Category Archives: Taxes

Tax deal struck, adjournment looming

MONTPELIER — After a week of veiled veto threats and behind-closed-doors meetings, Gov. Peter Shumlin emerged from his ceremonial office Saturday afternoon with legislative leaders to announced a tax deal — the linchpin paving the way for adjournment.

“I’m really pleased to announce that we’ve reached a deal on the budget that allows us to balance the budget and raise the revenue for the budget in a way that’s not only fiscally responsible but ensures that we can continue to grow this economy for every single Vermont,” Shumlin said, with House Speaker Shap Smith and Senate President Pro Tem John Campbell on either side of him.

unnamedDetails of the $30 million in new taxes raised to balance the 2016 fiscal year budget were to be released later Saturday.

“Everyone has given a little. I think it’s an incredibly sensible plan and most importantly we’re meeting our commitment that we all pledged to keep in this building in January of closing a budget gap by making smart choices for Vermonters and ensuring that our budget is sustainable going forward,” the governor said.

Lawmakers strike tax deal without gov’s approval

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.

Senate Finance Committee Chairman Tim Ashe, D/P-Chittenden, briefs reporters late Friday night on a tax plan. (Photo by Erin Sigrist)

Senate Finance Committee Chairman Tim Ashe, D/P-Chittenden, briefs reporters late Friday night on a tax plan. (Photo by Erin Sigrist)

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.

House Appropriations Committee Chairwoman Mitzi Johnson, D-South Hero, left, and Senate Appropriations Committee Chairwoman Jane Kitchel, D-Caledonia, speak during budget negotiations Friday.

House Appropriations Committee Chairwoman Mitzi Johnson, D-South Hero, left, and Senate Appropriations Committee Chairwoman Jane Kitchel, D-Caledonia, speak during budget negotiations Friday.

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.

Capitol Beat with the Governor 5-15-15

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Gov. Peter Shumlin and Vermont Press Bureau chief Neal Goswami chat about the end of the session and the bills that are still in play.

Gov. Peter Shumlin on the Capitol Beat podcast Friday, May 15, 2015.

Gov. Peter Shumlin on the Capitol Beat podcast Friday, May 15, 2015.

House GOP will support veto of tax bill

MONTPELIER — House Republicans voted in caucus Thursday afternoon to help sustain a veto of a revenue bill — if Gov. Peter Shumlin elects to veto the legislation — as House and Senate negotiators look to finalize how they will raise money to support the state budget.

GOP Leader Don Turner, of Milton, asked his caucus to take a position Thursday as negotiators continued to work.

“It’s my feeling that if the governor is going to step up and help us … then I think that’s a good thing,” Turner said.

Shumlin is opposed to how lawmakers have chosen to raise revenue. The House plan caps income tax deductions at 2.5 times the standard deduction. The Senate plan caps mortgage interest deductions and limits charitable contribution deductions to in-state charities.

Shumlin gathered a group of nonprofit leaders on the steps of the State House Wednesday to decry any tinkering with charitable contributions, saying it would cause less giving by Vermonters.

The House GOP caucus voted unanimously to support sustaining a veto after discussing potential pitfalls.

“Is this going to raise his political capital?” asked one member.

“I believe that the governor is doing what our constituents have asked us to do. If that’s the case, why wouldn’t we support it?” Turner countered.

Rep. Kurt Wright of Burlington cautioned the caucus to remember that Shumlin’s original budget proposal raised significantly more in new revenue than the plans passed by both chambers.

“The only thing to keep in mind — the governor didn’t like this tax package, but remember what he started with?” Wright said. “How do you know he doesn’t make a deal with the other side. … He had a larger tax increase on the table to start with.”

In the end, it was an enthusiastic vote in favor of helping Shumlin.

“We all campaigned last year. We all heard the same thing. Everybody in this building heard the same thing. People want their taxes under control. Therefore, if the governor is coming that way I’m more than willing to help him and us do what people asked us to do,” said Rep. Francis “Topper” McFaun, R-Barre Town.

Capitol Beat 5-11-15

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Barre-Montpelier Times Argus Editor Steve Pappas and Vermont Press Bureau chief Neal Goswami discuss the sexual assault case against Sen. Norm McAllister, R-Franklin, the last week of the session and Bernie Sanders.

Capitol Beat with the Governor 5-8-15

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Gov. Peter Shumlin discusses  end-of-session issues that remain unresolved, the possibility that lawmakers will vote to remove the state’s philosophical vaccine exemption and the arrest of Franklin County Sen. Norm McAllister on sex charges.

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Shumlin defends late budget push

MONTPELIER — Gov. Peter Shumlin said Friday he is asking lawmakers to cut an additional $10 million from the budget because they have rejected his proposal to institute a payroll tax to help pay for Medicaid costs.

Shumlin summoned the chairs of Senate money committees Wednesday — one day before the Senate took up the annual budget bill — to tell them they needed to cut more and tax less. The move frustrated lawmakers who are grinding toward adjournment, which is to come in mid-May.

