Category Archives: Taxes

Capitol Beat with the Governor 4-24-15

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Gov. Peter Shumlin and Vermont Press Bureau chief Neal Goswami discuss competing health care plans, the governor’s intention to sign gun legislation and the merits of lowering the state’s sales tax by expanding it to services.

State workers, supporters rally against cuts

MONTPELIER — Hundreds rallied at the State House Saturday to oppose cuts to the state budget and $10.8 million in labor savings sought by both the Shumlin administration and lawmakers in an event organized by the Vermont State Employees Association.

The state employees’s union was joined by other unions and groups, including the Vermont NEA, AFSCME and the Vermont Workers Center, to protest the the budget plan sought by Gov. Peter Shumlin and lawmakers.

VSEA members and supporters held a rally at the State House Saturday, April 11, 2015.

VSEA members and supporters held a rally at the State House Saturday, April 11, 2015.

The House has passed a budget that uses $33 million in new tax revenue, $53 million in cuts and $25 million in one-time funds to close a $113 million budget gap. The VSEA and others, however, want to see more tax revenue raised and fewer cuts.

The House-passed budget includes $10.8 million in labor savings that Shumlin, a Democrat, proposed. He has asked the VSEA to renegotiate its contract to help achieve the savings. Failing to do so will result in hundreds of layoffs, according to the administration.

About $2 million in labor savings has been identified by the administration, but $8.8 million remains of its target. It wants to delay by six months a 2.5 percent cost of living increase due to state employees in the 2016 fiscal year, and delay by one-year step-increases that average out to an additional 1.7 percent pay increase next year. Those steps would require union approval.

The union has so far refused to renegotiate, and has proposed ways to raise additional revenue instead. The 500 or so people gathered at the State House Saturday heard from Ed Olsen, a snow plow driver for the Agency of Transportation, about why the union is not willing to renegotiate.

“I pay taxes to this great state of Vermont, just like all the other hardworking, middle-class people. As a matter of fact, we, the middle-class Vermonters, pay more than 10 percent of our wages to this beautiful statehouse behind me, unlike the wealthy citizens who pay back 8 percent of their wages to our economy,” Olsen said. “That ain’t right. It pisses me off. That’s the biggest reason why I came here today.”

Olsen said the state’s wealthiest residents “aren’t being asked to give up anything.”

Agency of Transportation worker Ed Olsen speaks at State House rally Saturday, April 11, 2015.

Agency of Transportation worker Ed Olsen speaks at State House rally Saturday, April 11, 2015.

“I’m tired of being asked to give back more and more of my wages and benefits to help rescue Vermont’s economy,” he said. “I need every bit of the cash I earn. Vermont has a budget deficit and they always want to balance the budget on the backs of hardworking, middle-class citizens of Vermont.”

Several speakers compared Shumlin to Wisconsin Republican Gov. Scott Walker, who has sought concessions from union workers to help save money in that state, including Rev. Earl Kooperkamp of Church of the Good Shepherd in Barre.

“Vermont is not Wisconsin. Peter Shumlin is not Scott Walker. But it’s getting pretty damn hard to tell the difference,” he said.

Kooperkamp equated the effort to obtain savings from state workers to the seventh commandment — thou shalt not steal.

“It’s wrong, it’s immoral, and we’re here to say that,” Kooperkamp said.

The Shumlin administration is expected to meet again early next week to continue negotiations.

neal.goswami@timesargus.com

Capitol Beat with the Governor 04-10-15

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Gov. Peter Shumlin chats with Vermont Press Bureau chief Neal Goswami about the ongoing process to find $10.8 million in labor savings from the Vermont State Employees Association. He also discusses a failed effort to ban teacher strikes and lawmakers’ efforts pare down his legislative proposals.

Capitol Beat 4-6-15

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Vermont Press Bureau chief Neal P. Goswami and VPB reporter Josh O’Gorman talk health care, education, voter registration and the week ahead at the State House in this week’s episode.

