Legislators are taking common-sense steps toward tax policies that steer clear of the punitive measures promoted by Gov. Peter Shumlin. They are discovering that the legislative branch is a coequal of government and has no obligation to rubber-stamp ill-conceived ideas emanating from the executive branch.
House Speaker Shap Smith is not a leader in the feisty mold of former Speaker Ralph Wright. He has worked well with Shumlin in the past and is widely credited with helping the House operate smoothly. But he is learning the importance of independence as fellow Democrats stand up to the Democratic governor when he veers onto swampy ground.
Last week the House Ways and Means Committee approved a package of tax increases that could serve as an alternative to increases proposed by Shumlin. The governor said he was disappointed by the committee action. The committee, however, appears to have been disappointed by Shumlin’s proposals, which fell heavily on low-income Vermonters.
Gone is Shumlin’s plan to cut the earned income tax credit, which would have been the equivalent of a tax increase on the incomes of low-income workers. Instead, the House committee proposed a 6 percent sales tax on soda, candy, bottled water and dietary supplements. The meals tax would also rise — to 9.5 percent, from 9 percent. In addition, income tax increases for high-income earners would take effect next year.
The tax on soda and other inessential ingestibles could take the place of the tax proposed for sugar-sweetened beverages, which faltered this year, but with the added benefit of taxing bottled water, which is an enormous environmental waste.
Falling by the wayside is most of Shumlin’s proposed infusion of money for child-care subsidies. The House Appropriations Committee passed an increase of $3.3 million instead of the $16.7 million Shumlin had proposed. The boost for child care and early education was a centerpiece of Shumlin’s program this year, but basing his proposal on cuts to the earned income tax credit doomed it. And without a pot of new money to support the expansion of child care, the Appropriations Committee was not willing to go as far as the governor had hoped.
In addition, there was little enthusiasm among legislators for Shumlin’s proposals to pay for new energy-efficiency programs by taxing the break-open gaming tickets sold by bars and fraternal organizations. Shumlin had not done sufficient spade work to build confidence in the dependability of break-open tickets as a revenue source. The proposal came out of nowhere to tie an important program to a tax derived from a lightly regulated and shadowy form of state-sanctioned gambling. Instead, new energy-efficiency measures will have to get their money from as yet unidentified sources.
Meanwhile, the House has moved forward with a higher gasoline tax needed because greater fuel efficiency is allowing drivers to buy less gas, yielding less revenue for the maintenance of roads and bridges. The new fuel tax will be figured as a percentage of the price of a gallon of gas. If the House measure passes, drivers will pay 2 percent of their gas bill until June 2014, when the percentage will jump to 4 percent.
Thus, if the quantity of fuel purchased declines, but the actual price paid stays the same, the tax revenue will stay the same. This change is important because annual sales of unleaded gas are down 15 percent since 2005, and that decline can be expected to continue as vehicles become more efficient.
Legislators need not shrink from the task of charting a more responsible course where they see that the governor has gone astray. Shumlin continues to peddle a fallacious argument about tax fairness, complaining that legislators are increasing Vermont’s high tax burden, though he is the one creating new burdens for low-income Vermonters. On taxation, as on welfare, Democrats in the Legislature need to show Shumlin they represent the Democratic wing of the Democratic Party.
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