[A]fter two weeks of intense back and forth, Gov. Peter Shumlin and lawmakers have agreed to a $29.6 million tax package.
Shumlin had insisted that lawmakers find more budget cuts, and he used his bully pulpit to push back on the elimination of income tax deductions proposed by the Legislature.
The game of chicken ended Saturday as adjournment loomed. In the end, the Legislature got its way, and the governor agreed to $15 million in new revenues. (The remaining $15 million in revenue increases comes from the elimination of state and local income tax deductions that were not in dispute.)
Shumlin said he was pleased that he was able to reach a compromise with legislative leaders on the budget and “raise the revenue for the budget in a way that is not only fiscally responsible but ensures that we continue to grow this economy for every single Vermonter.”
“So everyone has given a little to get to this plan,” Shumlin said. “Most importantly, we’re meeting our commitment … of closing the budget gap by making smart choices for Vermonters.”
The legislative package includes $7.9 million in income tax changes, namely a cap on itemized deductions and a 3 percent alternative minimum tax on income-earners who make $150,000 or more.
The cap on deductions will be 2.5 times the standard deduction, or about $30,000. The legislation exempts charitable deductions and medical expenses. Schedule A itemizations can include mortgage interest, property taxes and moving expenses.
House Speaker Shap Smith said he and the governor and John Campbell, the Senate president pro tem, all Democrats, settled on the tax plan after an impasse that lasted several days because they “know each other really well.”
“We know how to get to an agreement in the end,” Smith said. “It’s like any political process, there are bumps along the road.”
Sen. Tim Ashe, D/P-Chittenden said, even though the tax package looks “substantially” like the bill that passed out of the Senate, the negotiations were difficult. “Overall I would say that this has been a particularly painful journey,” Ashe said.
The Senate conceded to a House increase in penalties for the current use program, and the decision set off a firestorm. The current use program gives farmers and forestland owners property tax breaks in exchange for keeping land open.
Sen. Richard Westman, R-Lamoille, opposed the plan and refused to sign the conference committee report. Saturday evening much of the Senate debate on the tax bill revolved around the impact of the new penalties on farmers who use the program.
Other details of the tax plan:
- The program raises $700,000 from court fees to support the hire of three judges;
- The Tax Department will garnish the wages of Vermonters who have skirted tax payments ($2.1 million);
- Medicaid reimbursements to doctors who owe taxes will be blocked ($100,000);
- Vending machines will be assessed the 9 percent meals tax ($1 million);
- The 6 percent sales tax will be extended to soda ($5.1 million for the general fund and $2.8 million for the education fund).
The legislation also raises $10.4 million in fees for the state’s water quality enforcement program and other environmental programs.
Lawmakers jettisoned a number of tax proposals that generated an outcry from the public and businesses.
DirectTV and Dish Network mobilized an outpouring of hate mail from rural Vermonters who were up in arms over a Senate proposal to tax monthly satellite TV bills.
Jim Harrison, the executive director of the Vermont Retailers and Grocers Association, said in the end a “number of balances were made,” and some of the taxes that would have affected his members, such as a sales tax on candy and bottled water went by the boards.
“Do we like the sales tax on soda? No, but that was probably a foregone conclusion, given the fact that they needed revenues,” Harrison said.
