• Hidden corners
    February 10,2013

    As legislators are delving into budget proposals from the administration of Gov. Peter Shumlin, they are discovering an unusual array of revenue-generating gimmicks designed to raise money for important programs.

    Shumlin is firmly wedded to his promise not to raise broad-based taxes. He is also wedded to his idea of himself as a visionary and activist governor. But it appears these two ideas are in contradiction, and so the result is that Shumlin has been searching in hidden corners for possible revenue sources that might support his vision.

    For example, Shumlin has proposed a new tax on break-open tickets that he says would bring in $17 million to fund energy programs he has portrayed as crucial to addressing the problems of climate change and energy efficiency. But in raising the veil on the reality of break-open tickets in Vermont, he has exposed a murky world that is foreign to many people. It is territory that, according to the Joint Fiscal Office, is unlikely to yield anything like the amount of revenue Shumlin is counting on.

    Break-open tickets are a form of gambling. Patrons at bars or social clubs pay $1 for a ticket that they break open to see slot-machine-like symbols that tell them if they have won a couple dollars or $100 or, more likely, nothing. It has been astonishing to many that, according to the administration, 173 million of these tickets are sold in Vermont annually.

    Those familiar with the way break-open tickets are used say that Shumlin doesn’t know what he is getting into. The tickets are supposed to be sold by bars for the benefit of nonprofit organizations or charities. The bars themselves are supposed to keep only a small percentage to cover expenses. Organizations such as the Elks or the American Legion also sell them, and the money is supposed to go to special charitable projects of the organizations, rather than to the organizations’ operations.

    In reality, much of the money flow associated with break-open tickets is unaccounted for, and charitable organizations that are supposed to receive most of it often complain that they are being cheated by bar owners. Only the loosest oversight of the bars’ handling of the money takes place, and it is thought that the tickets are an important revenue stream for some bars. Further, it is believed that many fraternal organizations have come to rely on the ticket money for their operations, not just for special projects. That’s why they have objected to the new tax.

    If Shumlin intends to tax the tickets, he will have to impose accountability on the flow of money associated with break-open tickets. That will not be easy. Maybe it should happen as a way to regulate a form of gambling that is now largely unregulated and which can be enormously damaging to gambling addicts. But as a reliable source of revenue for important energy programs, it seems like a reach at this point. Shumlin’s numbers suggest that the quantity of break-open tickets being sold, and suitable for taxation, amounts to $126.30 per capita for all 626,000 Vermonters. This is a huge number, and the Joint Fiscal Office estimates it is far too high.

    Other budget gimmickry that Shumlin has relied on includes his shift of money away from working Vermonters and toward expanded child care. He defends his proposal to decrease state support for the earned income tax credit by saying Vermont already has a progressive tax system — as if that is a justification for making it less progressive.

    If Shumlin’s new programs are important, they should be founded on reliable revenue sources rather than on sources in hidden corners of society where people are breaking open barroom tickets or in the pockets of people who can least afford it. That would mean looking for loopholes in the income tax that provide special breaks for the wealthiest taxpayers, who have enjoyed decades of special benefits.

    It is possible that the world of break-open tickets needs to be brought into the light of day with regard to its purported mission as a source of charity. Perhaps, once it is in the daylight, it may be a suitable source of revenue. For that to happen, Shumlin will have to be ready to take on those who have benefited, either legitimately or illegitimately, from this form of gambling.

    In the meantime, if he is serious about energy efficiency and climate change, a more reliable source of revenue should be found. If we can’t afford to tap that source, then it’s possible we can’t afford his energy programs. More likely, the revenue is there if the administration is willing to own up to the challenge of straightforward taxation for straightforward needs.

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