From the Senate President Pro Tem's Office:
Since January 2008, the state has cut $70 million from the state budget and the current FY10 budget contains $28 million in additional cuts. To alleviate the need to make further cuts, which would devastate essential state services and layoff over three hundred state employees, Senator Shumlin outlined a revenue package that would raise roughly $25 million. Vermont is only one of nine states that has the capital gains loophole in place.
“With the capital gains loophole, Vermont is taxing hard working people more than those who live off their investments or trust funds,” said Senator Shumlin. “This is an unfair tax policy and I am pleased to have proposed its elimination today.
By building on the House's revenue package and closing the capital gains loophole, the proposal also lowers Vermonters income taxes by lowering the marginal tax rates. The proposal would drop Vermont's top marginal rate from 1st to 5th nationally. Under this proposal, all taxpayers without capital gains (84% of Vermonters) will have lower taxes.
The following details were included:
$ 8.4 million H.442 Misc. Tax Bill – Accept Revenue Provisions
$ 4.2 million Satellite Gross Receipts Tax @ 5%
$ 2.0 million Increase the Other Tobacco Products Tax from 41% to 92%
$ 4.5 million Increase the Cigarette Tax by 25 cents from $1.99 to $2.24 per pack
$ 6.0 million Increase the Liquor Tax from 25% to 35% of gross receipts
$25.1 million TOTALPersonal Income Tax Proposal
Lowers marginal tax rates on all types of income for all taxpayers.
Current Law Proposed Marginal Rates Rate Change Percent Change
3.6% 3.50% -0.10 -2.8%
7.2% 7.10% -0.10 -1.4%
8.5% 8.25% -0.25 -2.9%
9.0% 8.50% -0.50 -5.6%
9.5% 8.95% -0.55 -5.8%
Obviously there's a lot to discuss here, so there'll be more to come.
Hallafreakin’ Lula! Wipe that sleep from your eyes and it all becomes clear.
I heard about this this afternoon. They’ve got the administration a little flat-footed right now. Shumlin came in armed with quotes from Douglas about how unfair the work penalty, a/k/a the capital gains loophole, is.
Now they have to stand up to him.
We’ll see what Douglas and the Republicans do. These capital gains loopholes are one of their babies and they will most likely preserve it at all costs. This could be a good fight, but Shumlin has a good point along with them in the corner of the ring. Thanks for putting this up.
proposals; one from Shumlin and one from the Finance committee
Personally, I’m very pleased that both proposals seek to eliminate (or reduce dramatically) the capital gains exclusion. Having said that, I’m disappointed that it is tied to decreases in marginal rates.
Both proposals note that Vermont’s national ranking would change. The implication is that such rankings are important factors in location decisions made by businesses and high-income residents. There is no persuasive evidence to support this. Indeed, a recent study from Princeton found that an increase in New Jersey’s top marginal rate was revenue positive – significantly so. Those who assert otherwise offer nothing more than anecdotes from self-interested parties.
In addition, both proposals offer substantial savings to the minority of high-income filers without capital gains income. I’m struggling to understand why those who earn more than $1 million but have no capital gains should receive a tax windfall of $8,000 – $10,000 at a time when programs are being cut and workers laid off.
Furthermore, the idea that the elimination of the capital gains exclusion needs to be offset by rate reductions to achieve “revenue neutrality” assumes that our current system is the appropriate baseline. I strongly disagree.
The cap gains exclusion was a costly mistake that contributed to the state’s budget problems ($159 million and counting). It should be corrected before they determine what other steps may be necessary to close the gap.
To those who suggest that Vermont should “live within its means”, I say our current “means” have been reduced artificially by the exclusion and that the baseline should be raised to include the foregone capital gains revenue.
And note that the higher the income the higher the rate reduction. Nice.
And “sin” taxes are regressive.
Again, I’m glad they’re (finally) addressing the cap gains exclusion but there is absolutely no justification for reducing the marginal rates (except for politics of course). Once reduced, it’s very hard to raise them again.
After reading Mr. Hoffer’s comments, I agree Shumlin’s idea seems kind of watered down. Too bad.
Anyone who knows anything knows that a higher percentage of lower income people vs. higher income people smoke. So, let’s hit them up with yet higher taxes and get the per pack cost up to ten dollars each! Maybe that will make them quit!
If we want to do something useful, let’s tax cigarette and alcohol advertising. Some magazines are 50% alcohol and tobacco ads. They all report and track Vermont sales. So, a tax of lets say ten cents per page of alcohol or tobacco ad should bring in a couple of million anyway.
PJ
How much I enjoyed this site…
It’s been a while since I’ve visited. Minnesota has some great sites, too, but GMD is one of a kind.
Cheers.
The income tax is arguably the fairest tax out there because you pay based on your ability to do so (and in appropriate proportion to how you are benefiting from our great and wonderful land).
So, is it a good thing to be number one in this category?
PJ