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In their first in-person debate of the 2020 election season, Vermont’s candidates for governor laid out divergent views of how the state should raise and spend its money — and used some conflicting numbers in the process.
VTDigger’s politics team has broken down two key claims from Tuesday’s debate between Gov. Phil Scott and Lt. Gov. David Zuckerman: First, did Scott really suggest a 5% budget cut amid the pandemic, as Zuckerman said? And second, would Zuckerman’s proposed tax on the top 5% impact Vermont’s middle class, as Scott contends?
On this week’s podcast, Kit Norton discusses the figures — and the fiscal philosophies — behind Scott’s and Zuckerman’s economic claims.
**Podcast transcript**
This week: In their first in-person debate of the 2020 election season, Vermont’s candidates for governor laid out divergent views of how the state should raise and spend its money — and used some conflicting numbers in the process. Our reporter Kit Norton breaks down two key claims from Tuesday’s debate between Gov. Phil Scott and Lt. Gov. David Zuckerman.
Anne Galloway: Thank you all for joining us today on the VTDigger live stream. It’s terrific to see you all here at the Mad River Barn in Waitsfield for the second of two debates.
Kit, thanks for jumping on.
Kit Norton: My pleasure.
Will you help me set the scene a little bit? Obviously, the circumstances of our doing a debate are kind of unusual this year. What’s the vibe in the room for these events?
Kit Norton: You know, it’s definitely not your normal in person debate at all. It’s a beautiful venue. But there’s no outside crowd and public, there’s a spattering of press, some members of the candidates’ teams that are in the room. So it makes for a bit of a slightly almost-awkward, slightly exciting experience, I would say overall. But definitely bizarre for all parties involved, I would say.
And despite any awkwardness, right off the bat, they got into some pretty intense policy discussion. And one of the first things that came up was this tax proposal that David Zuckerman has been talking about on the trail. What is in that proposal?
Kit Norton: So this proposal is called a wealth tax…
David Zuckerman: Well, what I’ve looked into is about $100 million temporary tax on the wealthiest 5%. That is half of what they got from the Trump tax cuts that have not trickled down to everyday working Vermonters…
Kit Norton: Basically, it would be an income tax increase on — the number that’s being bandied about is on the top 5% of earners in the state.
Got it. So it’s not a wealth tax in the sense that people who have a lot of money in the bank, that money is getting taxed. It’s an income tax surcharge that they would be bringing in here.
Kit Norton: Exactly, exactly. The plan that Zuckerman is putting forward, we’re not talking about something that would go on forever. It would be a stopgap five year plan to raise revenue in the state. And it’s also tied to making sure to trying to make sure that those people who are predominately the most wealthy people in the state, who have been taking advantage of some of the tax cuts put forward by President Donald Trump and Congress in 2017, who have seen massive savings: the state would be able to recapture some of that money that was lost because of those tax cuts.
And then again, this wealth tax would run until the Trump tax cuts are scheduled to expire, which I believe is in 2026. So that’s kind of the idea around what Zuckerman is talking about. And it’s not clear yet what that tax increase would be.
There’s similar legislation to what Zuckerman is proposing which was introduced this past session, both in the Vermont House and Vermont Senate, which isn’t part of this “Vermont Green New Deal.” And that is a 1.6% increase on folks who are making between $200k and 500k. And then there would be an additional 0.15% on folks who are making more than $500k,
What’s this money meant to be used for?
Kit Norton: So the point of raising this money is both in the legislation that was proposed, and then also what Zuckerman is talking about, is really to combat climate change. And for him, what that means is make sure that there’s additional funding for weatherization, making sure that folks, low-income Vermonters specifically, their homes are able to be properly weatherized. Then there’s also more things for making sure that our transportation can be electrified. And then also — which kind of sets it apart from some of the other climate change initiatives that are being discussed — the lieutenant governor’s document is also lumping within this broadband buildout. Which — it’s been discussed so much in the state, but for him, he’s talking about how this is integral to how the state can combat climate change. Because by making sure that people in rural Vermont have good broadband, it’ll cut down on how many people are going to be forced to commute to their jobs.
David Zuckerman: Those are all infrastructure investments, that when that temporary tax ends, there would not be the pressure to keep it going. Because we would invest in the infrastructure that would then build the economy, which would grow.
Kit Norton: So all of this is wrapped into what this tax would pay for.
Got it. So he’s out of the gate talking about this tax. How does Gov. Phil Scott respond?
Kit Norton: Well, it should come as a shock to no one that Gov. Phil Scott is not a fan of this type of tax. He’s gone through his entire time in the governor’s office saying no new taxes, no new fees.
Phil Scott: I think the question is — all good initiatives and worthwhile initiatives, but — how are we going to pay for it? And that’s something that I focused on over the last four years.
Kit Norton: He sees this, one, as unrealistic. And two, he said, he challenged his argument that saying that by taxing the top 5% of earners, that would include folks who are making in the $150k range of income annually, and that would include teachers, you know, a two-teacher household.
