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Scott considers estate tax to fund waterways cleanup

MONTPELIER — Gov. Phil Scott is looking at Vermont’s estate tax as a possible source of funding for the state’s federally mandated water cleanup initiatives.
The tax, which in recent years has generated an average of $20 million annually, is on a “menu” of options the governor is considering for water cleanup, according to his chief of staff, Jason Gibbs.
In his second term, the governor has pledged to find an ongoing source for clean water funding and has said his budget proposal for fiscal year 2020 will include about $15 million for the efforts, harnessing existing revenue.
The estate tax currently feeds into the state’s general fund, unless its revenues exceed 125 percent of its projections in a given year. In this case, anything above the 125 percent goes into the state’s higher education trust fund to help pay for college scholarships.
Some Democratic lawmakers, including Sen. Chris Bray, D-New Haven, the chair of the Natural Resources and Energy Committee, are concerned about using the estate tax to fund clean water efforts because the level of revenue it generates each year can vary. The least it has generated since 2004 is about $10 million, in fiscal year 2015, according to state figures.
“Something like water quality cleanup is something that we need very reliable steady funding for, and something like the estate tax is notoriously unpredictable,” said House Speaker Mitzi Johnson, D-South Hero.
Administration officials did not detail which other funding sources the governor is considering for clean water, but the plan the governor will roll out in his budget address next week could include several sources.
“The governor is committed to presenting a plan that provides the needed funding going forward, even taking into account any volatility in funding sources,” said Kaj Samsom, Vermont’s tax commissioner.
Bray and Johnson also noted that if estate tax revenue was used for clean water projects, other programs paid for through the general fund would likely need to be cut.
Like the governor, Johnson has made finding funding for clean water a priority in the House this session, though lawmakers have yet to settle on a promising source.
After pitching the idea last year, Bray plans on introducing another clean water funding bill with a per parcel fee, which he says at $40 per property would raise more than $14 million a year.
In addition to using the estate tax to fund clean water projects, the Scott administration is also considering reforming the estate tax which it believes is too burdensome, and may be encouraging wealthier Vermonters to move out, or legally change residency to other states.
Those with estates valued at $2.75 million or greater are subject to Vermont’s estate tax, which has a uniform 16 percent rate. Only 12 states have estate taxes, and the levies in some neighboring states like New York and Maine kick in at higher estate values: $5.125 million and $5.49 million, respectively.
Gibbs said Vermonters with high estate values receive advice from estate planners and accountants who point out more favorable tax policies elsewhere.
“And when they look at how different our policy is from other states, it really stands out,” he said. “We’re at a demographic point where we need everyone we can get.”
The administration plans on broaching the subject of estate tax reform with the legislature this session.
Johnson said the House would look at an estate tax reform proposal, but was skeptical of giving tax breaks to the wealthy.
“I think we’ve spent the last 30 years proving the fact that trickle down economics is a complete farce.”
Elizabeth Gribkoff contributed reporting.

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