With Adjournment Nigh, One Last Tax Battle Looms
When he unveiled a deal Tuesday to balance the budget without raising taxes, Gov. Peter Shumlin seemed to have squelched the legislature's efforts to thrust a greater share of the state's tax burden on wealthy Vermonters.
But proponents of a more progressive tax code appear poised Friday to make one last stand.
In the days since the deal was struck, leaders of the House and Senate tax-writing committees have been talking up the idea of moving forward with proposals to limit income tax deductions that mostly benefit the wealthy. In keeping with the framework of the deal with the governor, any revenue gained by doing so would be returned to middle- and lower-income Vermonters through slightly reduced tax rates.
"The goal of my committee has been to make the tax code fairer, and we believe that can be achieved in a revenue-neutral framework," says Senate Finance Committee Chairman Tim Ashe (D/P-Chittenden). "While reducing the special advantages to some deductions, we can lower taxes for as many as 200,000 people."
While Ashe and House Ways & Means Committee Chairwoman Janet Ancel (D-Calais) have been pushing behind-the-scenes to build support for their proposal, Shumlin has indicated he opposes it.
"I have made very clear that the consensus that has been built in this building, which I have urged, is to not take action on tax policy, but to finish up the work that we have, balance the budget and get home," Shumlin said during a Wednesday press conference. "And I think Vermonters want the legislature to do just that."
Now the question is whether House Speaker Shap Smith (D-Morrisville) and Senate President John Campbell (D-Windsor) are willing to risk a final confrontation with the governor by backing Ashe's and Ancel's plan.
Doing so could provoke a gubernatorial veto and jeopardize their desire to wrap up the legislative session as soon as Saturday. But it could also strike a populist note with the majority of Vermonters who would benefit from the move — not to mention tweak a governor who appeared to roll them earlier this week with the budget deal.
After huddling with Ashe and Ancel in Smith's Statehouse office late Thursday, the speaker and Senate president emerged and signaled a willingness to support their respective chairs.
"If we can actually put forward a plan that gives 200,000 or more Vermonters a tax cut — many of them middle-class Vermonters — I don't think it's right for us to dismiss that out-of-hand," Smith said. "I think we have to take a look at it seriously and if it's done in a revenue-neutral way, it's incumbent upon us as representatives of the state of Vermont to seriously consider the opportunity to give middle-class Vermonters a tax cut."
Asked whether supporting the proposal could risk a veto, Campbell said, "My personal belief is that, you know, we do what we do — and the administration does what it's going to do. I can't predict it. And I think our responsibility is owed to the Vermonters themselves."
Would moving forward with a tax bill that raises taxes for some Vermonters and lowers them for others violate the spirit of their deal with the governor? Not so much, Smith seemed to say.
"When we talked with the governor and talked among [conference committee members], we talked about what was necessary to make sure that we could balance the general fund and whether we needed new revenues to close the general fund gap," Smith said.
The bigger question is whether Shumlin actually would veto legislation that addresses inequities in the tax code without increasing the overall tax burden. While he's been steadfast this session in his opposition to increasing what he calls "broad-based" taxes, the optics of killing a revenue-neutral, progressive tax proposal might not be great for him.
Further complicating the matter is that the tax bill itself includes funding apparently necessary to draw down federal money to support Vermont's health care exchange. If the Shumlin administration can't find another bill to which it can attach that funding, the governor may be boxed in — and might have to support whatever the legislature sends his way.
Whether the legislature decides to pick that fight should be known soon. In order to stand a chance of adjourning by Saturday, the tax committee will have to make a final decision mid-day Friday.
Disclosure: Tim Ashe is the domestic partner of Seven Days publisher and coeditor Paula Routly.