On Thursday, administration officials presented a list of $8 million in further cuts to the Senate Appropriations Committee and made clear the third-term Democrat did not favor their tax plans.

Gov. Peter Shumlin speaks at a recent State House news conference.

Gov. Peter Shumlin speaks at a recent State House news conference.

“I really feel strongly that the tax packages being contemplated in this building will hurt our economy and hurt Vermonters,” Shumlin said in an interview with the Vermont Press Bureau on Friday. “I believe that the current budget framework needs to cut more and tax less.”

At the heart of the matter, Shumlin said, is how lawmakers have chosen to fund Medicaid case loads, which expanded under the federal Affordable Care Act to the tune of $16 million. The governor’s budget proposal used a 0.7 percent payroll tax on Vermont businesses to raise $90 million to cover that cost as well as to boost payments to Medicaid providers.

Lawmakers have rejected that, however, and funded Medicaid case loads through various taxes. But Shumlin, while now acknowledging his plan is unlikely, wants lawmakers to cut deeper rather than raise taxes.

“That idea has been an uphill slog and it looks like it’s possible that it may not come to fruition,” he said. “Unless they suddenly … see the light, which doesn’t seem extraordinarily likely, but I’m still hopeful, we have a $16 million budget challenge that we didn’t have, that we had taken care of.”

Shumlin said his proposal created an ongoing, dedicated source for Medicaid. Lawmakers, meanwhile, have created a host of new taxes to balance the general fund, he said.

“They want to take away your home mortgage deduction because you bought a home, they want to take away your charitable deduction because you want to support charities in your community, they want to take away the catastrophic health care deduction,” he said. “They want to tax soda and everything else with sugar in it because they say that drinking that stuff isn’t healthy for you, which it probably isn’t, but they also want to tax water. Tax water? Really? I thought you just said you shouldn’t drink sugary things, now they’re saying we’re going to tax water.”

Lawmakers are not amused with the governor’s late push to adjust their work. House Majority Leader Sarah Copeland Hanzas, D-Bradford, noted that lawmakers used the same amount of new revenue to support the general fund as Shumlin did in his proposal, but their challenge was even greater since the state saw an additional $18 million revenue downgrade after his budget address.

“We closed the $113 million budget gap with the same $35 million that the governor closed his $94 million gap. The same amount, not the same kind of revenue. So, to have the governor suggest that we are spending too much and raising too much in taxes is really perplexing,” she said. “I don’t know where they’re doing their math, but $35 million is $35 million.”

Rep. Sarah Copeland Hanzas

Rep. Sarah Copeland Hanzas

Hanzas said the governor should have made his pitch earlier — before the House passed its budget and sent it to the Senate.

“Where were you on Jan. 20 because it’s three months later and we’ve been through the painful process of vetting all of our painful priorities,” she said. “We would have appreciated them in January, not so much now.”

House Appropriations Committee Chairwoman Rep. Mitzi Johnson, D-South Hero, echoed that sentiment.

“It’s frustrating that he’s had opportunities for the last three months to weigh in on the budget and we don’t have a balanced budget proposal from him. He’s choosing to sort of nit-pick at different things,” Johnson said.

Both Johnson and House Speaker Shap Smith said Friday that the House-passed budget does fully fund the Medicaid case loads, but does not do it the way Shumlin sought.

Shumlin dismissed criticism of his timing, saying previous governors have also pushed for priorities late in the process.

“I don’t know where they’ve been. I’ve served under [Former Gov. Howard] Dean, [former Gov. Jim] Douglas, and I cannot remember as a legislative leader right before we’ve passed the budget not having the governor sit down with us and explain their concerns about budget and taxes. That’s what governors do. So, I understand it’s a time of year where folks get emotional,” Shumlin said.

Late-season requests are part of the budget process, Shumlin said.

“Folks get frustrated this time of year, I understand that, and I’m sympathetic to it. I’ve been on both sides of it in the governor’s office and the legislative leadership end of it,” he said. “The only thing I want to point out is this is not unusual and we shouldn’t be fearing frustration we should be fearing raising taxes on Vermonters at a time when they’re having a difficult time paying their bills, and we should be fearing passing a budget that isn’t sustainable for the years going forward.”

“I believe that my judgement is correct. We should cut $10 million more from the budget and not raise taxes on Vermonters by that $10 million,” Shumlin added.

The Senate appeared ready Friday to reject most of the $8 million in cuts the governor proposed this week. A $1.3 million savings pharmacy costs looked likely, but bigger ticket items, including an additional $2.8 million in labor savings on top of the $10.8 million Shumlin previously requested, appeared to lack support.

neal.goswami@timesargus.com

Capitol Beat 4-27-15

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Vermont Press Bureau chief Neal Goswami and VPB reporter Josh O’Gorman talk about the developments last week in the State House, including education, health care, vaccines and gun legislation.

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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