Capitol Beat with the Governor 4-3-15

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Gov. Peter Shumlin chats with Vermont Press Bureau chief Neal Goswami about the House’s health care bill. He’s not a fan.

Beverage tax advances to support health care spending

MONTPELIER — The House Ways and Means Committee on Thursday advanced a sweetened beverage tax and a hike in the state’s cigarette tax to cover the cost of proposed health care initiatives after weeks of wrangling.

Thursday’s vote came after a number of potential revenue sources were laboriously explored. Committee Chairwoman Janet Ancel, D-Calais, and Democratic House leaders considered myriad options before piecing together a plan that raises about $18 million and could also garner enough votes.

In the end, the committee found just enough votes to pass the bill out on a 6 to 5 vote.

Rep. Janet Ancel

Rep. Janet Ancel

“I would like to have a stronger vote coming out of the committee than we’re going to have, but I really appreciate the work that people have done to get to where we are,” Ancel said before the vote.

The committee-passed revenue plan includes a half-penny excise tax on sweetened beverages, including diet drinks and any beverage with artificial sweeteners. It also includes a 25-cent increase in the cigarette tax with a proportional increase in the tax on other related products like chewing tobacco. In addition, the plan eliminates the current sales tax exemption on dietary supplements.

Competing revenue plans sought to eliminate sales tax exemptions on soda, candy, bottled water and other products, but never found enough support on the committee, which features centrist Democrat Jim Condon of Colchester and independent Adam Greshin of Warren.

“Anytime you have an array of taxes and you’re looking at sales tax exemptions, which is kind of the alternative funding sources that we looked at, you have issues because of folks who live on the New Hampshire border,” Ancel said. “I think the retailers have been successful lobbyists against any sales tax on candy and soda for years. It was a whole variety of things. I think if you talk to any member of the committee they would have their own reasons for having trouble getting to yes.”

Democrats waited patiently for days for all committee members to be present. With Rep. Johanna Donovan, D-Burlington, back at the State House Thursday after several days away, Democrats finally had enough votes in place to advance the revenue package.

The bill that arrived from the House Health Care Committee was a non-starter for many members of Ways and Means. That plan sought to spend about $52 million on health care and used a 0.3 percent payroll tax and a 2-cent per ounce excise tax on sugar-sweetened beverages.

Through its weeks-long deliberations, Ways and Means killed off the payroll tax — first proposed by Democratic Gov. Peter Shumlin in January at 0.7 percent — and lowered the beverage tax significantly. Ways and Means also extended the beverage tax to diet drinks and anything that is sweetened with either natural or artificial sweeteners. Maple syrup, the state’s hallmark product, is exempt.

For Reps. Sam Young, D-Glover, and Jim Masland, D-Thetford, the two-cent tax was just too high. But eliminating it altogether was not an option for Rep. George Till, D-Jericho, a medical doctor, who sought an increase in the cigarette tax.

The final Ways and Means revenue plan nearly hit another roadblock Thursday when Young made a motion to reduce to the increase in the cigarette tax. Young agreed to withdraw the amendment after Till threatened to drop his support for the entire measure.

Opponents of the excise tax vowed to continue fighting against. Jim Harrison, president of the Vermont Retailers and Grocers Association, said the Ways and Means plan “is totally going in the wrong direction.”

“The excise tax is absolutely a nonstarter for us. This is a very regressive tax on food products that’s going to do nothing except hurt Vermonters in their pocketbook and send more retail business out of state because products in Vermont will be more expensive,” Harrison said.

And Andrew MacLean, a lobbyist for the beverage industry, said the original “health care aspects of the bill have dissipated” as lawmakers have moved beyond just sugar-sweetened beverages. It is now “strictly a revenue generator,” he said.

Andrew MacLean

Andrew MacLean

“I think the problem with the excise tax is it puts a stigma on a particular business and a particular product and its something that can be raised over time,” MacLean said.

The bill passed Thursday by Ways and Means discarded the House Health Care Committee’s previous policies and spending. The Health Care Committee’s revised plan that takes into account the available revenue will be finalized by the House Appropriations Committee.

