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May 02, 2013

As It Passes Tax Bill, Senate Debates How Progressive is Progressive Enough

PollinaOn the front lawn of the Statehouse Wednesday, hundreds of activists converged for a sun-soaked rally to demand a state budget that "puts people first."

But nary a May Day protester could be found within the Senate chamber that morning as legislators debated perhaps the most consequential bill this year concerning economic fairness.

There, by a vote of 24 to 5, the Senate approved $10 million in new taxes, the majority of which would be paid by wealthy Vermonters. 

The plan raises $7.4 million of that by capping the mortgage interest deduction at $12,000 and setting a minimum tax of three percent for those earning more than $125,000 a year. It raises much of the rest by taxing bottled water and satellite TV.

More important than what was in the Senate's version of the tax bill was what wasn't.

Despite Gov. Peter Shumlin's repeated calls to pay for new spending by slashing $17 million from the Earned Income Tax Credit, the Senate didn't touch the thing. It was so loathed by lawmakers as a regressive scheme to put low-income, working Vermonters on the hook that Shumlin's proposal was barely mentioned during hours of floor debate.

Instead, the Senate largely approved a far more progressive plan drafted by Senate Finance Committee chairman Tim Ashe (D/P-Chittenden). 

But neither Ashe's capital-P Progressive bona fides nor his efforts to spare the EITC shielded his plan from criticism from the left.

On the contrary, Sen. Anthony Pollina (P/D-Washington) panned the bill for failing to go far enough in reversing economic inequality in the state. He said that instead of slicing and dicing programs that benefit low-income Vermonters, the Senate should instead raise more money from high earners. And he criticized the inclusion of sales taxes on bottled water and satellite TV, both of which he said were regressive.

"People who have gained the most are going to be asked to do the least when it comes to balancing the budget and taking care of our neighbors, and I just think that's wrong," Pollina said in a stem-winder of a speech.

"I think it's about choices we make as a body — and we are making a policy choice here that's going to encourage further increases in inequality. We're going to make policy decisions that further undermine our ability to have a strong economy because we're not willing to allow us to have policies that put money in the pockets of people who need it the most."

To that end, Pollina put forward an amendment that would generate an additional $21 million by raising income tax rates on the top two tax brackets. 

But Ashe said that doing so simply wasn't necessary. Employing a colorful anecdote, he argued that the body should raise only the $10 million in taxes required to pay for the Senate Appropriations Committee's proposed $10 million in new spending.

"I was once in Key West with two of my three brothers," Ashe began. "One of my brothers was walking down the street with an open beer can. And I said, 'Why are you walking down the street with an open beer can?' He said, 'Because I can.' And I said, 'Just because you can doesn't mean you should.' We can clearly raise $21 million in additional income taxes, but that doesn't mean we should."

Ashe said that in judging his committee's bill, the Senate should bear in mind its exclusion of cuts to the EITC. That credit, he argued, is the single most effective means of countering regressive elements of the tax code. Preserving it, he said, is vital to low- and middle-income Vermonters.

In the end, Pollina's amendment failed by a vote of 7 to 22 — but it succeeded in splitting apart the liberal wing of the Senate. 

Siding with Pollina were Sens. Ann Cummings (D-Washington), Sally Fox (D-Chittenden), Eldred French (D-Rutland), Dick McCormack (D-Windsor), Jeanette White (D-Windham) and David Zuckerman (P/D-Chittenden).

Opposing the amendment were such liberal senators as Ashe, Phil Baruth (D-Chittenden), Peter Galbraith (D-Windham) and Mark MacDonald (D-Orange).

Baruth, who serves as the Senate's majority leader, says that while he's supported iterations of Pollina's amendment in years past, he felt it unnecessary this time around.

"The reason I didn't this year is because [Ashe's] committee put out a bill that, to my eye, half of it is directed at higher-income earners," Baruth said after the vote. "So it seemed to me like they had done what we had been asking for for years, which was, 'Can we focus at least half on upper-income earners?' So I wanted to support that."

He added, "If I voted for Anthony's amendment, it would generate a lot of revenue, but it would also wreck what Tim had put together. In a real sense, it would have destroyed the rationale he had for his plan."

After Pollina's amendment failed, most of the liberals who supported it nevertheless rallied behind the underlying tax bill, which passed by an overwhelming margin. The final tally was 24 to 5, with four of the nay votes coming from Senate Republicans. Remarkably, three more Rs — Sens. Kevin Mullin (R-Rutland), Diane Snelling (R-Chittenden) and Rich Westman (R-Lamoille) voted for the bill.

The sole non-Republican to vote against it? Pollina.

"I think it was better than a couple of the tax bills we've had in the past, but I still think it's not good enough," Pollina said after it passed. "Rather than just go along with something that I think is not good enough, when it comes to this fundamental question of how we raise and spend money, which is really theoretically why we're here, I think it's important to take a principled stand and say, 'This is better than it's been in the past, but it's simply not enough.'"

Disclaimer: Tim Ashe is the domestic partner of Seven Days publisher and coeditor Paula Routly.

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