Dennis Moore, Dennis Moore
Riding through the land
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
Stupid bitch!
Congratulations to Vermont’s own Dennis Moore, Governor Shumlin, for winning what he’d call a battle over principle (I’d call it a dick-swinging contest, but then I’m just a “blogger seeking relevance through savagery and acerbic wit,” as Joe Benning so aptly put it) with the Legislature. In the face of a thinly-veiled veto threat, House and Senate leaders withdrew their proposal to make some rich folks pay more and cut taxes for middle-income Vermonters.
And that’s what it came to in the end: Our Democratic Governor, defending wealthy Vermonters’ right to pay embarrassingly little in state income tax. And he won. Huzzah!
The Governor began this legislative session by loudly opposing “broad-based tax increases” while advocating tax hikes that didn’t fit his customized definition of “broad-based taxes” — the gas tax hike and his late unlamented plan to cut Vermont’s share of the Earned Income Tax Credit, not to mention the increase in state property tax. (Which was out of his control, but he could have proposed some corresponding relief if he cared to.) Indeed, eventually he stopped trying to define “broad-based taxes,” since the State House press corps wasn’t buying that particular bridge to nowhere.
The Legislature, which rejected his kick-the-poor ideas for raising revenue (EITC) and cutting expenses (the five-year lifetime cap on Reach Up benefits), kept coming up with creative ways to raise revenue while evading his hard line on taxes. And as quickly as they set ’em up, he knocked ’em down. As the session drew to a close, it became clear that he’d rather sacrifice his own well-crafted spending proposals than be forced to raise the taxes he didn’t want to raise.
The final Legislative proposal was a revenue-neutral idea to make the income tax a bit more progressive. It would have set limits on tax deductions, imposed a minimum 3% tax on top earners, and begun the process of shifting our state income tax from a “federal taxable income” basis to “adjusted gross income.” (As I wrote on March 22, Vermont is one of a handful of states that levy income tax on FTI rather than AGI. Using FTI means the wealthy pay a much lower effective tax rate. And I’m not an accountant, but it seems to me that they get to double-count some of their tax deductions on their Vermont returns. That’s a big break they don’t get in most other states.)
The overall effect: top earners would pay more. The revenue would go to lowering middle-class taxes, thus offering Shumlin a way around his curiously defined no-tax-hike pledge.
And he turned it down, offering some unconvincing rationales.
He first claimed that the plan violated his closed-door “Three Kings” deal with House Speaker Shap Smith and Senate Penitent Pro Tem John Campbell. He also objected to “changing tax policy on the fly,” which is an interesting way to put it. The AGI shift was proposed by the state’s Blue Ribbon Tax Commission two years ago, and the other two ideas have been kicking around the State House for the past few weeks.
Yeah, they’ve been around a while. The only thing “on the fly” about the budget and tax bill was the $10 million in budget cuts mandated by the Three Kings. Legislative budget-writers had to figure out those cuts in a few days’ time.
Shumlin’s eminence sel et poivre, Jeb Spaulding, advanced the “unintended consequences” wheeze. He warned that the legislation might hurt people with large medical bills — which could be fixed, if need be, with a small tweak. He said it might hurt the real-estate market — as if a slight raise in taxes would impede anyone with the means to buy a costly home. He said it could hurt charitable giving —
— except that donors already get a much more valuable deduction on their federal taxes. Because Vermont’s taxes are based on FTI, they effectively get a second deduction on state taxes. Are they really going to stop giving to nonprofits because they might lose a portion of a much smaller state tax break?
Legislative leaders hope to build a case for their tax plan and bring it back in 2014. I hope they do. Vermont’s tax system isn’t as fair or progressive as the Governor says it is. We can do better. And we could be doing better right now, except for Governor Shumlin’s opposition.
So congratulations, Governor. You stood your ground. Of course, in the process you stomped all over lawmakers who tried to devise a better tax system and aimed inflammatory and misleading rhetoric against your fellow Democrats. But I’m sure it was all worthwhile, just so wealthy Vermonters can continue to pay scandalously little in state income tax.
I don’t like it when people start arbitrarily defining what is “rich”. The thresholds always ensnares people who aren’t “rich” or who work extra hard to make additional income. For example, nurses who take extra weekend or shift work and then have this additional money taxed to death. And there’s also the case with a family with two incomes versus one. There is no reason the one with two incomes should be taxed at a higher rate than the one with one income.
If there was anything evident in this session, it was lawmakers scrambling to find new things to tax (and even old things to tax twice:gas), like soda, rip-open tickets, and cloud computing (and at the fed level, Welch and his internet sales tax so inappropriately called “fairness”). It seems nothing was out of consideration and yet the same level of effort was not directed toward cost cutting. I’ve supported almost all Dems in the past, but going forward it will be harder to do if the mentality of the current legislature continues. At some point, one has to draw a line. We can’t fix every problem. And we surely can’t by reclassifyiing middleclass as “rich” and taxing them as such.