year surcharge on the state income tax, which would help raise $24 million in fiscal year 2010.
Lawmakers have also been discussing the prospect of a 5-cents-per-gallon gas tax to raise money to repair roads and bridges.
Rep. David Sharpe, D-Bristol, is a member of the House Ways and Means Committee that has been drafting the income tax legislation. Specifically, he said the plan calls for $16 million in new income taxes and another $8 million through other measures — specifically, a “tax amnesty” offer, expected to raise $2.6 million; decoupling Vermont from the federal estate tax, to raise another $3 million; and bringing in additional collections personnel to more aggressively go after taxes owed to the state.
“There is $161 million due and owed to the state,” Sharpe said during Monday’s legislative breakfast in Bridport. “The (Vermont) Tax Department says $61 million of that is collectible.”
Sharpe pointed to figures from the Vermont Joint Fiscal Office indicating the proposed income tax surcharge would add $19 to the liability of a household earning $50,000 to $60,000 annually. That annual liability would go up to $43 in years two and three of the surcharge.
The liability would increase based on income. Households earning $100,000 to $125,000 would pay an additional $55 in income taxes during the first year. Those making more than $1 million would see their taxes go up by $5,481.
Sharpe said the recently enacted federal “Making Work Pay” tax credit of $400 would more than offset the impact of the state income tax surcharge.
“This is not an onerous tax,” Sharpe said. “I think this is pretty light duty to take care of a budget deficit in this state.”
Douglas, a Middlebury Republican, opposes both the proposed income tax and the gas tax. He has stated that both taxes would hit Vermonters too hard during this tough economy.
Lawmakers have countered that the gas tax will capture revenues from tourists while the income tax is being tailored to have a negligible impact on those with low to moderate incomes.
Without the additional $24 million in revenues, the state would have to cut some additional programs, according to Rep. Steve Maier, D-Middlebury. Items on the chopping block, according to Maier, include a prescription drug subsidy program for low-income senior citizens; some state historic sites that would have to be closed or open fewer hours; fewer court hours; fewer rest areas open; and additional state job cuts. As the Addison Independent went to press, the administration and Vermont State Employees Association (VSEA) had suspended talks in an effort to avert the proposed layoff of 320 workers. The Douglas administration has asked state workers making more than $38,000 to accept a 5-percent pay cut and pay a greater portion of their health care premiums, in an effort to realize $17 million in savings.
“These are difficult times and there are difficult choices involved,” Maier said.
Those choices should not be confined to cuts, according to Rep. Christopher Bray, D-New Haven.
“We have three tools in out tool chest as legislators – reducing costs, (tapping into the state’s) rainy day fund, and raising new revenues,” Bray said. “I would submit that it’s easier to talk only about cuts than asking people to step up, those who can afford it, in modest ways, to contribute more to get through this difficult period.”
Addison resident Mark Boivin voiced concerns that increasing taxes on Vermonters would give residents and businesses less money to spend on goods and services. That, he said, means less money circulating within the local economy.
“What you raise in funds, other people have to cut,” Boivin told lawmakers.
Rep. Greg Clark, R-Vergennes, said the current financial crisis should provide an impetus for lawmakers to make cuts that will be sustainable over many years.
“We should think about ways that government could be more effective and efficient,” Clark said. “Just cutting programs and raising taxes to try to help ease the pain, I don’t think that’s the answer. I think there’s a third way, and that is looking at the structure of government.”
Sen. Claire Ayer, D-Weybridge, said lawmakers have — since January of 2008 — cut state spending to the tune of $240 million.
“We have been doing out best, and I think we have done a good job, to find the places where there is some slack in the budget where we can be more efficient,” Ayer said.
Ayer, chairwoman of the Senate Transportation Committee, said that further, large-scale budget cuts could produce disastrous effects.
“We are going to have starving people if we try to cut our way out of this,” Ayer said. “We are going to have kids who aren’t getting a good education and we are going to have entire institutions that shut down.”
Rep. Willem Jewett, D-Ripton, said his constituents have been telling him they are not interested in additional cuts in services. He noted Addison County has already been hit hard, with the most high-profile cut thus far being the Middlebury-based Probation and Parole Office. The Vermont Health Department’s Middlebury office may soon shrink by one-third, according to Douglas administration recommendations.
“We need to hold the line at the House budget,” Jewett said. “I don’t want to see our courts closing in Middlebury; I don’t want to see the health department close up shop; I don’t want to see those things happen in our community.”
Lawmakers realize, however, that they will have to rally around their tax plan in significant numbers if it is to pass into law.
“We are on a collision course in this Legislature,” Sharpe said. “You have not seen the last of vetoes.”

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