(Host) The Douglas administration is supporting a tax package that’s expected to raise about $10 million primarily from out-of-state businesses. The administration wants to use half of the money to lower income tax rates for Vermont businesses and the other half to help deal with unexpected pressures on the state budget.
VPR’s Bob Kinzel reports.
(Kinzel) In the course of the last month, the Douglas administration became aware of about $5 million in new budget needs for the Corrections Department and the Agency of Human Services. Rather than cut this much money from a budget proposal adopted by the House, the administration agreed to a plan to increase revenues.
The tax proposal has two different parts. The first closes some loopholes to require out of state companies that have Vermont stores, to pay taxes on the profit from their Vermont operations. Currently these companies can claim national expenses to offset their Vermont profits. This provision will raise about $5 million and the revenue will be used to lower the state’s corporate income tax rate by about 14 percent over a two-year period.
Administration Secretary Michael Smith says this plan provides an element of fairness for Vermont businesses:
(Smith) “Because they don’t have the ability that multi-state corporations do now with this loophole of avoiding Vermont taxes and paying just the minimum tax. When we close this loophole everybody will be on the same playing field in this tax equity plan that the governor proposed will be implemented.”
(Kinzel) The second part of the tax package closes some loopholes in the state’s bank franchise tax for multi-state financial corporations. This is also expected to raise about $5 million a year. Smith says the governor will support a plan developed by the Senate Appropriations committee to use these funds to cover an unexpected shortfall in next year’s state budget:
(Smith) “We could use some of the bank franchise money to help with some of the added pressures of corrections and SRS as well as the Vermont State Hospital.”
(Kinzel) Smith says the two taxes must be considered together if the governor is going to support the overall package. He says the governor will withdraw his support if either section of the tax package is removed.
For Vermont Public Radio, I’m Bob Kinzel in Montpelier.