Budget plan

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(HOST) As the legislature considers the governor’s budget proposals, commentator Allen Gilbert is reminded of a famous quote about money – and where to find it.

(GILBERT) One of the bits of folk wisdom that you often hear at the Statehouse concerns the notorious bank robber Willie Sutton. Asked why he robbed banks, Sutton reportedly said, “Because that’s where the money is.”

So it probably shouldn’t come as a surprise that Governor James Douglas wants to shift a passel of government expenses to the Education Fund, since that’s where a lot of money is now. Our property taxes keep going up as the value of our homes keeps rising, and the same tax rate yields a lot more money. For gov-
ernment, this is a neat trick. Without having to announce a tax increase, tax bills nonetheless go up.

But the Education Fund is supposed to be used for only a narrow range of expenses. When the fund was created as part of the education finance reforms of the 1990s, everyone knew that the fund would hold a lot of money. So the state agreed to build a protective wall around the fund. Legislators reasoned that when
the fund got fat, there’d be tremendous temptation to raid it.

And sure enough, Governor Douglas is now looking at all this “extra” money in the fund. He could propose returning surpluses
to taxpayers, to cut property taxes, but so far he favors using the extra money to pay for other things.

The governor also wants to cut so-called “prebates” for middle-income families, a move that would have the same effect as raising property taxes. “Prebates” are the mechanism by which our property taxes become an income tax. Eighty percent of Vermonters have their property taxes adjusted to their income by means of these prebates. If prebates are eliminated for some middle-income taxpayers, however, property taxes are decoupled from the ability to pay. The result: taxes will rise.

The Douglas administration defends its program. It offers anecdotes about owners of expensive properties who claim huge prebates by hiding their true incomes. If that’s the case, the administration’s Tax Department should suggest a way to plug such leaks. It’s not fair to punish everyone for the tax sins of a few.

It’s ironic that in his state-of-the-state address the governor said that Vermonters are facing a “crisis of affordability” because of high taxes; yet the governor’s plans for the Education Fund can only make that crisis worse.

This is Allen Gilbert.

Allen Gilbert is a former journalist, teacher, and consultant currently serving as executive director of the ACLU of Vermont. He has a longtime interest in public policy issues. He spoke from our studio in Montpelier.

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