House and Senate forge tax deal

Late Friday night the House and Senate agreed to a tax package that Gov. Peter Shumlin has already said he doesn’t like and may in fact veto.

Shumlin administration officials said they would issue a statement about the plan on Saturday morning.

House Speaker Shap Smith says the deal paves the way for adjournment.

No agreement with the governor was reached on Friday. Shumlin has not publicly offered lawmakers any compromises and has insisted that they cut more from the budget.

If Shumlin, a Democrat, vetoes the tax package, Republicans in the House have said they will help him sustain a veto.

The $30 million legislative tax package includes a cap on itemized income tax deductions. Under the plan, taxpayers can claim up to two times the standard deduction, or $25,000 for a household, for itemized deductions. Medical expenses and charitable donations are exempted. The change limits deductions for mortgage interest, property taxes, moving costs and other Schedule A itemized categories.

The plan includes a 3 percent alternative minimum tax for taxpayers who earn $150,000 or more.

Together, the income tax changes raise $11 million for the general fund.

Lawmakers also approved extending the sales tax on soda, which will generate $5 million.

Shumlin has repeatedly objected to any changes to the state income tax code that could result in wealthy Vermonters paying more in taxes.

Smith said the House and Senate have responded to a number of the governor’s concerns and abandoned plans to eliminate deductions for medical expenses and charitable deductions.

“My hope is that in addressing those things that we can move closer together,” the speaker said.

The $25,000 cap, Smith says, is a significant amount of allowable deductions. The allowable charitable and medical deductions on top of the cap, he said is “reasonable.”

Sen. Tim Ashe, D/P-Chittenden, said in the past the tax writing committees have been asked to raise a few million dollars. This year the Senate Finance and House Ways and Means committees were faced with a $30 million hole.

“There are many ways to solve a small problem, but when you’re in the $30 million budget hole range, you can’t do 30 $1 million solutions,” Ashe said. “You have to start looking at sales, income and other things. You’re talking about bigger blocks. There is no easy way to bridge that gap unless you find those money-farting unicorns I referred to earlier in the year, which are still elusive.”

Lawmakers and the governor agree on the elimination of the state and local income tax deduction, which raises $15 million.

The legislation requires the Department of Taxes to report on and develop rules for implementing an extension of the sales and use tax to select consumer services. State economists would analyze the impact of proposals. Vermont currently taxes three services; other states tax 30 or more consumer services.

The plan prohibits the sale of lottery tickets in bars and restaurants.

The amount of sales tax Vermonters can claim for sales tax on items purchased out of state would increase from 0.10 percent of income to 0.15 percent of income in tax year 2015. The change raises $500,000 for the state.

Scofflaws also take a hit. The Tax Department can now garnish the wages of tax evaders. And the state would “intercept” Medicaid money to health care providers who owe the state money.

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Anne Galloway

About Anne

Anne Galloway is the founder and editor of VTDigger and the executive director of the Vermont Journalism Trust. Galloway founded VTDigger in 2009 after she was laid off from her position as Sunday editor of the Rutland Herald and Times Argus. VTDigger has grown from a $16,000 a year nonprofit with no employees to a $2 million nonprofit daily news operation with a staff of 25. In 2017, Galloway was a finalist for the Ancil Payne Award for Ethics, the Al Neuharth Innovation in Investigative Journalism Award and the Investigative Reporters and Editors FOIA Award for her investigation into allegations of foreign investor fraud at Jay Peak Resort.

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