Tax Bill Impasse Could Derail Planned Adjournment Of Legislature

May 15, 2015

One issue that could derail the planned adjournment of the Legislature this weekend is the tax bill that's needed to balance the state budget. Legislative leaders and Gov. Peter Shumlin have some fundamental disagreements about several key elements of this tax package.

At the center of the dispute is a series of deductions that are used by Vermonters who itemize on their tax returns. Roughly 27 percent of all Vermont taxpayers fall into this category.

The most common deductions are for mortgage interest, charitable contributions and unusually high medical expenses.

The House wants to limit the total amount of deductions to $15,000 for an individual and $31,000 for a couple.

"I feel very strongly that it would be a mistake to remove the charitable deduction, the home mortgage deduction and the catastrophic health care deduction. I think it will hurt Vermont." - Gov. Peter Shumlin

The governor strongly opposes this plan. He says it will hurt the housing market, undermine charitable organizations and place some very sick people in a precarious financial situation.

"I feel very strongly that it would be a mistake to remove the charitable deduction, the home mortgage deduction and the catastrophic health care deduction,” Shumlin says. “I think it will hurt Vermont, and my job as governor is to make sure that we do things that help Vermont not hurt Vermont."

House Speaker Shap Smith says it's important to remember that the House is not removing these deductions; it's placing a cap on the total amount.

"Is there some place that we could meet in the middle? I think there is some common ground, but I think it's going to take some give on both sides,” Smith says. “And I'm concerned with the governor drawing lines in the sand."

Smith says he's willing to consider other tax options, such as raising income tax rates on the wealthy, if it will lead to a compromise with the governor.

"I think there is some common ground, but I think it's going to take some give on both sides. And I'm concerned with the governor drawing lines in the sand." - House Speaker Shap Smith

"I think there's going to have to be some component within the revenue package that will be progressive taxation,” Smith says.

The governor has made it very clear that he will veto a tax bill that includes limits on any of the major deductions. The question for Democratic leaders is whether they want to challenge Shumlin on this issue when it's unlikely that they can muster the votes to override a gubernatorial veto.