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Vermont lawmakers consider tax and fee increases

VERGENNES — When lawmakers return to Montpelier this week after their Town Meeting break, they will continue consideration of where to get revenues for state programs.
Lawmakers at the Legislative Breakfast in Vergennes last week discussed potential increases in existing fees and taxes, as well as Gov. Peter Shumlin’s proposed new 10-percent surcharge on break-open tickets sold by various civic groups, including the American Legion Halls.
INCREASED FEES AND TAXES?
Dave Brooks of Waltham noted plans to increase the statewide homestead education property tax by 5 cents (to a total of 94 cents) per $100 in property value and consideration of a new 8-cent gasoline tax to generate more revenues to repair Vermont’s roads and bridges.
Brooks said such taxes cannot be easily absorbed by retirees on a fixed income, such as he and his wife.
“I don’t have the luxury of taxing people, so I have to think about cutting,” Brooks said. “I wonder if the state is talking about cutting.”
Lawmakers responded that while some new tax proposals have been making headlines, state government has been making some cuts. Sen. Claire Ayer, D-Addison, said the state’s developmental services budget for citizens with disabilities is being sized up for “big cuts.” Also in store for substantial cuts according to Ayer: The Reach Up program that provides job training and other aid primarily to single moms with kids.
“In human services — which is a bloated budget — we have been cutting steadily in the amount of services we have,” Ayer said.
What is becoming worrisome, Ayer said, is that state officials have been counting on the federal government to help pay for programs while local communities have been looking to the state for aid. But the financial spigot is being gradually turned off, Ayer noted.
“All of the money comes out of our pockets in one way or another,” she said.
The Legislature is currently looking at a fiscal year 2014 revenue shortfall of $67 million, according to Rep. Willem Jewett, D-Ripton, who serves as the House majority leader.
“At some point we have to figure out how we are going to pay for all these services, and I think it’s going to be a rude awakening when we realize that the feds aren’t going to come through for us the way they have in the past,” Ayer said.
Rep. Diane Lanpher, D-Vergennes, said the Legislature has cut close to $300 million from the general fund budget and cut 660 state jobs during the past four years.
“We have made some tremendous cuts in keeping our budget within a walkable line,” Lanpher said.
She is a member of the House Transportation Committee, which is still weighing the state’s fiscal year 2014 transportation budget. The drying up of federal stimulus money, coupled with inflation and declining gas tax revenues brought on by more fuel-efficient cars, have strangled state transportation revenues, Lanpher said. Jewett said the state is looking to find around $28 million on new state transportation revenue to leverage $56 in federal aid.
Lanpher said her committee is looking at a combination of a 5-cent gas tax (on distributors), $4.3 million in cuts from the governor’s proposed budget and increased bonding.
“We have not passed this yet; we are still refining it,” said Lanpher, who also noted that the Burlington-Franklin County area has the 11th-highest profit margin for gasoline sales in the country.
But freshman Rep. Warren Van Wyck, R-Ferrisburgh, said Shumlin’s proposed fiscal year 2014 state budget represents a 5.6 percent spending increase and creates 79 new positions.
“The governor’s budget has no real cuts,” Van Wyck said.
Outgoing Vergennes Mayor Mike Daniels suggested the state explore gaming as a potential revenue source.
Shumlin has been resistant to raising broad-based taxes, arguing this would stem economic growth.
Ripton resident Millard Cox argued that many large corporations receive tax exemptions and the wealthiest Americans are paying less in taxes (in proportion to their income) than lower-wage workers.
“We are buying this myth of (tax revenue) scarcity,” Cox said. “I would say to the governor, ‘If you’ve got to raise taxes, you know where the money is.’”
BREAK-OPEN TICKETS
The governor told a crowd in Bristol last month that the 10-percent surcharge on break-open tickets is designed to raise $17 million that would be used to help Vermonters weatherize their homes. He also contended that the surcharge would affect the handful of vendors of the tickets and not the civic groups selling the product.
But local Legion officials aren’t sold on that promise. They believe producers will pass the increase on to the civic groups, which would have to increase prices for the tickets from the current $1, or would simply have less revenue to pass on to the many charitable causes they are able to assist with the proceeds.
Bristol Legion Commander Ron LaRose reiterated his concern about the surcharge and the potential impact on the various youth, human services and community causes that have been benefitting from break-open ticket revenues each year.
“We take that money and pour it back into our communities,” LaRose said.
The Bristol Legion annually gives $6,000 in scholarships to Mount Abraham Union High School; $3,000 for Bristol July 4 fireworks; and $1,500 to $2,000 toward the annual Three-Day Stampede Towards the Cure for Cystic Fibrosis, to name a few.
“You pass the surcharge, and it goes away,” he warned lawmakers. “You really hit us where it hurts, if this passes.”
LaRose asked if this was state government’s first step in taxing other charitable gambling activities.
“What’s next? (A surcharge) on 50-50 raffles at the basketball games?” he asked.
LaRose urged the governor to cut other items in his proposed budget rather than tapping the break-open tickets as a revenue source. And he warned that passing the surcharge could come back to haunt lawmakers in November 2014.
“If it passes, all these nonprofits represent a lot of voting people,” LaRose said.
John Mitchell, a member of the Legion post in Vergennes, echoed LaRose’s concerns.
“A tax of 10 percent will have a serious and negative impact on this post’s ability to support the local community,” Mitchell said.
“Any way you look at it, a higher price for tickets will affect demand.”
Lawmakers present on Monday said they doubted the surcharge would pass.
Lanpher said the House Ways and Means Committee has received testimony indicating the break-open tax surcharge is not apt to raise as “nearly” much money as the governor believes.
“I think we will see some significant changes in that particular legislation before it comes out,” she said.
Rep. Mike Fisher, D-Lincoln, agreed.
“My read is that there is very little appetite from the Legislature for this proposal,” Fisher said. “I also want to say there are a number of new spending initiatives in the governor’s proposal that aren’t linked to revenue streams that I think the Legislature is willing to agree with.”
Sen. Chris Bray, D-New Haven, serves on the Senate Finance Committee, which recently heard testimony on the proposed break-open ticket surcharge.
Among things the committee learned was the prize “pay-out rate” for the tickets — which he said translates into around $870 per $1,000 in tickets sold. In other words, the group selling the ticket nets $130 per $1,000 in tickets sold. Adding a dime (surcharge) per ticket would reduce the net for the group selling the tickets to 3 cents per ticket, he said.
“It changes the economics far more than a dime might suggest,” Bray said.
“People are being cautious about moving this forward.”
Reporter John Flowers is at [email protected].

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