Legislative leaders are working on a new tax plan that could put Governor Peter Shumlin in an awkward position.
For most of the session, the tax committees at the Statehouse worked on a plan to raise new revenue by capping income tax deductions and by imposing a minimum 3 percent tax rate for everyone who makes more than $125,000.
But the plan seemed to be dead when the Governor and Legislative leaders announced a deal to balance the state budget without raising any taxes.
Now the proposal is back, but the idea is to use the new revenue to lower tax rates for all Vermonters. House Ways and Means chair Janet Ancel thinks the plan makes a lot of sense.
“It’s generally a middle class tax cut overall,” said Ancel. “But everybody gets a lower tax rate.”
Lawmakers raised the gas tax this year and Ancel says the income tax cut could help offset the impact of the higher gas tax.
“I think to the extent that this change would make the income tax more progressive I think it does counter balance to some extent the gas tax which is by its nature regressive.”
Chittenden senator Tim Ashe is the chair of the Senate Finance committee. He says the vast majority of Vermonters would benefit from this plan while a few thousand would end up paying more:
“Both the House and Senate have shared proposals which would add tax burden to roughly 15,000 Vermont tax filers and reduce the tax burden to 250,000 tax filers,” said Ashe. “So that’s what you can achieve when you clean up a few deductions and then spread the benefit to lower rates.”
Throughout the session, the Governor made it very clear that he didn’t want lawmakers to raise a broad based tax. Legislative leaders stress that this new package is “revenue neutral” because the money is used to lower tax rates.
Despite the new use of the revenue, Shumlin doesn’t want lawmakers to pass this bill this year.
“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,” said Shumlin. “But to finish up the work that we have, balance the budget, and get home.”
Senator Ashe says he’s somewhat surprised by the Governor’s position.
“Lowering the taxes of 250,000 tax filers in my opinion I’m not sure there’s a terrible time to do that if it’s done in a thoughtful way.”
Because the bill still needs to be considered by both the House and Senate, it will be very difficult to pass the legislation if the session ends this weekend, but if the session spills over until next week, there could be time to take the bill up.