Phil Scott: The top 5% of those who pay taxes in the state make $159,000 per family and more. So, we’re talking about middle class families that are going to be taxed more for some of those initiatives.
Kit Norton: So he came back saying that basically while Zuckerman is attempting to tax the most wealthy, Vermont does not have that many wealthy people. And so this tax would actually be hitting middle class Vermonters.
Phil Scott: We have, I think, those making over a million dollars in the state of Vermont right now, I believe, is only 500. Now you impose a wealth tax, what are they going to do? They’re just going to establish residency somewhere else, and then they’re going to visit the state, and they’re going to stay in their homes as nonresidents. So I think it’s just counterintuitive. We just don’t have the numbers that I’m hearing that we do. Again, when you take the 5% — 5% — of the higher income pay 40% of our taxes right now. That 5% starts at $159,000 per family. So we’re not talking about a great, grand amount of money here.
Kit Norton: This is something that is very different from what progressive lawmakers in the legislature had been using as the amount of money that would start the tax, and what Zuckerman himself was saying. So this this made our ears perk up for sure.
It seems like there’s a fundamental difference here between the figures that each side is throwing around. Can you help me break this down? Who is looking at what numbers here, and what makes the most sense?
Kit Norton: So this is where we get into a bit of an interesting conundrum, because both sides are looking at 2018 tax data to make these claims. However, there was a Joint Fiscal Office report put together at the beginning of 2020, that was for the drafting of this legislation that I talked about earlier, that was introduced as the top 5% of in terms of percentile groups starting at $200k. So that’s where this number is — that top 5%, and then this $200,000 beginning for who would see this tax — is coming from on Zuckerman’s side, on progressive lawmakers’ side.
However, the governor and the administration, the tax department, put together information for them in order to look at this bill. And they say, and the tax department’s numbers say, that actually, the top 5% of filers of all folks who are paying taxes would actually start at around $159k. So it’s very possible that they’re both talking about the same thing here. But simply their numbers are different.
So there’s a difference there of about $40,000, in terms of where that line is of what includes the top 5%. It sounds like there’s also just kind of some looseness in the use of the term “middle class.” Like, how do we define who’s considered middle class and who’s not.
Kit Norton: That’s right. And also, it should be noted that Zuckerman and lawmakers who put this type of plan forward have never talked about wanting to tax folks who are making $150,000 a year. It was always based on this $200,000. So even if, say, that 5% does include this, this is not what any of them have been discussing. So it’s just simply a miscommunication. That’s also important to understand.
But there’s a lot of aspects — it depends on which report was done on the tax data, how you’re looking at it, in terms of whether it’s the top five. There’s also a difference between percentile group and total voters. And then there’s also what is considered middle class. And as Governor Scott is quick to point to, those people who would see a tax increase are already paying over 40% of the state’s taxes to begin with. And of course, from his point of view, putting more taxes on anyone is not necessarily the greatest way to solve some of the state’s issues and specifically the demographic issue. Lt. Gov. Zuckerman looks at it a different way.
Got it. You’re saying that regardless of the numbers here, this type of disconnect shows us something that’s fundamentally different about their approaches to economic issues.
Kit Norton: This is a perfect example of where the two diverge. Zuckerman is a progressive Democrat. He’s looking at ways in order to make sure that government is going out there and trying to make sure that there are mandates or taxes put in place to build up society, and build up the state.
David Zuckerman: I’ve heard from many that do locate to Vermont because of who we are, what we do as a community. And many have said they’re willing, and think that it is appropriate, that after seeing tax cuts after tax cuts after tax cuts at the federal level, they would be willing to pay more to rebuild the Vermont economy to help their neighbors.
Kit Norton: Governor Scott looks at it very differently in terms of trying to make sure, as a fiscal conservative, to make sure that private enterprise is able to do what is needed. And the best way to deal with issues is not necessarily to levy a new tax.
Phil Scott: From my standpoint, I want people to have more money in their pockets. I think we share the goal of having that happen. We have a different way, approach to getting there. I mean, I think your approach is, just tax people more. Just increase the burden, increase their wages, so they can pay the more taxes, which inflates the cost of the economy. So my approach is more supply and demand.
Kit Norton: It’s this very clear distinction between the two candidates.
Got it. What are some other moments from Tuesday night’s debate that stuck out to you?
Kit Norton: This was really the big one, in terms of the wealth tax and specifically how it relates to climate. The other one, which was during a pretty spirited debate, was also around a bit of a squabble in terms of, again, a numbers game around how much of a budget cut Governor Scott and his administration had allegedly proposed during the beginning of the Covid-19 crisis.
David Zuckerman: Our governor proposed initially a 5% cut across the board in state government, which would have further injured and weakened our infrastructure for vulnerable Vermonters, and would have not invested in the economy of our future. To me, when we’re struggling, that’s when we do ask the wealthiest to help.
