Lawmakers avoid 3-letter word: T-A-X
Lawmakers avoid 3-letter word: T-A-X
Tough times may make that option more palatable
By Terri Hallenbeck, Free Press Staff Writer MONTPELIER — Less than 24 hours after Gov. Jim Douglas delivered his budget address, a group gathered in the room next to his Statehouse office to decry the cuts and call on the state to solve its budget problems with tax increases instead.
“Vermont cannot and should not cut its way out of our current economic crisis but instead turn to more creative and appropriate options, including the raising of new revenues,” said Ken Libertoff, executive director of the Vermont Association for Mental Health.Talk of tax increases has been relatively scarce in the Statehouse. Douglas has denounced the option. Legislative leaders have been wary of being branded with the tax-and-spend label. Even as new House Speaker Shap Smith proposed bonding for transportation projects this month, he left the funding source in the “TBA” category.
Now that Douglas’ proposed 2010 budget is out, with 660 state jobs, $34 million in Human Services programs and $4.3 million in housing and land conservation on the chopping block to make up a $201 million spending gap, will lawmakers put taxes on the table as a more palatable dish?
It seems inevitable that some sort of tax will emerge. Plenty of legislators don’t like the taste of what Douglas brought to the table. Plenty of advocates like Libertoff will be pushing them to look for new tax revenue. But if it happens, it likely won’t be right away and it won’t replace all the budget cuts.
“We do not have capacity to solve a $200 million problem,” said Senate President Pro Tempore Peter Shumlin, D-Windham. “We do have some revenue capacity.”
The push for revenue
Several advocates who spoke at a Friday news conference along with Libertoff encouraged state leaders to turn to taxes instead of cutting programs that the elderly, disabled and low-income people use.
“This budget is really a tax increase on the people who can least afford it,” said Christopher Curtis of Vermont Legal Aid. “There are other ways to handle it. Somebody needs to explain to the governor that the word tax is not a four-letter word.”
A recent poll of 400 Vermonters by Macro International found that 56 percent of the respondents strongly support a temporary state income tax surcharge on those who earn more than $500,000 a year to keep the state’s subsidized health care programs affordable. The poll found that 70 percent strongly support a $1 increase in the cigarette tax for the same purpose.
“The survey confirms what we already know,” said Ed Paquin, executive director of Vermont Protection and Advocacy. “Vermonters care deeply about their friends and neighbors.”
Peter Sterling, executive director of the Vermont Campaign for Health Care Security, said a $1 increase on the cigarette tax would raise $8.9 million. A 1 percent increase in income tax on those who make more than $500,000 would generate $8 million to $12 million, he said. Those are a couple of options, he said, but there are others. “I think there’s got to be other ways to find revenues,” he said.
The response
Legislative leaders have lots of reservations about Douglas’ budget cuts, but they aren’t eager to embrace a specific new tax, at least not yet.
It’s not as easy as some advocates make it sound, said Senate Appropriations Committee Chairman Susan Bartlett, D-Lamoille. People might say they support a tax when a pollster calls, she said, but when it comes down to a specific tax they suddenly aren’t so eager.
Rep. David Zuckerman P-Burlington, a member of the House Ways & Means Committee, said he thinks that talk about taxes will heat up later in the session.
“The governor’s budget clearly shows tremendous cuts in both services and programs. I think it’ll be a few weeks or a even a month of allowing that to sink in before a serious discussion about revenues occurs,” Zuckerman said.
Bartlett said it’s too early to talk about taxes because it’s too early to know how much money is needed. “There are such a staggering number of moving parts you don’t even know what you need to pay for,” she said.
The federal economic stimulus package looms as a great unknown. How big it is, how flexible it is and when it arrives will be key factors in how much of the state’s budget problem it solves. Douglas’ budget already depends on $90 million of that package to go toward Medicaid expenses.
“Before we talk about revenues we need to know how big our hole is,” Shumlin said.
Bartlett said she would want any tax to help solve long-term problems. For example, she said she would consider changing the existing gas tax to a percentage rather than a flat tax, a move that would generate more revenue when gas prices go up and help solve structural problems with the Transportation Fund. Rep. Rick Hube, a Republican on the House Ways & Means Committee, said he can picture discussion turning to new revenues as the budget process goes on, but he thinks legislators can pass a budget without them. “There’s always going to be a call for raising taxes,” he said. “I don’t think we have to get there.”
Is it a tax?
Douglas will continue to oppose new tax proposals, Administration Secretary Neale Lunderville said. “The governor does not believe Vermonters have a capacity to pay more in taxes,” Lunderville said.
Shumlin argued that Douglas’ budget is full of tax increases that simply aren’t identified as such. “There isn’t anyone in this building, including the governor, who isn’t talking about increasing taxes,” Shumlin said.
Douglas proposes to shift $40 million from the General Fund to the Education Fund, counteracting the burden on the Education Fund by freezing school budgets at their 2009 per-pupil spending level. Shumlin calls it a property tax increase, arguing that freezing all school budgets is unrealistic and local taxpayers will take a hit.
Lunderville said that’s an unfair characterization. The governor’s proposal would mandate the limit and if local taxpayers spend more, they would be doing so by choice. “From a state perspective we wouldn’t be raising their taxes,” he said.
Douglas did propose one item in his budget that he concedes is a tax increase — an almost doubling of the tax employers pay into the state’s unemployment fund, which is running out of money. If the reaction from business lobbyists was any indication, any proposed tax increases will face opposition. It might run as strong as opposition to budget cuts.
©2002-2010 Vermont Association for Mental Health