The Senate has passed a tax bill that raises $10 million in new revenue but it faces the strong opposition of Governor Peter Shumlin.
With very little debate or opposition, the Senate gave its strong support to its 2013 tax bill. The legislation uses four primary sources to raise the additional revenue.
It caps the amount of mortgage interest that can be deducted on the income tax, it imposes a minimum 3 percent tax for all people who earn more than $125,000, it applies the sales tax to bottled water and it places a tax on satellite TV services.
Chittenden senator Tim Ashe is the chairman of the Senate Finance committee. He says the panel could have simply raised income tax rates on millionaires but he says the committee took a different approach.
“We attempted to avoid easy solutions to see if there were changes that could be made that made the code more equitable without simply raising tax rates.”
Ashe says capping mortgage interest at $12,000 is a fair thing to do because it will have the greatest impact on people who purchase expensive homes in Vermont or out of state.
“When people think of the mortgage deduction what they think of is a tool to help more or less middle class people buy more or less typical and average homes and that’s what the deduction was originally intended for,” said Ashe. “But in many cases it is clearly not serving that purpose.”
Ashe says a number of people who earn more than $125,000 are able to pay a very low tax rate by using a variety of deductions. That’s why the package includes a 3 percent minimum tax on all income above this amount.
“We believe that this creates a floor payment so that every person is contributing at least a modest amount for paying for the roads, schools environmental clean up and so on.”
Governor Peter Shumlin says “he’s disappointed” by this package and he thinks it could hurt the state’s housing market.
“You know where I stand but I’ll just say it once more just in case there’s any confusion,” said Shumlin. “This is not the time to raise income taxes, sales taxes, meals taxes on hard working Vermonters. It’s just not the time.”
The bill is expected to come up for final approval in the Senate on Wednesday. If it passes, a House Senate conference committee will try to work out a compromise plan. Then the Governor will decide if he’ll support the bill or veto it.