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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