Reports say that the governor’s budget will “pinch” Vermonters. The fact is though that the governor is doing all he can to avoid pinching the sensitive upper income brackets. Governor Jim Douglas is asking most Vermonters to make sacrifices during these difficult times. State services are being cut to the bone, state fees are being increased and there is talk of cutting unemployment benefits.
Care and Feeding of the Upper Tax Brackets: Minus any hint of shared sacrifice, Douglas has proposed replacing a 40% capital gains tax exemption removed last year that favors those in upper income brackets. This move and other changes he proposes would, according to the Times Argus, result in $9.9 million loss of state revenue. He attempts to justify this by raising the fear that Vermont’s rich will have no incentive to stay unless their taxes are lowered.
Douglas acknowledged last week that if his proposal were enacted it would effectively be a tax reduction for top earners. Vermont's having among the highest top margin rates risks driving wealthier Vermonters out of the state, Douglas said.
"We have to make sure there are people in those brackets in the years to come," he said. "I think we are going to see fewer of them."
In addition, Douglas would roll back changes made last year that reduced how much money could be excluded from Vermont's estate taxes.
It remains to be seen how empathetic those experiencing Catamount health cost increases, cuts in human services, housing support service cuts and limited state Medicaid programs will be toward Governor Douglass’ proposal. No explanation was offered as to why a horde of upper bracket Vermonters didn’t leave the state in droves over the past year.
Perhaps some sympathy could be had if he were to document the coming exodus, show the empty mansions, the derelict condos, the luxury cars packed high with goods abandoned along the highway in hurried flight from the tyranny of a closed capital gains tax loophole.
No word yet of upper tax bracket exodus from other states such as Connecticut that have raised taxes on the wealthy. Last year Connecticut enacted a new tax on top income brackets that increases taxes on incomes above a certain threshold. Governor Douglas might be shocked by the reaction.
In a letter, 21 upper income Connecticut residents state "We are willing and able to share in the solution to our state's budget crisis":
"As upper-income residents of Connecticut who treasure the quality of life in our state, we believe that Governor Rell's proposed budget cuts unnecessarily limit the State's ability to maintain public structures and human services that are vital to keeping Connecticut strong and vibrant […]
…the rich need incentives to stay in Vermont, because they have the option of leaving. The rest of us? As long as we can’t afford gas money to get to the border, no incentives are required.
People live in VT because the state is beautiful and has an incredible richness of natural resources, a strong sense of community, and a fierce independent streak.
If the wealthy were going to pull up their tent stakes and leave town over taxes, they’d have done it when the cap gains tax exemption was removed. This is all bluff.
I’m so sick of the right wing trying to scare people into doing their bidding. Enough. We’ve been pulling their share of the economic weight for far too long. The financial fat cats have become fiscally flabby by failing to do their fair share, they could use to work a little harder for their wealth.
(Sorry about the missing comment – touched the wrong key by accident and away it went without my comment.)
I believe there really is no way that the budget shortfall can realistically get patched without there being an income tax increase.
So it seems to me that we have three kinds of politicians out there. Those that are hard-wired to protect the wealthy and will never go along with a tax increase (like Gov. Douglas). Those that say that they won’t raise taxes (like Shumlin) but will eventually. And those few, like Doug Racine that say flat out that there needs to be an income tax surcharge.
Personally, I think it is absurd to cut critical services (and make no mistake about it, that is what is proposed) when there are plenty of people doing just fine and can easily afford to pay some more income tax and help get through these tough times. In fact, that is what the income tax does – – tax those that have the income and can pay.
I have greater respect for the brave politicians that know quite well that income tax increases are not politically popular but are the right thing to do and say so.
Norm Etkind
It seems obvious to me that the tax cuts for the wealthy that were enacted during GWB’s time in office did more harm than good (for the vast majority of us), and it seems to me that the only reason this tax policy idea stays on the table is because of the fear tactics used to support it.
“We have to make sure there are people in those brackets in the years to come.”
Really? Why?
And who exactly is “We“?
Everybody in Oregon with an income over $250,000 will soon be leaving if the persistent logic of Gov.Douglas is to be believed.
http://calitics.com/diary/1099…
leaving just enough for one calf every now and then.
I am sorry but who can most afford to handle an increase in taxes? The unemployed or the wealthy? The down and out or the wealthy? The middle/lower class or the wealthy? Come one all ready. If “they” were going to leave because of an increase in taxes they would have left eons ago. People move and stay in Vermont because of what it is and not because of its tax structure. We all know people building vacation homes daily from out of state. Is this because we have such a high tax structure? I doubt it.
Tax those who can afford rather than taking away from those who can’t.