(Host) The tax debate between Democratic legislators and the Douglas administration represents a fundamental disagreement about how to pay for government.
Democrats argue that it’s appropriate to ask wealthier people to help finance an income tax cut for all Vermonters.
But the administration says lawmakers should cut next year’s budget even more before they consider any tax increases.
VPR’s Bob Kinzel reports.
(Kinzel) The disagreement largely centers on changes to the income tax and the property tax. The Democrats want to place a $5,000 cap on income tax deductions for taxpayers who itemize their returns. They say this change would primarily affect people who make more than $125,000 a year.
They also want to eliminate the 40 percent exemption for the capital gains tax and replace it with a $5,000 exemption.
Using new revenue from these two sources, the Democrats are able to propose a larger, across-the-board income tax cut than the one backed by the governor. And they’re able to avoid some additional budget cuts.
Janet Ancel is the vice chairwoman of the House Ways and Means Committee. Speaking on VPR’s Vermont Edition, she said the Democrats’ plan represents tax fairness.
(Ancel) "There are, however, taxpayers who are doing well in this economy. And we can see for the last few years that there is a growing disparity between the highest-income Vermonters and the lowest-income Vermonters. And the people that we’re asking to pay a bit extra are taxpayers who are making well over $200,000 a year, more in the $300,000-plus range, including those taxpayers who continue to make a million dollars a year. We think that’s great that they are doing well, but we think they can afford to pay a bit more, as well."
(Kinzel) But Tax Commissioner Tom Pelham says the Douglas administration opposes this plan because lawmakers raise too much new revenue and because they’ve failed to enact meaningful budget reductions.
(Pelham) "What the Legislature has done is they have pushed ‘the easy button.’ They basically said, ‘We’re not going to go into extensive budget reductions. We’re not going to chase after reforms in government that we could make. And we’re going to take the easy route and raise people’s taxes. And even after raising people’s taxes, leave a $67 million deficit in 2011 and $141 million deficit in 2012, for which the taxpayers will also be on the hook.’"
(Kinzel) The Douglas administration also wants to reduce eligibility for property tax subsidies. The Democrats oppose this change because they say it will raise property taxes for more than 13,000 homeowners who earn between $75,000 and $90,000 a year.
For VPR News, I’m Bob Kinzel in Montpelier