Kit Norton: What Zuckerman said during the debate was that Governor Scott had initially put forward a 5% budget cut proposal. And then the governor quickly said, ‘I don’t know what you’re talking about, David.’
Phil Scott: I would love to see the 5% reduction proposal you keep talking about that I proposed. Maybe you could provide that to me, because I haven’t seen it.
David Zuckerman: When the budget process started in the middle of Covid, I believe you even might have said 8%. But then because there was a quarterly budget, it became two at the time for that quarter. Thankfully, the legislature and thankfully the taxpayers had resources…
Phil Scott: There was no proposal, David, let’s be honest.
Kit Norton: So this is where we start off. And this is also where we get into kind of the the craziness of the budget discussion that took place this year because of Covid-19. Because we’re talking about two different budgets: one that was passed at the end of June, which was for the first quarter of fiscal year ‘21, and then the legislature came back later in the summer to deal with the rest of the fiscal year’s budget. Because of this, there was this whole thing in terms of: where’s the revenue? What are we doing with Covid? So this comes into a time when the budget discussions were crazy.
How does Scott respond in this case?
Kit Norton: Well again, Scott says basically, ‘I’m not sure where you’re getting that number. That doesn’t seem accurate to me. I really don’t know what you’re talking about.’ And so it really comes down to, where did Zuckerman get this number?
The Scott administration did put forward a proposed budget cut for, again, this quarter one, fiscal year ‘21 budget, that was averaged around 2%. And then we go forward to the next budget, which is a bit budget adjustment-esque, in the sense that it dealt with some of the shortfalls from that quarter one budget and then filled in the rest of the fiscal year ‘21. And that was again, on average, the administration proposed initially a 3% cut, neither of which are a 5% cut.
And then what Zuckerman says, and what his campaign says he got that number from, is that there was a document put forward by the administration early on in this process that was meant as an exercise for departments to try to find a way to see if they could cut 5%. So on the face of it, Zuckerman’s statement that this was an initial budget proposal to cut 5% is inaccurate. However, it is accurate to say that there were proposed cuts to the budget by the administration. However, we’re talking about off by a few percentage points. And we’re also talking about kind of a misunderstanding among all these hectic budget discussions that were taking place this year.
What was Zuckerman trying to get at here? Like, what was the larger significance of bringing up the idea of budget cuts in the first place?
Kit Norton: So this, again, kind of talks to the main difference between these two. Zuckerman’s point of view is this is not the time to be cutting government expenditures. This is a time to be making sure that everything is shored up so that the state can spend more and make sure that it’s supporting the citizens, which — we’re in an economic downturn, global pandemic. So this is where he’s going at it. This is not the time for budget cuts.
David Zuckerman: The question is, in difficult times, do we cut our way out and do austerity budgeting, which has shown to fail in Greece, it’s been shown to fail in this country? And what do we do after recessions? What do we do after the Great Depression? We infuse money into the economy. We build the infrastructure. And that’s what I’m looking forward to do.
We need vision to get out of this situation. We can’t just say, well, when Covid is gone, little investments here and there will somehow we spark the economy. We need to build to restart our economy.
Kit Norton: Governor Phil Scott and his administration look at it as a time when we’re not sure what’s going to happen here. Not sure in terms of what surplus revenues are going to be, even though we did come in with a record revenue surplus. And then that we’ve got to make sure that we’re set for the immediate future.
Phil Scott: I think what I’m hearing from — maybe we’re hearing from different folks. What I’m hearing is, we’re taxing people too much here in Vermont. We’re not providing enough certainty. Every time there’s a new initiative, it just costs more money and a new tax rather than finding money within the system to make it more efficient. So my approach is different. I think the proof is, the first two years, there wasn’t a single tax or fee. And since then, we had surpluses every single year. So there is a path forward by reducing the burden that we can actually grow the economy organically.
Kit Norton: So again, this gets to a really basic difference between the two: a fiscal conservative response and approach to government, and a liberal’s approach to making sure that during tough times, safety/welfare nets are in place, and the government is not cutting back but in fact spending.
Got it. Were there any moments in this debate where either of them strayed from those economic philosophies? It seems like in both these examples, they are hewing really closely to a really specific economic ideology here.
Kit Norton: You can kind of see this thread of basic philosophy around government and fiscal policy go all the way through the debate, and really through their different careers in public service. These are two men who are seen, I would say, across the state as good, decent human beings who just really disagree on how state government should work. And then what issues should the government put in place for Vermonters.
This debate was really about the basic differences between the candidates, whether it be enacting a minimum wage, paid family leave, climate action, no taxes and fees from the governor’s point of view, a wealth tax from Zuckerman’s point of view. This was really the throughline through this entire debate. And it was why it seemed that it was such a spirited contest, because both of them know their philosophies and know what they’re trying to say on these topics very clearly, and are very excellent spokespeople for these different philosophies.
Got it. Thanks, Kit.
Kit Norton: My pleasure, Mike.
