On the face of it, the House and Senate tax bills appear to share little common ground. There is, for one thing, a $17 million gap to address (the House bill raises $27 million; the Senate $10.2 million), not to mention philosophical and practical differences of opinion that could prove insurmountable for members of the tax conference committee.
Still, lawmakers were sanguine on Friday. The discussion was congenial and at the end of the first hourlong session, Rep. Janet Ancel, D-Calais, chair of House Ways and Means, emphasized the positive and minimized the negative.
“I keep saying we’re not so far apart,” Ancel said. “The money is quite different, but the Senate had better information.”
Their shared goal, she said, is keeping revenue increases as low as possible.
In an initial side-by-side review of the bills, they found two points of agreement out of a total of 33 items yet to be discussed: a municipal tax exemption for blighted residential property and the removal a $10,000 floor for the fuel gross receipts tax.
Philosophically, there is another area of mutual agreement: Namely, the rejection of the governor’s $34 million in new revenues — a 10 percent tax on break-open tickets and a clawback of two-thirds of the Earned Income Tax Credit for low-income workers. The break open ticket proposal generated a small fraction of the promised $17 million and the House and Senate are adamantly opposed to tapping the EITC. The administration’s other proposals — a bank franchise tax, an extension of the moratorium on the so-called “cloud tax” and an increase in the health care claims assessment — were not adopted by either the House or the Senate, but it’s possible one or several of those options could make it into the final bill.
The House and Senate also agree that they’d rather eliminate tax expenditures, or tax breaks, than broadly increase taxes of any kind. And though Ways and Means and Senate Finance approached this concept differently in the details — a cap on itemized deductions vs. a cap on mortgage deductions; changing the marginal tax rate tiers vs. a 3 percent minimum effective rate for well-heeled Vermonters; and closing a sales tax loophole on certain items — philosophically the two committees are in synch.
They also appear to also share an interest in a provision that would require the Legislature to cite a purpose in statute for all property tax exemptions. Any exemption that did not include a purpose would automatically expire. The Senate has also proposed that beneficiaries of the public, pious and charitable property tax exemptions submit insurance values to municipalities.
From there, it gets more complicated. Ancel and the House Speaker are adamant about setting aside reserves that could be used to counteract federal sequestration cuts. (The state is using all of its roughly $30 million in temporary reserves as a one-time fix to close this year’s $50 million budget hole.) Meanwhile, senators have said they loath the idea of raising taxes to create a savings fund.
“I think having a healthy savings account is important for the next time we hit the skids, and we will,” Ancel said.
The Senate wants to tax satellite service; the House, which has more rural constituents who don’t have access to cable television, is unlikely to support a 3 percent tax that in two years goes up to 5 percent. As House Speaker Shap Smith, D-Morristown, put it: “Satellite is a tough sell in my neck of the woods.”
The Senate has extended sales taxes to water, but no other items. The House eliminates the exemptions for clothing, candy, soda, vending machine food and bottled water.
Tobacco takes a 50 cent per pack hit in the House bill; the Senate held off on a $1 per pack increase and may include that hike in a separate piece of legislation.
The cloud tax is up in the air. A 0.5 percent one year increase in the meals tax hasn’t been discussed yet, neither has a 3 percent tax on break open tickets sold in for-profit bars that would raise about $400,000.
Shumlin has said his plan does not raise any new broad-based taxes, and he opposes lawmakers‘ proposals for sales, tobacco, meals and income taxes. In a press conference earlier this session, he told reporters he would rather jump off a tall building than endorse the House plan.
In a press availability on Friday, House Speaker Shap Smith said the notion that the governor didn’t raise broad-based taxes was a fallacy. His package, Smith said raised taxes on people who gamble and the working poor, “so it’s hard for me to understand how the governor’s package suggests no new taxes.”
“Look, the governor raised 34 million bucks,” Smith said. “He can call it what he wants, but it was broad-based taxes, and if he doesn’t believe that they were that’s fine, that’s one person that doesn’t. If you raise $17 million from 44,000 people, OK, you haven’t touched everybody but that’s pretty broad.”
Smith says he feels “pretty good” about where the Legislature has landed with the budget and tax bills. The governor’s “aspirational” budget, he said, was pared down by the House and the Senate and new taxes have been kept at a minimum.
“I think the Senate budget was reasonable, and I think our budget was reasonable, too, and even with us spend less money, we’re putting aside money for LIHEAP, making investments in higher education, we’re help kids have better nutrition when they get into school,” Smith said. “We’re making investments that we should. From my perspective that’s a success, and my hope is that, given where there’s common ground, the House, the Senate and the governor can come together, we can agree on a budget, we’ll see where the tax legislation goes, and we can declare the session a success.”