Legislative leaders decided on Monday not to challenge Gov. Peter Shumlin over their plan to lower income tax rates.
The key to the deal was the assurance by the governor that he will work with lawmakers on a similar tax plan next January.
Democratic leaders at the Statehouse didn’t relish the possibility of getting into a major fight over taxes with a governor from their own party in the final days of the session.
Lawmakers were looking at a plan to lower marginal income tax rates for all Vermonters by capping several personal deductions and by imposing a minimum 3 percent tax rate on all people who make more than $125,000.
The governor strongly opposed the plan. He said it was wrong to make major tax changes in the final days of the session and he argued that the plan had not been thoroughly reviewed.
House Speaker Shap Smith said lawmakers were willing to drop the idea for this session with the understanding that the governor would join them in supporting a tax reform plan in January.
“We think that we all share the same goals of lowering rates for all Vermonters and a fairer, more equitable tax structure,” Smith said. “And so if we can get to agreement on that with the administration and with the House and Senate, we think that it’s worthwhile all being on the same page rather than having a fight about something that we should all want to do.”
And Smith was concerned that if lawmakers went ahead with the plan this week, the debate would have focused on the accuracy of the financial forecasts used by the House and those projected by the administration.
“Why get caught up in that kind of argument when you can all move in the same direction,” the speaker said.
Administration Secretary Jeb Spaulding said he was pleased by the agreement because he had major concerns that several groups of taxpayers might be inadvertently impacted by the bill.
“The governor was clear that doing this kind of tax reform at the last minute without adequate consideration would likely produce unintended consequences, which nobody was going to be happy with,” Spaulding said.
And Spaulding says he hopes to work with lawmakers on the bill in the coming months.
“We are more than happy to have a considered discussion over the summer,” Spaulding said. “The governor has always been positive towards some elements of the Blue Ribbon Commission a couple of years ago. And he is more than happy to talk about lowering income tax rates for all Vermonters.”
The resolution of this tax disagreement is expected to put the Legislature on course to adjourn on Tuesday or Wednesday.