That plan, outlined this week will provide about $3.3 million in state funding during the 2016 fiscal year to boost Medicaid reimbursement rates for primary care providers. That would draw down $3.7 million in federal funds.

The health care proposal would also provide $2.45 million for a Medicaid rate increase for professional services, drawing down $2.77 million. No additional state funds will be applied to hospital outpatient rate increases.

The House Health Care Committee’s plan provides just a fraction of the Medicaid rate increases that Shumlin proposed in his January budget address.

neal.goswami@timesargus.com

Capitol Beat with the Governor 3-27-15

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Gov. Peter Shumlin chats with Vermont Press Bureau chief Neal P. Goswami about the health care package in play in the House, new unemployment numbers and gun legislation that cleared the Senate this week.

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Speaker’s group pitches economic development ideas

MONTPELIER — An ad hoc economic development group created by House Speaker Shap Smith earlier this year presented an economic development plan to lawmakers Tuesday, some of which could be acted upon this year, according to Smith.

The Economic Development Proposal Review Group, comprised of people from across the political spectrum, was created by Smith to help review ideas submitted by the public. Smith called on the public to submit economic development proposals early in the legislative session. The group reviewed about 90 proposals and crafted a report for lawmakers based on those ideas.

Paul Ralston

Paul Ralston

Vermont Coffee founder and former Democratic lawmaker Paul Ralston served as the group’s leader, facilitating meetings over a three week period. He told the House Commerce and Economic Development Committee Tuesday that economic development in the state will require changing the conversation.

“It’s time for our government to stop talking about huge programs that cost a lot of money that don’t work. It’s time for our government to stop talking how old we’re getting in Vermont and how young people don’t want to live here in Vermont. It’s time to change that story and the story can be changed by taking action,” he said.

Ralston said several ideas could be acted on this session, including passing legislation to clarify that the state’s sales tax does not apply to remotely accessed software, commonly referred to as the cloud tax. In addition, lawmakers this year could:

— Enact an employee relocation income tax credit
— Restore a research and development tax credit
— Repeal or “substantially” reform the licensed lender law
— Develop a process to simplify and strengthen the Vermont Economic Growth Incentive program to work for more employers

Other ideas in the report the group believes could be passed this biennium include examining benefit cliffs in the state’s social assistance programs and reforming the Earned Income Tax Credit to “mitigate financial penalties from work.” The group also suggested mapping all workforce development programs across state government and creating a single budget for them.

The group also wants to increase access to capital by creating a regulatory framework that encourages crowd funding. The state could also offer loan guarantees to support private sector funding for “essential business infrastructure” like telecom projects.

The group recommended permit reforms that “constructively reduce cost and time.” Some reforms could also speed up construction of workforce housing through downtown construction tax credits and faster permitting for housing projects.

Long-term ideas the Legislature should consider include revisiting recommendations made by a Blue Ribbon Tax Commission in 2010. The group suggested a carbon-based tax that is revenue neutral by using it to replace the corporate income tax, creating a seed capital fund, targeting tax incentives for young entrepreneurs, creating a “Vermont embassy” in area cities like Montreal, New York and Boston and enhancing the state’s public transportation system.

Ralston said the group’s recommendations “disproportionately landed on tax credits” because members were concerned that lawmakers would not be willing to appropriate funds in a tough budget year.

Smith made a rare appearance before a legislative committee Tuesday to tout the report and encourage lawmakers to act.

House Speaker Shap Smith speaks to the House Commerce and Economic Development Committee Tuesday.

House Speaker Shap Smith speaks to the House Commerce and Economic Development Committee Tuesday.

“Not surprisingly, a number of them cost money and involve tax credits and direct investments. But there are a number of them that don’t cost money and I think we could move forward with them this year,” Smith told the Commerce and Economic Development Committee.

The speaker cited the employee relocation tax credit as a way to attract younger workers to the state for jobs that employers have had difficulty filling.

“I’ve never been a huge fan of tax credits, but I think the employee relocation tax credit that they’ve identified is a very intriguing idea and could be a tool that could be used by businesses,” he said.

