A handful of progressive lawmakers countered planned Shumlin administration cuts to the poor with $50 million in taxes on companies, banks and the rich at a Statehouse press conference on Wednesday.
It’s the first time legislators have presented an alternative to Gov. Peter Shumlin’s budget address last month, which redirects $16.7 million in tax credits for the poor towards child-care subsidies, and limits family welfare benefits through the Reach Up program.
Shumlin’s budget proposals have been panned repeatedly by advocates for the poor and have faced a lukewarm reception among legislators from both major parties.
The newly unveiled Progressive package includes an estimated $20 million in revenue through raising income taxes for those earning $500,000 or more, $11 million by fully taxing capital gains (investment) income, and $5 million via a corporate income or franchise tax on banks.
The message from Progressive lawmakers, led by Rep. Chris Pearson, P-Burlington, came out as a pitch for fairness: Asking the wealthiest half of Vermonters to pay for state services for the poorer half.
“Many of us across the state find his funding proposals detached from the economic reality of our neighbors. It’s downright an insult to the working families of our state,” said Pearson.
Although many progressive lawmakers applaud Shumlin’s push for more investment in energy efficiency and education, said Pearson, they find his funding options repugnant.
“Many of us across the state find his funding proposals detached from the economic reality of our neighbors. It’s downright an insult to the working families of our state,” said Pearson.
He displayed data from the state Department of Taxes showing that from 2001 to 2011, the wealthiest half of Vermonters enjoyed substantial income growth across the board, while the poorer half of state residents mostly saw their wages decline.
The top earners, earning over $1 million annually, saw income rise by 136.4 percent over a decade. The tax bracket with the state’s median household income — $53,000 per year — saw a decrease of 0.8 percent, while those earning below $30,000 all saw their incomes decline.
“You cannot ignore that we have a large segment of Vermonters who are doing very well — and I’m glad they’re doing very well,” said Barre independent Rep. Paul Poirier. “But at the same time, as their incomes have increased 136 percent, 82 percent, 98 percent, we’re not asking them to do anything to help contribute to try to make life easier for people who are struggling.”
In a brief but impassioned speech, Sen. Anthony Pollina, P/D-Washington, said the proposal would combat rapidly rising inequality, which he sees as the state’s most pressing problem, and offer lawmakers a chance to show genuine compassion for the poor.
But Shumlin shows no signs of backing down from his budget plans. Although he wouldn’t comment on the specifics of the proposal, he restated his opposition to raising broad-based taxes at a Wednesday press conference, adding that the best way to fund welfare is to spend the same amount of money more intelligently.
House Speaker Shap Smith said almost all the suggestions were already familiar legislative attempts from past years that died for lack of broad political support.
House Speaker Shap Smith is less than enthusiastic about endorsing $20 million additional taxes on the state’s highest earners.
“Many of these actually don’t have broad support, or haven’t had broad support in the House before,” said Smith. “And that’s the reason that they’ve failed.”
Smith is less than enthusiastic about endorsing $20 million additional taxes on the state’s highest earners.
“You know, I think that I would need to see what is being bought with that money, before I would be willing to look at that increase,” said Smith.
The broad thrust behind the tax proposal — the idea that the top half of richer Vermonters ought to subsidize welfare for the bottom half — is a progressive tax policy that is already in place, Smith said. “The question is: Do we want to do more of that?”
Progressives have a long history of pushing hard for tax increases on the rich. At least two bills based on proposed policies in Pearson’s package failed in the last biennium.
But Pearson said these long-shot tax proposals stand better chances this year because of more grassroots support, and also because two key tax lawmakers, House Ways and Means chair Janet Ancel and Senate Finance chair Tim Ashe, don’t want to cut the state’s earned income tax credit (EITC).
Ancel, a Calais Democrat, says Pearson’s approach jumps the gun somewhat. Although she isn’t “particularly eager” to reduce EITC, a program she praises, Ancel adds that the Legislature hasn’t even decided whether to fund any of Shumlin’s investment proposals at all.
“Whether we should do them, the period of time we would want to be able to make those investments for, how much investment is needed — those are priorities that are being set now,” said Ancel. “I think the first question is: how much of an increase in spending do we want to support this year overall? And what are the priorities of the Legislature? And is there sufficient money?”
Although Ancel would back increasing child-care subsidies, she said: “We’re working in a very tight budget situation, coming off years of recession, when we’ve really had to reduce budgets significantly. I think it’s a legitimate question whether we’re going to spend additional money even on really important programs this year.”
The proposal unveiled today also received backing from the co-chairs of the Working Vermonters Legislative Caucus, which has more than 40 members.
Below are the nine sources of revenue proposed by Pearson and others.
Progressive Revenue Menu
1. Bank Franchise Tax (pay higher of BFT or corporate income) — $5.0 million
currently 0.000096 of the average monthly deposit banks have expanded into services, etc
2. Tax capital gains as ordinary income — $11.0 million
currently exempt first $5,000
3. Property Transfer Tax per 0.25% value > $500K — $1.5 million
adds 3rd tier for high-value properties
4. Estate Tax – reduce exemption from $2.75 to $1 million — $1.9 million
brings into line with neighboring states
5. Income Tax Top Bracket Collapse — $20.0 million
brings actual rates closer to marginal rates
6. Vermont Alternative Minimum Tax — $1.0 million
parallel’s federal structure
7. Escheat (unclaimed bottle deposits) — $1 million-$2 million
reclaim the nickels
8. Natural Resources Extraction Taxes Groundwater extraction 28 cents per gallon — $4.5 million
Earth Resources extraction 2 cents per cubic yard
We are one of only 11 states without one
9. Eliminate Sales Tax Exemptions
Bottled Water — $1.0 million
Clothing > $100 — $2.2 million
We don’t need bottled water
People buying $120 sweater can afford $7.20
Kavet and Rockler analysis of Vermont income growth from 2001-2011 from Department of Taxes data.