The decision by legislative leaders to defer until next year tax reforms opposed by Gov. Peter Shumlin could be the start of a divisive fight between progressive legislators and a governor whose credibility has suffered this year because of ill-starred tax proposals.
Or the search for acceptable tax reforms in the coming months could become the cooperative, productive exercise that all parties were pointing toward Monday as they described the agreement between Shumlin and legislative leaders.
With the legislative session in its final days, a potential showdown loomed between Shumlin and Democratic legislators who wanted to end tax breaks for wealthy taxpayers in order to lower rates for middle-class taxpayers. Shumlin opposed the changes, saying they had been cobbled together at the last minute and would hurt the economy.
House Speaker Shap Smith and Sen. John Campbell say they have not abandoned the Democrats’ tax reforms. Instead they have kept open the conference committee that had developed the bill, and the Legislature will take it up when it reconvenes in January.
Nevertheless, they have given the Shumlin administration seven months to try to chip away and undermine the legislators’ effort, if that is Shumlin’s intention. To many legislators, Shumlin’s intention is murky. His positions on taxes this year came with a Republican tinge, clothed in rhetoric about protecting the prerogatives of the wealthy and raising taxes on the working poor. Smith and Campbell have given in for the moment, but within their caucuses are Democrats who will want to defend the thrust of the Legislature’s proposals.
As legislators work with the administration over the summer to hammer out acceptable tax reforms, they will no doubt be trying to weigh Shumlin’s motives. If they were to take Shumlin’s comments at face value, they might conclude he has been converted to the belief that the tax privileges of the wealthy must never be tampered with. Democratic legislators are not buying it.
Another possible motive is that Shumlin wants to hold the line on increases to anyone’s taxes because new taxes to pay for health care are in the offing and he wants to make sure the blow can be absorbed with minimal pain. To make a single-payer health care system work, some sort of state tax will be necessary, taking the place of health insurance premiums. Those taxes will be a hard sell, and by showing tax restraint now, Shumlin may believe he is bolstering his credibility on taxes for future battles.
Comments from Smith and Campbell displayed a remarkable degree of deference toward the governor. Campbell said he would rather defer action on tax reforms than get in a “pit fight” with the governor. They are all Democrats, after all, and it is clear they wanted to spare their governor the embarrassment that would be caused by shoving a bill down his throat or forcing him to veto it. They did that with a Republican governor in 2008, and it did not make for good feelings.
Apparent veto threats showed Shumlin was prepared to play hardball. Smith responded by saying he didn’t want the issue, tax fairness, to be clouded by political differences. He thought it would be better to get all parties behind the eventual reforms. He said this even as he defended the thrust of the legislators’ proposals.
Shumlin would gain by working with legislators to develop a tax package. His tax proposals this year floundered because they came to the Legislature without legislative support. It is unlikely that the Legislature, particularly the members on the money committees who have studied these issues closely, will want to be railroaded toward tax proposals like those Shumlin was promoting this year. Rather, Shumlin ought to join legislators in a genuine effort to improve the fairness of the system. It appears that with the economy showing signs of improvement they have room to maneuver.
If Democratic legislators don’t relish the prospect of caving again on the issue of tax fairness, they will have to assert themselves during the long search for solutions, and they will have to make their leaders follow. It appears the struggle among Democrats is just beginning.
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