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Statehouse sparring continues over budget

Gov., business leaders want more service cuts, not tax hikes

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MONTPELIER – As lawmakers pressed Wednesday to make their planned Saturday adjournment date, they sparred once again with Gov. James Douglas over taxes and spending.

Douglas, flanked by Lt. Gov. Brian Dubie, who is endeavoring to replace him when the governor leaves office, was joined by business owners from across the state who called on lawmakers to undo estate tax and capital gains tax increases put in place last year.

Pam Trag of the Quality Market in Barre said the business represents work and investment by her family.

"We put our life savings into this business," she said.

Mark Saba of Formula Ford Nissan said his company made the decision to only consolidate a few of their 100 positions when the car market went soft.

"That meant a 60 percent reduction in my income," he said.

Monica Green of Precision Tools in Swanton said that when her father died, her family was caught in a retroactive estate tax increase.

"Frankly it is very difficult" to move a business from one generation to the next, she said.

Lawmakers should repeal those tax changes they made last year and instead cut more in school spending and human services programs, Douglas said. For instance, those who have been on the Temporary Assistance for Needy Families, or TANF, program for five years without fulfilling their work application requirements should be put off the program, Douglas said.

"That's one place we could start," Douglas said. "Human services spending is going up 7 percent under the budget being considered by the Legislature."

Dubie paraphrased President Ronald Reagan, saying, "the best social program is a good job."

"Let's eliminate the capital gains tax, let's eliminate the estate tax," Dubie said, referring to the roughly $20 million in tax changes put in place by lawmakers last year.

But legislative leaders said they have already split the difference between cuts in programs and cuts in taxes.

"We have tried to find the balance between cutting the budget and taking care of the people who are having a hard time," said Senate President Pro Tem Peter Shumlin, a Windham Democrat. "There are no broad-based taxes being raised by this Legislature" this year.

Fewer than 20 estates were affected by the change in estate tax law and only 3 percent of Vermonters paid more in capital gains because of those changes, Speaker of the House Shap Smith, a Morristown Democrat, said.

Many inside the Legislature and outside of it have urged legislative leaders to raise income taxes to make up for declining state revenue.

"We have pushed back against that notion this year," Smith said. "We are showing restraint in Vermont that other states are not."

But "we don't have the capacity in this year's budget" to lower capital gains and estate taxes, he added.

Legislators also pointed out that Douglas himself has in the past supported undoing the exclusion that used to mean Vermonters who earn capital gains income pay less than if they earned the same amount in wages.

That was the change lawmakers put in place last year, although they did not return all of the money in their package of lower-income tax rates as Douglas requested.

Dubie raised the ire of lawmakers by suggesting that, when compared with the investment needed by Vermont companies, just under $9 million in a jobs, farms and economic development bill passed earlier this year was "chump change."

"The lieutenant governor wasn't even there when this bill was debated and passed," said Senate Majority Leader John Campbell, a Windsor Democrat. "If he was he might see this not as chump change but is a life preserver."

louis.porter@rutlandherald.com