MONTPELIER — The House money committees finalized a fiscal year 2015 budget and corresponding tax plan Monday, paving the way for the full chamber to debate the bills later this week.
The Appropriations Committee voted 7-4 on a straight party line to approve a $1.44 billion general fund budget. It is a 3.8 percent increase over the current fiscal year, according to Chairwoman Martha Heath, D-Westford.
Gov. Peter Shumlin’s proposed budget had a 5 percent increase, she said.
The committee-passed budget uses $34 million in one-time funds, including an $8.3 million settlement from the R.J. Reynolds Tobacco Co., said Steve Klein, chief fiscal analyst with the Joint Fiscal Office.
Heath said the committee created “a responsible budget” without seeking new revenue. It includes more addiction treatment, addresses poverty and has strategies to reduce homelessness, she said.
In a room downstairs, the Ways and Means Committee finalized a miscellaneous tax bill that levies a 92 percent tax on the wholesale price of e-cigarettes, which are not sold in a standardized unit. It also raises the tax on snuff, chewing tobacco and other smokeless tobacco to a level comparable to the $2.62 cent tax per pack of cigarettes. A tin of snuff, chew and other smokeless tobacco is currently taxed $2.24.
According to the Joint Fiscal Office, raising the tax on smokeless tobacco will generate an additional $700,000. The tax on e-cigarettes will raise $500,000. Both Heath and Ways and Means Committee Chairwoman Janet Ancel, D-Calais, said they do not consider the levy on e-cigarettes to be a new tax, even though one is not currently assessed.
Ways and Means approved its bill on a 9-2 vote, with Reps. Patti Komline, R-Dorset, and Adam Greshin, I-Warren, voting against it.
The tobacco taxes helped close a remaining $4.4 million gap in the state budget crafted by Appropriations. The budget-writing committee is planning to use $1.1 million of a $3.6 million fund set aside to offset federal sequestration cuts to help close the deficit.
Meanwhile, the Ways and Means Committee is using about $900,000 in savings from changes to the renters rebate program and to the property tax income adjustment to help close the gap.
An additional $1.2 million not previously used by the Shumlin administration or lawmakers from a Tax Department information technology project completes the needed funds. The state signed a contract in February for a major IT project to help achieve better tax compliance. The contract delivers 80 percent of recovered taxes to the contractor and 20 percent to the state.
Most lawmakers were pleased with the end result.
“This is good news for the taxpayers of Vermont,” said Rep. Jim Condon, D-Colchester. “Between the leadership of the Ways and Means Committee and the Appropriations Committee … I think we’ve got to a point where there are just slight disagreements over how we’re going to raise the money.”
Condon pushed hard to jettison the e-cigarette tax, arguing that the devices are useful tools for smoking cessation and should not be made more expensive or taxed like cigarettes.
“Putting a hefty tax on a product that people are using to quit smoking seems counterintuitive,” he said. “It’s an apples and oranges thing, and we shouldn’t tax the orange the way we tax the apple.”
Condon’s motion to scrap the e-cigarette tax and replace it with a study of the product while keeping the smokeless tobacco tax increase and raising the cigarette tax by 6 cents failed on a 7-4 vote.
Jim Harrison of the Vermont Retail Association also asked lawmakers to equalize the tax on smokeless tobacco and raise the cigarette tax a “modest” amount to raise the needed money.
Andrew MacLean, a lobbyist representing the R.J. Reynolds Co., noted that Minnesota, the only state currently taxing e-cigarettes, has made e-cigarette products cost more than twice the average of a pack of regular cigarettes.
The bills approved Monday are expected to hit the House floor Thursday.
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