MONTPELIER — House and Senate negotiators were nearing a deal on a $30 million revenue package early Saturday morning that will help balance the 2016 fiscal year budget and close a projected $113 million gap — but includes provisions Gov. Peter Shumlin has said he does not support.
The bulk of the new revenue comes from changes to the income tax code. Both the House and Senate have agreed with the governor to raise $15 million by eliminating taxpayers’ ability to deduct their prior year local and state taxes on their state returns.
But the House and Senate are also looking to raise about $10.5 million by making changes to how much taxpayers can deduct. Under the plan lawmakers were nearing agreement on, income tax deductions would be capped at two times the standard deduction — about $25,000 for a couple. The plan exempts charitable donations and deductions for catastrophic health care costs, however.
In total, lawmakers are looking to raise $26 million in new income taxes with the changes.
Shumlin has spent much of the week restating his opposition to lawmakers’ plans to limit deductions. He made that case again to the Vermont Press Bureau in an interview Friday morning.
“The reason states don’t tend to cap these deductions … is because they all provide an important role in ensuring you have a strong economy and a strong state and an economy that works for every single member of that state,” Shumlin told the Vermont Press Bureau in an interview. “Among the tax choices that are going to be made, let’s not make illogical choices.”
Senate President Pro Tem John Campbell, D-Windsor, has said Shumlin has threatened to veto the revenue bill because of his opposition to deduction limits.
But that didn’t stop lawmakers from forging ahead.
Senate Finance Committee Chairman Tim Ashe, D/P-Chittenden, said he worked with the House to complete a revenue plan both chambers could agree on.
“The governor’s made no hesitation to say that he would prefer that the only income tax that’s raised be the $15 million that he raised,” Ashe said. “We arrived at what we thought was a fair way to raise the money and that we could reach agreement with the House.”
House Ways and Means Committee Chairwoman Janet Ancel, D-Calais, echoed Ashe’s comments, saying the revenue plan is one that both sides have agreed to.
“We’re trying to get a revenue bill and trying to get out of here,” Ancel said.
House Speaker Shap Smith, D-Morrisville, acknowledged the tax deal was arrived at without the governor’s approval.
“That is true, yes,” the speaker said.
But the plan addresses many of the concerns Shumlin has raised, according to Smith.
“We’ve responded to a number of the concerns that the governor expressed, particularly around the health care and the charitable deduction. We tried to address that. So, my hope is that in addressing those things we can move closer together. I’m eternally optimistic, but perhaps it is unwarranted in this instance,” he said.
The deduction cap included in the deal is fair, Smith said.
“You’re going to get a $25,000 cap on your itemized deductions. That’s a significant amount of allowable deductions, including, on top of that, charitable deductions and for medical. It seems to me pretty reasonable,” he said.
Lawmakers planned to complete the deal early Saturday morning and return later in the day to have both chambers vote on it. Smith declined to comment on how lawmakers would address a potential veto by Shumlin.
“We’ll take it one step at a time,” Smith said.
Scott Coriell, spokesman for Shumlin, left the State House around 11:30 p.m. Friday and said the administration was reviewing the proposal and would have no comment until later on Saturday.
The revenue plan also includes extending the state’s 6 percent sales tax to soft drinks, which will raise $5.1 million, extending the 9 percent rooms and meals tax to vending machine purchases, and includes a 3 percent minimum tax on taxpayers earning at least $150,000.
“That’s more of a floor payment on people with larger incomes,” he said.
The House and Senate had also agreed in principal to the budget and were expected to sign off on it early Saturday morning.