Smith said he believes Vermont is an attractive place for business, but the recommendations in the group’s report could improve the business climate.

“I think that we can make it an even better place,” he said. “I’m hopeful that there will be some ideas here that you can work with and will be put into law by the end of the year.”

neal.goswami@timesargus.com

Read the group’s report below:

Read the economic development ideas submitted by the public to House Speaker Shap Smith below:

House budget plan becoming more clear

MONTPELIER — The House’s path to closing the state’s $113 million budget gap is becoming more clear after a new framework was revealed Friday by House Appropriations Committee Chairwoman Mitzi Johnson.

Johnson, D-South Hero, in her first year leading Appropriations, unveiled her own budget proposal the committee will use to finalize its 2016 fiscal year spending plan. It incorporates many of Gov. Peter Shumlin’s ideas to close the original $94 million hole the state faced in January, and incorporates new ideas for the additional $18.6 million needed after a revenue downgrade in late January.

Rep. Mitzi Johnson

Rep. Mitzi Johnson

Some of Johnson’s ideas are taken from a list of potential cuts totaling $29 million that lawmakers crafted with the Shumlin administration. House Speaker Shap Smith, D-Morrisville, said Monday that list of potential cuts “is appropriate to use” to close the gap.

Among the cuts used by Johnson in her budget proposal are:

— $5 million reduction for Vermont Health Connect, including subsidies
— Eliminating a $6 million state contribution to the Low Income Home Energy Assistance Program
— Closing the Southeast State Correctional Facility in Windsor, for a $820,000 savings in both the 2016 and 2017 fiscal years
— A $1 million reduction in funding for the Vermont Veterans Home
— A $1 million reduction in funding for the Department of Information and Innovation
— A $560,000 reduction in funding for Vermont PBS split over the next two years

In total, Johnson’s proposal makes about $57 million in general fund cuts. It would incorporate $10.8 million labor savings the administration is seeking from state employees and also consolidate four emergency dispatch centers down to two.

Johnson’s proposal would utilize more than $20 million one-time or short-term funding sources. About $5 million in reserve funds would be tapped to help close the gap. It also would shift $4.8 million in spending for the Vermont Housing and Conservation Board to the capital bill to be raised through bonds. Another $1.7 million would be generated by leasing prison beds to the U.S. Marshal Service.

Whatever proposal the Appropriations Committee settles on will be paired with a revenue package fine-tuned by the House Ways and Means Committee. Smith, D-Morrisville, said the House will likely move forward with a revenue package of $35 million.

It will include, Smith said, a Shumlin proposal to eliminate the ability to deduct the previous year’s state and local taxes for taxpayers who itemize deductions. That will generate an additional $15 million tax revenue.

House Speaker Shap Smith

House Speaker Shap Smith

The House will look to also cap the amount of all itemized deductions at 2.5 times the standard deduction, according to Smith. That will raise about $18 million in additional revenue. Another $2 million in a separate fee bill will generate the remaining revenue to help balance the general fund.

Smith said he supports the framework of Johnson’s proposal which will help the committee finalize its plan this week, including the use of reserve funds.

“I do think that the framework that she’s put forward, it works. I think we both have been trying to figure out ways to bring down the amount of one-time money that is used, recognizing that next year could be difficult as well. At this point in time, I think she’s done about as good of a job as she can limiting the use one-time money,” he said. “I think it is appropriate to use (reserve funds) given the challenge that we face as long as we’re thinking strategically how we might replace it … in outgoing years.”

Smith and other House leaders are still planning to finalize a budget plan this week, but additional time will be taken if needed, he said.

“My view is that if something comes up I’d rather get it right than get it done fast. I think that we’re on target right now for the completion of the budget by the end of the week with consideration of the full House next week,” Smith said.

neal.goswami@timesargus.com

Read Johnson’s budget outline below:

Capitol Beat 3-16-15

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Vermont Press Bureau reporter Josh O’Gorman and bureau chief Neal Goswami discuss guns, a sugar tax, new budget proposals and education in this week’s episode.

