House Votes To Delay Tax Decrease, Setting Off Partisan Debate

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(Host) Governor Jim Douglas is accusing House Democrats of trying to balance next year’s budget by raising taxes on Vermont’s business community – a move he says will hurt the state’s economic recovery.

But Democrats dispute Douglas’s claim and they say the governor is backing budget cuts that would devastate human service programs.

VPR’s Bob Kinzel reports.

(Kinzel) The issue that set off this partisan debate is a provision of a tax bill that would delay an expanded income tax credit for manufacturing businesses, for a two year period, in order to generate roughly 4 and half million dollars a year for the state budget.

Berlin Rep. Pat McDonald said the delay was a mistake because these businesses need this tax credit to help recover from the recession:

(McDonald) "Vermont lost 25% of its manufacturing jobs this decade leading up to the recession and we continue to lose more. Any relief in taxation or other costs of doing business is critical to holding on to our manufacturing base."

(Kinzel) Many Democrats argued that a delay in expanding a tax credit wasn’t a tax increase and

Newfane Rep. Richard Marek said money from the plan would be used to help lower tax burdens for all Vermonters:

(Marek) "Every business has an argument why they should be exempt from paying and have a special deduction –  if they don’t pay, average Vermonters do – their burden as so many repeatedly tell us is heavy enough already."

(Kinzel) Voting closely along party lines, the House backed the tax bill by roughly a two to one margin.

At his weekly press conference, Governor Jim Douglas said the Democrats’ decision to delay the business tax credit and their refusal to roll back recent changes to the state’s capital gains tax, would hurt efforts to strengthen the Vermont economy.

Instead, Douglas suggested that the Democrats cut another $20 million from the budget:

(Douglas) "To make those tough decisions that families and businesses are making – that I made in presenting a budget – and not using some one-time federal money raising taxes to try to address it that way."

(Kinzel) Speaking on the House floor, Appropriations chairwoman Martha Heath defended her panel’s budget plan. She said it avoided some of the most painful cuts proposed by the Governor:

(Heath) "Many have said this wasn’t possible, that we must roll back and or end commitments we have made. Now for the third fiscal year the House proposes a budget that demonstrates that we in fact can create a balanced budget and maintain this commitment to the health, safety and well being of our neighbors."

(Kinzel) Both the tax bill and the budget will come up for final approval in the House on Friday and a lengthy debate is expected over both bills. However it’s unlikely that the substance of either bill will be significantly changed.

For VPR News, I’m Bob Kinzel in Montpelier.

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