TOBY TALBOT / AP FILE PHOTO
Gov. Peter Shumlin, center, speaks at a news conference earlier this year in Montpelier.
MONTPELIER — Ask Peter Shumlin to track the origins of his fiscal policy, and he’ll tell you about childhood trips to a general store in Putney, where he turned his 5-cent allowance into a budding bedroom candy enterprise.
Shumlin, accompanied by his younger brother and older sister, would “go into the store with our allowance ... and of course we’d do what kids do — we’d buy candy.”
Unlike most kids, however, Shumlin’s appetite wasn’t for sugar.
“I’d keep the candy in my drawer,” Shumlin says, a smile spreading. “And at the appropriate time, when I knew that my brother or sister had loot, I would sell it to them when they were really desperate for sugar. That’s my nature.”
When it comes to the economic theories that guide his approach to fiscal governance, Shumlin lists no formative influences, no branch-forking epiphanies. A born capitalist, the business of Shumlin has always been business. And if it works for his private-sector enterprises, Shumlin says, then it can’t be bad for government.
“I’m a business person,” Shumlin said during a sit-down last week at his fifth-floor office in the Pavilion Building. “And what I know about businesses is you’ve got to do two things to really be successful: Manage money, manage every single penny like I did my allowance and find ways to make it grow. And two, ensure that you never spend a penny that you don’t need to spend. And that’s the philosophy of building businesses. And it’s what I bring to state government.”
A career-long Democrat, Shumlin acknowledges the power of government to improve the lives of the people it represents. And he championed all manner of new programs in his budget address in January: $17 million in child care subsidies for low-income parents; $6 million for thermal efficiency; $5 million for green-energy subsidies.
His frugality, however, would prove their undoing. If lawmakers weren’t willing to abide offsets in new spending by reducing a state earned-income tax credit that delivers cash benefits to low-wage earners, Shumlin said, then he’d sooner drop the child care proposal than raise sales or income taxes to pay for it.
“You really can’t always say, ‘I’ve got a great new idea, and I know there’s plenty of money to pay for it,’” Shumlin says. “We have challenges, and we need to figure out where are we actually getting value for our money? And where are we not succeeding?”
As in business, Shumlin says, successful government looks to maximize efficiencies before injecting new capital. And he says Vermont has a long way to go before taxpayer investments are yielding optimal returns.
His proposal to cut the EITC may have tanked miserably with Democratic lawmakers this year, but Shumlin doesn’t sound like a man deterred. He points to anti-poverty programs especially as areas in which state expenditures aren’t performing to his standards.
“The money we’re spending on our poverty programs sometimes works, but most often it doesn’t,” Shumlin says. “All this money we’re spending on education, and we’re much more generous on social programs than other states. You’d think we must be having great success, but we’re not.”
Liberal members of his own party have derided Shumlin’s insistence on budgetary reallocations as a Hobson’s choice that pits poor against poor. As income inequality widens, his critics say, it makes no sense to fund new programs for one group of poor people by taking money away from programs for another.
Shumlin has spent his three years as governor beating back revenue proposals that would raise taxes on the rich. The fight centered most recently, and most dramatically, around a plan from House and Senate leaders to cap the itemized deductions used mostly by wealthier Vermonters to drive down income tax obligations.
The proposal, which House Speaker Shap Smith and Senate President Pro Tem John Campbell shelved at Shumlin’s insistence, would have, on the aggregate, raised taxes for people making more than $200,000 by about $5.4 million, and lowered taxes for people making less than $100,000 by $4 million.
Shumlin says his image as a protector of the wealthy isn’t an accurate one.
“My argument often gets made for me, so I want to make it clearly: I believe that people who make the most money in this state and this country should pay the highest taxes,” Shumlin says.
Shumlin takes credit for co-authoring an income tax code that he says is among the most progressive in the nation.
“And if you have the most progressive income tax system in the country, how do you do it twice? You’re already doing it,” Shumlin says. “It gets interpreted in the press as though I’m saying, ‘Don’t ask wealthy people to pay taxes.’ Wealthy people should pay taxes, they should pay more taxes than everybody else. And we’re doing that.”
Shumlin says that doesn’t mean he’s not amenable to taking up the House and Senate tax code overhaul next year, after he’s had more time to analyze the specifics. But he says that while revenue-neutral changes to the tax code might offer some marginal benefits to economic development, he says he won’t be beating the bushes to get it done.
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