By Timothy McQuiston. Businesspeople did not have to encourage Governor Douglas to use the bully pulpit to make his case for vetoing the Vermont state budget, but they did it anyway. Douglas was at DEW Construction in Williston for a town hall style meeting with about 40 business leaders. Douglas has also visited businesspeople in St Albans and in the Northeast Kingdom to spread his message that the Legislature s $4.5 billion budget spends too much, taxes too much, and where lawmakers did make cuts, they made the wrong cuts.
What he was really trying to do, without mincing too many words, was to get employers and their workers to contact their legislators and urge them to sustain his veto of the budget when the Legislature meets in a special session June 2. If Legislative leaders can muster a two-thirds majority in both the House and Senate, they will override the veto and the budget will become law. If the veto is sustained, lawmakers will have to work quickly to get another package passed. The 2010 fiscal year starts July 1.
The choices, I think, have been poor, Douglas told the clearly like-minded gathering.
Legislative leaders have maintained throughout the budget process that the state cannot cut back spending too much because the need for services has grown as the economy has receded and that state spending, as with the federal package, should be used for economic stimulus.
Several times during his meeting, Douglas mentioned a recent Forbes magazine report that stated that Vermont has the highest tax burden in the nation. He also referenced Vermont s high standing in social services. Other issues were the Unemployment Insurance trust fund, which is expected to run into significant deficit, and the state pension fund, which he said will also run into deficit. He said in neither case did the Legislature take action.
He also said that the gas tax will go up along with gas prices themselves, and that it is inevitable that electric rates will also go up. To raise tax rates, including retroactively raising the estate and capital gains taxes, would put too much burden on taxpayers at a time of economic recession. He said he favors a leveling of the capital gains tax, which is now lower than the income tax, but starting next year.
According to the administration: The combined tax hit as a result of legislative changes in capital gains exclusion ($16.2 million) and limiting deductions ($15.5 million) is $31.7 million, but the legislative proposal only drops marginal tax rates by $22.4 million with the additional $9.3 million siphoned off the top as a tax increase going to General Fund spending. This a $9.3 million increase in income taxes on Vermonters, the administration maintains.
Douglas also mentioned that the projected deficits in the 2011 and 2012 budget will run into the hundreds of millions if a more sustainable approach to spending is not enacted.
Legislative leaders also held a meeting of their own Wednesday afternoon in Montpelier and will hold another tomorrow. The House and Senate Appropriations Committees, along with the Chairs of Ways and Means, Finance, Human Services, Health Care and Government Operations, will hold a public hearing from 1 4 pm in Room 11 on the governor s proposal to make deeper General Fund cuts. You can sign-up in advance to testify by contacting the Joint Fiscal office at 828-5767 and asking for Theresa, or by emailing [email protected].
In a statement following the legislative hearing today, Speaker of the House Shap Smith issued these comments: The Senate and House Finance and Ways and Means Committees, joined by the Chairs of Senate and House Appropriations and Education, heard from Vermonters across the state on the adverse impact that the governor s budget would have on their lives and businesses. Legislators primarily heard from small business owners, school board members and school administrators who voiced their concern with the Governor s proposal to increase property taxes on the middle class, lower taxes for the wealthy and double the tobacco taxes and hurt our high quality local schools.
I m not a high-paid lobbyist or special interest, said Bill MacDonald, owner of the Waits River General Store and Chair of the board of the Vermont Grocers Association. I m just here to represent my business. MacDonald urged legislators to reject the Governor s proposal to double tobacco taxes because of the negative impact it would have on his business.
After listening to Vermonters today, I am even more concerned about the Governor s proposal to raise property taxes on middle income Vermonters, Smith said. As the product of Vermont s public schools and the father of a first grader I am also extremely concerned about how the Governor s proposal will negatively impact the education our kids receive.
As for looking back to Governor Snelling s handling of the 1991 recession, in which he agreed to a spending and tax increase to write down a deficit, Douglas said Vermont was in a much different situation then. For instance, he said, the state income tax was 4 percent instead of 6 as it is now, the rooms and meals tax was 7 percent instead of 9. Local options taxes in some places, like Burlington, Manchester and, now, Rutland Town, among others, have pushed those taxes a point higher. Other taxes were also lower. So, he said, the tax burden is overall greater now than it was then and therefore the state has less flexibility.
Vermonters are really hurting and we are not immune to the effects of the national economic recession. That is why we have to do all we can to pass a balanced, responsible and sustainable budget that invests in economic development, said Governor Douglas. Legislative leaders have failed to do so by passing a budget that raises taxes on small businesses and farmers and leaves a staggering shortfall of over $200 million over the next two years. These deficits cannot be pushed off to the future when the economy could be worse and economic stimulus dollars more scarce.
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