House Speaker, Governor at odds over capital gains tax

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(Host) House Speaker Gaye Symington says Vermonters need property tax relief. And she wants to pay for it with $21 million dollars raised by eliminating a capital gains tax exemption.

But Governor Jim Douglas rejects the idea. He says the Speaker is trying to launch new spending programs.

VPR’s John Dillon reports:

(Dillon) The governor and House Speaker Symington agree that the law should be changed so that earned income – such as salaries – is taxed at the same rate as unearned income – like money made from the sale of stocks or business investments.

Right now, these "capital gains" in some cases are taxed at a lower rate than regular income.

Douglas calls it a loophole that should be closed.

Symington – along with many other Democrats and Progressives – is on board.

(Symington) In concept, I am comfortable with what the governor has proposed in terms of eliminating this special treatment of capital gains earnings in our tax codes.

(Dillon) But they disagree strongly over what to do with the money.

Symington wants to use the $21 million that would be raised to reduce property taxes. For example, she’d direct $7 million to help towns pay for school construction. She’d spend another $8 million on town roads and bridges. That’s a program Douglas wants to cut.

The governor instead wants to take the $21 million and lower income taxes for those in the middle and upper income brackets. He blasted Symington’s idea.

(Douglas) I want to thank the Speaker for coming in earlier to talk to me about a proposal that she’s advanced to increase income taxes by $21.4 million and use that for a variety of spending programs.

(Dillon) Symington rejects the criticism. She points out that Douglas also wants to spend money on school construction.

(Symington) The governor has expressed that concern to me. I find that kind of amusing. If the governor can call $25 million for school construction aid tax relief, how is that when I propose to put $7 million to school construction relief, that’s spending?

(Dillon) The latest disagreement between the Republican governor and the Democratic speaker shows how far apart they are on fundamental questions of tax relief and education funding.

Douglas wants to reduce the statewide education tax for one year by leasing the state lottery.

But Symington and many other lawmakers are leery of that idea. They don’t want to relinquish control of the lottery – and they’re reluctant to raise money for education by getting people to gamble more.

Douglas has heard the criticism.

(Douglas) But I welcome other ideas. I simply don’t believe that the idea of raising the income tax and redeploying a small amount for those purposes is really effective and meaningful relief.

(Dillon) Symington says everyone wants to pay less in income tax. But she says people are really feeling the pinch in property taxes.

For VPR News, I’m John Dillon in Montpelier.

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