Capitol Beat with the Governor 3-13-15

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Gov. Peter Shumlin chats with Vermont Press Bureau Neal P. Goswami about a House Health Care Committee bill, the state budget and gun legislation.

Tax code changes eyed to balance budget

MONTPELIER — The 2016 fiscal year state budget the House considers is likely to include $35 million in new revenue raised through changes in the tax code, according to House Speaker Shap Smith.

That amount is consistent with what Gov. Peter Shumlin recommended in his budget, which was presented to lawmakers in January, the Democratic speaker said in an interview Thursday. But the House plan will likely also look to cap itemized tax deductions to raise additional tax revenue from wealthier Vermonters, he said.

“The governor’s original budget relied on $35 million of new revenue and we are looking at that amount of revenue to balance the budget that the governor presented, as well as the additional … $18 million that was necessitated by the revenue downgrade. We’re continuing to rely on the need to raise $35 million in new revenue,” Smith said.

The 2016 fiscal year budget has a current hole of about $113 million. After raising $35 million revenue, lawmakers will need to make about $78 million in cuts.

House Speaker Shap Smith

House Speaker Shap Smith

The House, Smith said, will use the governor’s proposal to eliminate a current policy that allows taxpayers who itemize deductions to deduct their previous year’s state and local tax liability from their taxable income. But the House will look to go even further and cap all itemized deductions at two-and-a-half times the standard deduction. For a couple filing jointly that would be about $31,000.

Those two measures would raise $32.4 million, Sara Teachout, a fiscal analyst with the Joint Fiscal Office, told the House Ways and Means Committee Thursday. Revenue included in a fee bill makes up the additional general fund revenue needed to hit the $35 million target.

Smith said he did not want to commit to that plan before the committee fully considers it, but said he supports it.

“I think that given the reductions that we’re making in the budget and the fact that it largely impacts people at the lower end of the income ladder that it’s fair to ask those at the upper end of the income ladder to pitch in to solve the problem, and through capping the itemized deductions I think we could do that,” he said.

According to Teachout, Vermonters earning $75,000 or less would chip in an additional $3.91 million under the proposal. Vermonters earning $75,000 or more would contribute an additional $28.48 million in tax revenue.

According to data Teachout provided the Ways and Means Committee Thursday, about 84,000 of Vermont’s 310,389 tax filers would see a tax increase. But the increases would be minimal for low- and middle-income Vermonters. People earning $75,000 or less would see their tax bills rise by $144 or less, on average. The state’s 355 filers earning $1 million or more would see an average tax increase of $18,603.

Smith said limiting deductions will put Vermont more in line with tax policy in most states.

“They often times don’t allow the itemized deductions that we do. I think it moves us closer to what other states do,” he said.

Exactly where the House will look to make budget cuts is still evolving, Smith said. However, some of Shumlin’s recommendations are likely to be used, including cuts to the state’s assistance program known as Reach Up and to the Low Income Home Energy Assistance Program and through the consolidation of emergency dispatch centers.

The House will also look to include $10.8 million in labor savings from the state’s work force, according to Smith.

“Under any circumstance in balancing this budget it’s going to require some labor savings,” he said.

The administration ratcheted up pressure on the Vermont State Employees Association this week in its effort to obtain the labor savings by requesting that agencies and departments identify up to 325 positions to be cut. The administration has asked the union to reopen its contract to negotiate the savings without job cuts, but the union has so far refused to do so.

Meanwhile, the House Appropriations Committee held a public hearing Thursday on a list of potential cuts totaling $29 million. The list features a range of ideas, but most would not provide immediate savings for the 2016 fiscal year, Smith said. Many of those ideas could be used to address future budget gaps, including in 2017, which faces a shortfall of about $45 million.

Smith said the Appropriations Committee, led by Chairwoman Mitzi Johnson, D-South Hero, will use the list as needed.

“I really do have confidence that that committee will make the right recommendations that need to be done to balance the budget. I really rely heavily … on that committee to make the right decisions,” he said.

