Democrat seeks to undo increase on capital gains
|
|
Toolbox
By Peter Hirschfeld Vermont Press Bureau - Published: December 14, 2009
MONTPELIER – At least one Democrat in the Vermont Senate wants to undo the increase in capital-gains taxes that leaders of her own party championed earlier this year.
Increasing taxes on capital gains – income accrued through investments as opposed to wages – according to Chittenden County Senator Hinda Miller, will have a chilling effect on the entrepreneurial start-ups she says are needed to revitalize the Vermont economy.
The increase in capital-gains taxes approved by the Vermont Legislature in last session's budget and enacted in July, she says, will only exacerbate the revenue problems that lawmakers were trying to fix.
"If we don't repeal these capital-gains tax increases then we are going to dissipate any consideration people might have to risk their own money in the future of Vermont businesses," Miller says. "And I'm not just talking about big companies. I'm talking about one- or two-person start-ups like an auto mechanic or general store."
The Legislature during the last session closed what was known as the "capital gains loophole," a part of the tax code that previously exempted considerable portions of investment income from taxes. Supporters of the legislation said the loophole unfairly favored wealthier residents, as well as those who derive their incomes through investing rather than labor wages.
Miller though says that amid all the talk of fairness and equality, lawmakers lost sight of reality.
"In this building there are a lot of judgments about what is fair," Miller said last week to a commission appointed to review Vermont's tax structure. "This fairness that engulfs this building I think prevents us from seeing what actually is happening out there."
A former entrepreneur herself – the Burlington businesswoman founded of Jogbra – Miller says Vermont needs to encourage the private investment that grows high-risk start-up companies. The capital gains loophole, she said, was among the few incentives to encourage the flow of private capital into new companies.
"If we do not encourage risk capital into this state, then we are going to squeeze the life out of Vermont," Miller says. "We have this head set where we say we want jobs and we say we want entrepreneurs to get the capital they need. But we're not doing things that make that unlikely to happen."
Miller says she's crafted new legislation that will repeal the capital-gains increases without sacrificing the new revenue they bring. By assessing new taxes on soda, candy, and bottled water, and by charging bottled-water companies for the groundwater they extract from Vermont's aquifers, she says, Vermont can raise new revenue in a manner that does not stunt new enterprise.
"I am proposing smart taxes instead of fair taxes," Miller says. "We need to motivate human behavior to support the strategic goals of this state."
Discouraging the consumption of unhealthy foods and bottled water that creates tons of plastic waste, she says, will support healthier and more environmentally responsible consumer behavior. And the bottled-water companies pumping millions of gallons of water from Vermont's aquifers, she says, ought to be paying a price for their raw materials.
"I look at a business that takes water from the ground and say, 'why should they have zero cost for their raw materials?'" Miller says. "You pay for it, like every other business. And if you're smart enough and you're employees are creative enough, you still make a profit."
Fair or no, Miller says, tax incentives for investments will play a key role in creating a new generation of Vermont-born businesses that provide the decent-paying jobs this state needs.
"Economic development through tax policy needs to be a huge component of our economic-development plan," Miller says. "It may not have been before. But it needs to be now."
"I am proposing smart taxes instead of fair taxes. We need to motivate human behavior to support the strategic goals of this state."
3