McDonald: Amnesia in Montpelier over tax increases

Editor’s note: This op-ed is by Pat McDonald, chairwoman of the Vermont Republican Party. It originally appeared in The Barre-Montpelier Times Argus.

Just two short years ago, in a rush to raise taxes, the Democratic majority in the Legislature overrode Gov. James Douglas’ veto of the budget in 2009, the combined budget and tax bill for fiscal year 2010, by just one vote. The governor and Statehouse Republicans opposed this bill because it spent too much and raised taxes unnecessarily.

Those Democratic tax increases from 2009 are still being phased in. On Jan. 1, 2011, Vermonters aged 70 and over lost their exemption on capital gains income — not very helpful in the middle of retirement. Vermonters under age 70 lost their capital gains exemption 18 months prior, also as a result of the Democrats’ budget.

But those tax increases were apparently not enough. During this legislative session, more taxes were enacted, targeting health care providers, health care insurance claims and (once again) property owners with yet another increase to the broad-based property tax.

So, what’s the result of all these tax increases? Well, the headline in The Times Argus on July 22 read, “State to End Year with $40M Surplus.” Interestingly, in all the news reports and the public statements of Vermont’s Democratic leaders, not once was there a mention of how this surplus came to be. Democratic leaders like to take credit for this surplus, claiming it’s resulted from growth in Vermont’s economy and “one-time” revenue anomalies. But in fact, this surplus is the result of tax increases that apparently were not needed after all.(As a side note, it’s tough to claim the economy has recovered enough to create such a large surplus, when household costs continue to increase faster than incomes, the unemployment rate has increased and many working Vermonters are underemployed.)

Political amnesia from Democrats seems to be the norm in Montpelier. Perhaps they were not listening when, during his 2009 Inaugural Address, Gov. Douglas said, “In previous recessions, the state has raised taxes. But when our fortunes improved, some taxes remained and the revenues were spent.” That seems to be what Democrats are intending on doing now — spending Vermonters’ hard-earned tax dollars for reasons other than why they increased taxes in the first place.

Rather than spend the surplus as recommended by the Shumlin administration, are there other ways to use this $40 million surplus to the benefit of Vermonters? Here are two approaches that we think can help Vermonters and especially seniors: Return it, in the form of much-needed property tax relief, and restore the capital gains tax exemption for seniors, as originally proposed by Gov. Douglas.

Vermont was just cited by Kiplinger’s for being the most tax-unfriendly state for retirees in 2011, adding a notation that Vermont’s property taxes are among the top 10 in the nation. It didn’t help that during this past legislative session, Gov. Peter Shumlin and Democratic legislative leaders raided the Education Fund for $23 million, which resulted in property tax rates being raised in every city and town in Vermont by 2 cents.

Democrats demanded that Vermonters pay higher taxes in 2009, and they did the same this year. Now that revenues are higher than what was budgeted, those Vermonters whose hard-earned tax dollars are responsible for that unexpected surplus — especially seniors who struggle to get by on fixed (and dwindling) investment incomes — should get some measure of relief. The governor and Democrat super-majority in Montpelier should work with Republicans to give the funds back to Vermonters, as now in retrospect, it is clear these tax increases were not necessary and that Gov. Douglas was right to veto them in the first place.

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Mike Curtis
5 years 5 months ago

Governor Shumlin and the Democratic legislature cut spending by well over $150 million this past session. The session before that, the legislature cut tens of millions more.

Was that enough for the Vermont GOP? Nope. They are still complaining that not enough was cut.

They complain when there is a budget deficit. They complain when there is a surplus. Long on complaints. Sort on ideas.

Ms McDonald, instead of telling us that taxes are too high, how about you identify specifically what more you’d cut out of the state budget?

