Committee drops capital gains provision from tax bill

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(Host) The head of the House Ways and Means Committee says he won’t bring Governor Douglas’s signature income tax cut out his committee. Stowe Representative Dick Marron says he’s concerned that the plan will set off a fierce spending debate at the Statehouse.

VPR’s Bob Kinzel reports.

(Kinzel) Marron’s decision to jettison the major part of the governor’s proposal came as a surprise to the Douglas administration. Under the governor’s plan, the so called “40 percent exemption” on capital gains tax revenue would be eliminated and the money would be used to implement a personal income tax cut. Vermont is one of a handful of states that still has the exemption in place.

The proposal came under fire from several different sides. There were some Republicans who opposed it because they like the idea that the first 40 percent of capital gains are exempt from Vermont taxes. Many Democrats objected to the plan because they felt higher income people would get most of the benefits from it.

Instead, the Democrats proposed using the money from the elimination of the capital gains exemption to fund a new municipal revenue sharing plan. Marron says he decided to kill the governor’s proposal because the issue was becoming far too political:

(Marron) “The governor’s proposal was to reduce income tax rates for Vermonters. I commend the governor for that idea but the Legislature has a lot of other ideas as how that money should be spent. So my current inclination is to just leave well enough alone and not go down that path.”

(Kinzel) Tax Commissioner Tom Pelham, who’s the main architect of the governor’s plan, said he’s disappointed by the turn of events. Pelham defended the administration’s proposal:

(Pelham) “So clearly, it’s a good proposal, a well thought out proposal, a progressive proposal. But we are disappointed that it seems to be getting bogged down into partisan politics. This is one of the those bad things happen to good people.”

(Kinzel) The Ways and Means Committee is going to proceed with the second part of the governor’s proposal. This provision will raise new money from out of state corporations that do business in Vermont. The new revenue will then be used to lower the state’s corporate income tax rate.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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