The final House plan must pass muster with both the administration and the Senate. Smith said there are ongoing conversations with both, but areas of disagreement will be addressed when the Senate considers the House version.

“I don’t think that we have identified, sort of, the areas of tension yet. I don’t think we’ll have a good sense of that until it gets over to the Senate,” he said.

neal.goswami@timesargus.com

Proposed sugary drink prompts debate

MONTPELIER — Business and health advocates are squaring off over a proposed tax on sugar-sweetened drinks.

Wednesday morning, the House Ways and Means Committee took testimony on a proposal that would add a 2-cent-an-ounce excise tax on beverages with added sugar. Advocates claim the tax would raise as much as $34 million in state revenue while curbing rising obesity rates, while opponents say the tax will hit poor people the hardest and will drive Vermonters over the boarder into New Hampshire to shop.

What was a theoretical discussion in the morning took on more weight in the afternoon, when the House Health Care Committee approved a bill that included the proposed 2-cents-an-ounce tax, and a .3 percent payroll tax, as a way to boost Medicare reimbursements.

Dr. Barbara Frankowski,M.D., professor of pediatrics at University of Vermont Medical School, discussed trends in sugary drink consumption, saying consumption in the United States has risen 500 percent during the past 50 years.

Frankowski and other medial professionals argue that the rise in sugary drink consumption is a driver in childhood obesity rates, which in Vermont have risen from 11 percent in 1990 to 25 percent today. Frankowski noted that in the ‘90s, children began consuming more sugary drinks than milk.

“Children who become overweight tend to remain overweight for the rest of their lives,” Frankowski said.

Jane Kolodinsky, a professor of economics at UVM, argued that, with the exception of the Irish Potato Famine from 1845 to 1851, an increase in price will always lead to a decline in consumption and said the proposed tax would lead to people drinking fewer sugary drinks.

“An excise tax will work,” Kolodinsky said. “It will reduce demand.”
Opponents argued that an excise tax, which is not visible to the consumer in the store, will drive consumers to shop elsewhere, including over the border in New Hampshire.

“My customers will not see this tax on their price register receipt,” said Pam Trag,co-owner of Quality Market in Barre. “What they’ll think is, ‘Wow, your prices have really gone up and we’re going to shop somewhere else.’”

Rep. James Condon, D-Colchester, suggested that retailers would not apply the tax directly to the sugary drinks, but would spread the added cost over all of their products. Kevin Dietty, who has lobbied on behalf of the beverage industry for 29 years, said small stores, which have fewer products to spread the tax across, would feel the impact the most.

Jim Harrison, president of the Vermont Retail & Grocers Association, argued that the tax would be regressive.

“It penalizes people with the least money,” Harrison said.

“We cannot tax people into eating brussel sprouts,” Harrison continued. “Where do you draw the line? Do you tax all products with sugar? Do we tax salt? Do we believe, that through taxation, Montpelier knows what is best for us?”

Rep. Alison Clarkson, D-Woodstock, responded to Harrison’s remarks. She noted the public health costs of obesity, which nationwide topped $150 billion in 2014, half of which was paid for by public insurance programs, according to Frank Chaloupka, Professor of Economics, University of Illinois at Chicago.

“Montpelier is paying a wad for obesity right now,” Clarkson said. “Montpelier is concerned about the cost of obesity because it costs us all.”

Video: City Room with Steve Pappas

Barre-Montpelier Times Argus Editor Steve Pappas discusses a proposed payroll tax with Gov. Peter Shumlin and Chief of Health Care Reform Lawrence Miller.

City Room with Steve Pappas: Gov. Peter Shumlin & Lawrence Miller, Cost Shift on Health Reform from Central Vermont Television on Vimeo.

Capitol Beat 3-9-15

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Barre-Montpelier Times Argus Editor Steve Pappas sits down with Vermont Press Bureau chief Neal P. Goswami to talk about town meeting, Gov. Peter Shumlin’s troubles selling his payroll tax plan, a renewed aid-in-dying debate and AHS Secretary Hal Cohen.