Whether you’re talking about your household checking account or the state General Fund, the math can be boiled down to a simple subtraction problem: revenues – expenses = X.
In good years X equals surpluses; for the last four years, that X has been a negative number in the many millions at the beginning of the state budgeting process. This year the figure in red represents 12 percent of the state’s budget, or about $176 million. In this legislative session, there is no Uncle Sam at the ready to bail out states with fistfuls of ready cash. In fact, the old man may have empty pockets next year and leave us with a new deficit problem caused by significant reductions in programs like the Low-Income Heating Assistance Program (that federal cut would amount to $14 million if it goes through).
In order to resolve this year’s budget gap, Gov. Peter Shumlin has proposed an austere budget that would cut $43.8 million from the Agency of Human Services and raise $30 million in new taxes on medical providers. He has refused to consider using budget stabilization funds (rainy day money) or raising “broad-based” taxes, i.e. income taxes, to soften the blow to programs for the elderly, developmentally disabled and mentally ill.
Despite public pressure and internal rumblings in the General Assembly, it appears that Sen. John Campbell, president pro tem of the Senate, and House Speaker Shap Smith have locked arms with the governor on the no new taxes pledge. When Campbell and Smith stood in front of 1,000 people who gathered in front of the Statehouse to protest the human services cuts on Wednesday, neither leader offered much comfort in the way of promises to restore the cuts. Smith, for example, told the activists he wouldn’t make promises he couldn’t keep.
Several Progressive members of the General Assembly meanwhile are pressing for taxes on the wealthy to ameliorate the worst of the reductions in state spending. The Democratic leadership, however, is doggedly singing the familiar refrain: “We can’t tax our way out of this.”
It was in this light that Speaker Smith issued an ultimatum to the House Ways and Means Committee on Thursday: Stick with the program.
Smith made an appearance in front of the committee to reinforce party discipline. He asked lawmakers to accept the governor’s budget, as is, and to refrain from the temptation to raise income taxes or place a levy on sugar-sweetened beverages.
He argued that the governor’s budget already raises a significant amount of revenue — $30 million in new health care provider taxes.
“The budget does not balance if we do not have $30 million in new revenues,” Smith said. “The scope of what the governor has proposed is a good direction to go in.”
The speaker then ticked off a list of talked-about taxation options he said “I think we should avoid.” At the top? A sugar-sweetened beverage tax. “It’s not that I don’t believe it’s appropriate at some point and time,” Smith said. He told the committee it would make more sense to levy a tax on soda as part of a health care package at some point as a way to incentivize healthy behaviors. “Sin taxes” shape behavior, in his view, and they are “not the best way to generate stable revenue.”
The speaker took care to say he “broadly” supports the Vermont Blue Ribbon Tax Structure Commission report, but he hoped legislators “would not confuse” that with the capacity to raise taxes. While he didn’t foreclose on the possibility that taxes could be increased, he strongly urged lawmakers to refrain from using the restructuring of the tax code as a vehicle for raising taxes.
Smith said the commission’s recommendations were revenue neutral (they didn’t raise more in taxes), and he wants House Ways and Means to keep it that way.
“We ought to be cautious about moving away from that framework,” Smith said. “We may need a new framework in the future.”
The dirty little secret, Smith said, is “we can’t raise that much money in income taxes” (for fiscal year 2012) unless the state retroactively applies the rates.
