Lawmakers Recommend 3-Tiered Income Tax

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Two dozen lawmakers are sponsoring legislation to increase the Vermont income tax. They say the money is needed to help offset drastic budget cuts proposed by Governor Howard Dean.

But as VPR’s Bob Kinzel reports, the income tax plan faces some strong opposition.”

In 1991, when the state was facing a sizeable budget deficit, former Republican governor Richard Snelling surprised many members of his party when he supported the imposition of a three-tiered income tax system in Vermont. Under this system, wealthier people were taxed at a higher rate than individuals with moderate incomes. The state returned to its single-rate system in 1995 after the deficit had been eliminated.

Now a group of lawmakers wants to bring the three-tiered system back to raise new revenue so that budget cuts in health care, education and other human service programs can be avoided.

Burlington Progressive David Zuckerman is one of the lead sponsors of the bill:

(Zuckerman) “Basically, wealthy folks benefited tremendously by the rise in the last six to eight years in our economy – far more than the average working people. And right now when working people are going to bear the burden of the spending cuts we feel that some of the wealthier folks can pitch in to get us through these tough couple of years.”

Governor Howard Dean has vowed to veto any bill that increases the state income tax and Dean argues that Vermont’s fiscal situation in 2002 is very different from 1991:

(Dean) “In 1991 we had a $65 million deficit that we had to make up. There were already substantial budget cuts that we had to make up and there was no reserve. The situation in 1991, fortunately because we managed differently in the last 8-10 years, is not the same. I think a three-tiered income tax would be devastating to the economic development future of the state and I think that’s an idea I cannot and will not support.”

Another bill is being introduced in the House which would readjust the state’s tax on capital gains to reflect rates that were in place before the new federal tax cut went into affect.

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

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