Tax revenues fall even further than projected

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(Host) There’s more evidence that the Vermont economy is in tough shape. Tax revenues last month fell $14 million short of projections.

The Douglas Administration says additional budget cuts will be needed to deal with the problem. But a group of lawmakers argues that the cuts are too deep and they’re backing a tax increase to balance the budget.

VPRs Bob Kinzel reports:

(Kinzel) The new report comes as a surprise because state revenue projections were downgraded just a few weeks ago. Administration Secretary Neale Lunderville says the drop reflects a weak holiday season and mounting job layoffs:

(Lunderville) "This is one of the single largest one month drops in memory 14 million dollars and we just had a revenue forecast 3 weeks ago and so this is very unexpected."

Lunderville says the additional revenue gap means more cuts to this year’s budget:

(Lunderville) "We’re going to have to look for more reductions in the current fiscal year we’ve got to be able to bring in the budget balanced and to do that we have to start taking action quickly."

A group of two dozen lawmakers has another idea. They argue that there needs to be a balance between cuts and tax revenue.

Lincoln Rep. Michael Fisher is the lead sponsor of a 3 tiered income tax surcharge that’s modeled directly after a plan proposed by Governor Richard Snelling in 1991.

Under Fisher’s bill, middle income taxpayers would pay an additional 3% of their state tax liability – upper income people would pay a higher rate. The tax hike would be in place for 3 years:

(Fisher) "In tough times you look for answers and you look for examples of what’s been done in the past and I looked at what Richard Snelling put on the table in ’91 I don’t know that it’s the right fix for 2009 but I think it’s a very good starting place."

But Lunderville argues that a tax increase will make a bad situation even worse for many people:

(Lunderville) "Families are already feeling the pinch because their jobs are being affected. Now is not the time to add an income tax surcharge or increase the tax rate for the working families in Vermont."

Rep. Fisher says he’s proposing the tax increase because the governor’s proposed cuts will hurt Vermonters who need state services the most:

(Fisher) "I sit on the Human Services committee and when I’m not a legislator I’m a social worker I know what it’s like when we don’t provide our side of the bargain… there are proposals today to cut our supports to shelters to agencies that support families with young children who are having a hard time across the board there are some very serious proposals."

The House Ways and Means committee will now review the measure.

For VPR News I’m Bob Kinzel in Montpelier.

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