House representatives in the two money committees are taking last-minute testimony, staring hard at spreadsheets and trying to put two and two together; that is, lawmakers are examining the relationship between people (those affected by tax changes and cuts) and money.
Members of the House Appropriations Committee are wading through $88 million worth of cuts to the state budget while the House Ways and Means members look at generating $24 million in revenues through taxes on health care providers.
Both committees have the different paths toward the same goal: The number zero, in the face of a $173 million budget shortfall for fiscal year 2012.
How they’ll meet in the middle on spending and revenue will likely remain an open question until next week when the miscellaneous tax and the budget bills move forward. The miscellaneous tax bill is expected to be voted out of committee tomorrow.
The Democratic leadership in the Legislature and Gov. Peter Shumlin have said they won’t raise broad-based taxes to reinstate cuts to programs for the elderly and services to the mentally ill and developmentally disabled.
Meanwhile, in defiance of leaderships’ position on the matter, a loosely formed, tripartisan confederation of lawmakers is pressing forward with a separate bill that they hope will shift the balance of cuts and revenue generation.
This breakaway group of about 20 lawmakers is calling for a 1.25 percent increase in income taxes for Vermonters in the top two income tax brackets. This surcharge would sunset after two to three years and would apply to household incomes of more than $75,000.
In all, the proposal, an amendment to H.401, would generate about $40 million.
Three lawmakers — Rep. Paul Poirier, I-Barre City, Rep. Chris Pearson, P-Burlington, and Rep. Johanna Donovan, D-Burlington — went to House Ways and Means to make a pitch for the plan. They also presented it to a group of about 20 interested legislators in an informational session.
Poirer told lawmakers that they have explained their proposal to the leadership team (and in fact, the chairs of the two money committees, and the majority and majority whip were present for the impromptu meeting in Room 10). “We have been trying to be as transparent and as up front as possible,” Poirier said.
Pearson pointed out that Vermont’s richest 5 percent have seen a 70 percent increase in income since 1980, based on calculations from Tom Kavet the Legislature’s economist. This year alone, this group of taxpayers will see a $190 million break thanks to an extension of the Bush tax cuts.
The new income tax proposal from House Ways and Means would, he said, continue to reward wealthy Vermonters.
House Ways and Means is poised to vote out the miscellaneous tax bill, which includes the elimination of itemized deductions. Pearson said the shift creates winners and losers. Some people who earn $1 million a year, he said would effectively get a tax break if the committee’s revenue neutral proposal goes through.
“Why we are holding these people harmless is beyond me,” Pearson said. “This is (a matter of) basic economic fairness.”
The idea of taxing the wealthy may be unpopular among pols, but the concept is widely accepted by Vermonters, Pearson said.
He pointed to a recent poll from the Center for Rural Studies at the University of Vermont that found that 78 percent of respondents support tax increases on Vermonters who earn $250,000 or more a year.
Pearson also said since he introduced H. 401 a few weeks ago, he has received an “astonishing” number of phone calls from wealthy individuals who have chastised him for not raising taxes even higher.
Rep. Johanna Donovan, the chair of the House Education Committee, one of the small minority of Democrats who are sponsoring the bill, told her colleagues that Vermonters need to come together and support programs that ensure the mentally ill are not on the streets. In the end, taxpayers in cities like Burlington and Barre will have to pay the price when those Vermonters end up in jail.
Raising taxes to ensure that the most vulnerable Vermonters are cared for “is a values statement,” Donovan said.
“What I see in front of us is the moral imperative to respond in some fashion to cuts,” Donovan said.
“We are a small community,” Donovan said. “In Vermont every day people are aware of the hardships of our neighbors. It would be beneficial for us all to pay more.”
Donovan said for example, cutting $1.6 million for the student assistance professional program, which is designed to keep kids off drugs, will cost the state more in the long run.
“We’re all in this together, and we all need to pay,” Donovan said. “We all praise the progressive tax system. There are always winners and losers. I learned long ago life isn’t fair. I’m not about to create class warfare, but we need to have everyone pay in.”
Poirier said the city of Barre will see more demand for municipal services as a result of the cuts to human services.
“We know we’re going to have to deal with this at the local level,” Poirier said. “We will have more people coming out of corrections on the streets the burden gets passed on us.”
He recalled that in the early 1980s, in the worst recession in decades, Gov. Richard Snelling asked a Democratic minority then to support a bill to raise taxes so that the state could avoid dropping what he deemed to be essential services.
“We restored key programs,” Poirier said. “Shumlin says this is a different time. I don’t buy that argument.”
In House Ways and Means, Rep. Jim Masland asked Pearson how rank-and-file lawmakers could negotiate with the “corner office” that the bill was essential when Shumlin has already put in an anti-tax stake in the ground.
Pearson said lawmakers need to challenge assumptions “that allow the governor to declare the bill dead on arrival and decide that’s it.”
“You don’t get to point where you can trade or negotiate when you’ve already folded your hand and I think that’s where we’re headed,” Pearson said.
Editor’s note: A write-through of this story was posted at 7:18 a.m.
