Tax counterproposal: Target the rich
By PETER HIRSCHFELD
Vermont Press Bureau | February 15,2013
MONTPELIER — Calling a proposal unveiled by Gov. Peter Shumlin last month “an insult to the working families of our state,” Progressives and their liberal Democratic allies outlined a $50 million revenue package Thursday that relies on increased contributions from wealthier Vermonters.
The nine-prong plan includes everything from rate hikes on high-income earners to a 6 percent sales tax on items of clothing costing more than $100. Proponents say the package targets a class of Vermonters — people making more than $200,000 — that has seen its average annual income nearly double over the last decade.
“Really it is a matter of fairness and it’s a matter of looking at what are the priorities for the state and who can afford to help us provide the services that government needs to provide,” said Sen. David Zuckerman, a Chittenden County Progressive/Democrat, during a late-morning news conference in the Statehouse.
Shumlin last month thrilled the Democrat-controlled Legislature by calling for $17 million in new child care subsidies for low-income Vermonters. His plan to fund it has been far less popular: Shumlin wants to reduce by two-thirds a state “earned income tax credit” that now benefits the 45,000 lowest-wage workers in Vermont.
Progressives said the Democratic governor ought to be looking at the highest earners in the state to fund his proposal, not the lowest.
Higher-income earners have seen wages soar over the last decade. People making between $200,000 and $300,000 per year, for example, saw their incomes climb by an average of 83 percent between 2001 and 2011. Working-class and poor residents haven’t fared so well.
People making between $40,000 and $60,000, for instance, on average saw almost no wage growth over the last decade. And Vermonters with annual incomes of $30,000 or less have seen wages decline over the same period. In 1991, the top 2 percent of earners accounted for 7.5 percent of all income. In 2007, they were pulling in 24 percent of the pie.
“We cannot continue to ask people who have the least to pay the most,” said Sen. Anthony Pollina, a Progressive/Democrat from Washington County.
At a news conference Thursday, Shumlin defended his plan, saying the earned income tax credit — it provides a lump sum check annually to the working poor — isn’t a smart investment.
“I firmly believe that my plan to move Vermonters away from poverty to prosperity is absolutely dependent on finding a smarter way to spend those EITC dollars,” Shumlin said. “We’ve got to take the dollars we’re spending now and spend them better to get better outcomes.”
Other items in the Progressives’ revenue plan include:
A bank franchise tax, which would raise an estimated $5 million.
Eliminating the capital gains exemption on the first $5,000 of investment income, for a projected $11 million in new revenue.
Increasing the property transfer tax on houses that cost more than $500,000, to bring in $1.5 million.
Reducing the exemption on the estate tax from the first $2.75 million to the first $1 million, which would generate $1.9 million.
A tax on the extraction of groundwater and earth, to generate an estimated $4.5 million.