Vermont View: Modest tax increases are necessary : Times Argus Online

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Vermont View: Modest tax increases are necessary
If Vermont is going to get through this recession-induced budget crisis without completely savaging the poor and most vulnerable, we're all going to have to pay some new taxes despite the fact that Gov. James Douglas has said that he will not consider them.

Douglas has said we must cut the fat in the state budget, but he knows there's not a lot of fat there because if there were, it'd be his fault since he's been responsible for creating the first draft of the budget for the past six years. Saying so gives him cover for laying off state workers (thereby depriving the state of their income taxes!) and making cutbacks in human services.

His comments should be seen as posturing to set up the Democratic majority in the Legislature, so that when it refuses to make the cuts he is asking for and instead sensibly proposes some tax increases, Douglas can cry like a kindergartner, "They made me do it!"

I never thought I would feel nostalgic about former governor Richard Snelling, but his straightforward manner was decidedly refreshing. When faced with similar revenue shortfalls, he simply said we would need to make cuts and impose new, temporary taxes. Much less dramatic but much more efficient and much less likely to alienate voters already tired of posturing politicians.

So let's cut to the chase and look at what might be some fair and acceptable tax increases.

Doug Hoffer, the Burlington independent economist, has given the matter some thought and has come up with some interesting ideas:
Eliminating the 40 percent capital gains exclusion would bring in $15 to $50 million, a tax that would be paid mainly by the wealthy who get most of the benefit from this break. We could protect small business owners and farmers by redefining "long term" as five years instead of one year;
A sales tax on selective personal services (not health care) used primarily by the wealthy would bring in millions depending on what was taxed and at what level;
Raising the rooms and meals tax by 1 percent would bring about $10 million and be paid mostly by tourists and those of us with enough discretionary income to afford a night on the town but would raise the cost of a $40 meal by only 40 cents;
Making banks pay the corporate income tax instead of the fee now paid based on their deposits would bring in about $5 million per year.
Creating a new top marginal tax rate for those earning more than $1 million and/or add a surcharge to the personal income tax of those earning more than $500,000 would mean an additional $7 million to $8 million per year in state revenues. Hoffer said at present someone earning $1 million will pay just over $88,000 in state income taxes; with his proposed surcharge, the tax payment would be $94,000. "Is it unreasonable to ask someone earning $1 million to pay an extra $6,000 to help avoid cuts to programs for kids and elders?"

These proposals do not add up to the total $200 million shortfall that has been projected over this fiscal year and the next, but they point the way. In addition, there appears to be a good probability the state will receive $100 million to $200 million in federal aid.

There's also the $100 million sitting in the state's rainy day fund. Douglas and others have said we should not use the fund, but it's not just raining, it's a downpour. Hello!

Eighty-one years ago when the country was going through a similar period of great income inequality and excessive influence of money in politics, Associate Supreme Court Justice Oliver Wendell Holmes Jr., wrote in a dissenting opinion, "(t)axes are what we pay for civilized society."

Today thanks to the organized propaganda of the anti-government movement which is parroted by many politicians, taxes have come to be regarded by many as a drain on productive activity that distorts incentives to work instead of a bill gladly paid for the privilege of living in a decent society, and that's a shame.

When faced with a crisis like a severe recession, a civilized society does not cut services for the poor, working families, and the vulnerable; the rest of us pitch in and shoulder our fair share.