Doug Hoffer
5 years 5 months ago
They never quit. Top marginal tax rates were cut as part of the deal to (partly) eliminate the capital gains exemption. Not satisfied, now the Republicans want the exemption back. All this at the same time Congress (and the President) extended the Bush tax cuts. Any effort to paint this as helpful to struggling seniors is classic misdirection. We all know that the vast majority of capital gains go to the wealthy (regardless of age), along with the benefits of the exemption. Indeed, the exemption cost the state over $150 million during its short life and most of it went… Read more »
Drew Smith
5 years 5 months ago

I think there is truth in what Pat McDonald is saying, or should Vermont be proud of the honor bestowed upon it by Klipinger magazine and the fact that it has the highest per capita state taxes in the nation?

Edward Pais
5 years 5 months ago
Upon seeing that you referred to Vermont having the highest per capita taxes in the nation, I decided that I had to verify that for myself. The 2005 Census does have Vermont as number 1. However, according to the 2010 census information Alaska has surpassed Vermont by over $2,000 per capita. The top five in order are: 1. Alaska, 2. Vermont, 3. North Dakota, 4. Wyoming, 5. Hawaii. South Carolina has the lowest per capita state taxes in the nation. Here is a link to the census page on 2010 taxes. It doesn’t list the per capita tax… Read more »
Doug Hoffer
5 years 5 months ago
Mr. Smith Per capita taxes is a meaningless measure. There is no one in the phone book named per capita. Taxes are paid based on income. Vermont has a progressive income tax and an income sensitive education property tax. As a result, per capita figures are terribly misleading. In addition, it is noteworthy (if you care about facts) that the Census figures cited are for STATE taxes. Vermont is unique in that we have a statewide property tax for education. As a result, any comparisions of state taxes are not (and cannot be) apples to apples because education taxes are… Read more »
Drew Smith
5 years 5 months ago
Ed, Wow, you are industrious to crunch the numbers yourself. Here is my source Vermont is the #1 most taxed state. And this article was just published on July 26, 2011…so it is current. Alaska wasn’t even in the top 10. Here is the link to Kiplinger Magazines rating Vermont as #1 Retiree Tax Hell and I agree setting aside surpluses for a “rainy day” is a wise thing to do, particularly with the uncertainty of how much taxes will have to be increased to cover the cost of the single payer health care plan. To me… Read more »
Drew Smith
5 years 5 months ago
Doug Hoffer, The link I provided earlier will connect you to the methodology that was used. They included property tax, sales and gross receipts taxes, license taxes, income taxes, and other taxes. You are correct that per capita data don’t tell us who is paying the taxes, but as most Vermonters know, the high taxes in this state are quite progressive, so the lower to mid income people are relatively spared. In the 2007 tax study that you mentioned, Vermont was considered to have the most progressive state taxes. The tax foundation ranks Vermont 8th highest in the nation in… Read more »
Doug Hoffer
5 years 5 months ago
Mr. Drew With respect, you are misreading the data. For example, you said, “The tax foundation ranks Vermont 8th highest in the nation in state and local tax burden.” The Tax Foundation’s methodology is just as flawed as the others. It does NOT account for the progressivity of the system. Reporting per capita or taxes as a percentage of total income completely ignores the distribution of the so-called “burden.” You also said, “This and other comparisons have shown that Vermont is a highly taxed state, particularly for the higher income earners, who tend to be the business owners who bring… Read more »
Tom Pelham
5 years 5 months ago
Mike Curtis…..You’ve been misinformed. Let me point you to a link on the legislature’s Joint Fiscal Offices website that will provide you with accurate information about the state budget during this recession – from Fiscal 2008 through the current approved fiscal 2012 budget. At this link you will find the following: Budget Category FY 2008 FY 2012 Difference Rate per yr. Total Budget $4.102 bil. $ 4.688 bil. +$585.6 mil. 3.39% Total State funds $1.870 bil. $ 2.009 bil. +$139.5 mil. 1.81% Net Education fund $ 974 mil. $ 1.075 bil. +$101.5 mil 2.51% Here’s the link: Because neither… Read more »
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