Category Archives: Taxation

Phil Scott’s Tax Cut Hypocrisy

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At his press conference yesterday, Gov. Phil Scott offered a mixed message to the state Legislature. He seemed to be holding an olive branch, but whether he’ll use it as a peace offering or a weapon remains uncertain.

His topic was the budget, and the differences between his plan and what’s on the table in the Statehouse right now. He cautioned against squandering our historic federal windfall, by which he means spending it in ways he doesn’t like. But he offered some praise for Senate budget writers on one important point:

I heard in Senate Appropriations yesterday they are concerned about creating cliffs by funding new programs with one-time money that will be difficult to address in the future. I couldn’t agree more.

It’s a point he’s made before. Use the one-time money for one-time investments, not to create or sustain programs that will remain on the books after the federal tsunami recedes.

I’ve got no beef with that concept. But the governor expresses none of that concern when it comes to cutting taxes. We’ve got the money right now, thanks to all the economic activity generated by all those federal dollars. We can afford some tax relief now, but any tax cuts we adopt this year will remain on the books indefinitely.

And he doesn’t care about that.

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The Well-Off Are Flocking to Vermont

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This graph is wonderful news for those who think Vermont’s economy needs to grow. (It is, as I’ve written before, very bad news for our housing supply.) The pandemic has made our state the most desirable in the nation for affluent Americans.

More desirable than our famously low-tax neighbor, New Hampshire. More desirable than the Sun Belt or the tax havens of Texas and Florida. We’re Number One, baby!

It’s too soon to tell if this dramatic shift will continue. But if it does, then it’s time to rethink our policies across the board, from taxation to education to broadband to economic incentives.

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An Unsettling Incident in Senate Finance

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Senate Finance Committee chair Ann Cummings is a mixed bag. She’s not the most imaginative or energetic policymaker; she barely bothers to campaign and waltzes to re-election every two years. She’s one of the many veteran senators with a very well-developed sense of entitlement.

On the other hand, she knows her stuff. That’s nothing to sneeze at when it comes to issues as complex as taxes and state revenue.

But that didn’t seem to be the case during a Thursday committee hearing. Quite the opposite; she was shockingly uninformed on one of the biggest financial issues facing state government in 2021. I couldn’t believe it at first, but then she did it again.

The subject was S.59, a bill introduced by Sen. Cheryl Hooker and four other senators. The bill is an attempt to address the glaring shortfalls in the state teachers’ and public employees’ pension funds — an issue brought to the forefront by Treasurer Beth Pearce this year. After having defended the funds throughout her tenure, she started ringing the alarm bell on funding shortfalls and advocating substantial changes.

The Dem-dominated Legislature now faces a choice between finding a big new pot of money for the funds, and imposing pain on two of the party’s most important constituencies. S.59 opts for the former; it would add a 3% income tax surcharge on Vermonters with incomes of $500,000 or more, and devote the revenue to filling the hole in the pension funds. Sen. Ruth Hardy, a member of Senate Finance and an S.59 co-sponsor, presented an initial look at the bill. It didn’t go well.

Pearce’s pivot has been the unexpected policy story of 2021 (so far). She’s been making the rounds of relevant legislative committees, laying out the problems and presenting lawmakers with the unpleasant policy choice described in the previous paragraph. On February 4, she offered her pension testimony to Senate Finance.

One week later, Cummings made it clear she didn’t have a clue about Pearce’s position or the status of the pension plans.

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“The Tom and Jeff Show”

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Best: Gov. Scott, great lighting, busy but effective background. Worst: Pretty much everybody else.Extra demerits for “Redshift” Cummings and “Tiny” Hooper.

Vermont’s Emergency Board, an obscure but highly influential entity, held its twice-yearly meeting Tuesday afternoon to receive an updated revenue forecast from state economists Tom Kavet and Jeffrey Carr. Or, as the governor dubbed it, “The Tom and Jeff Show.” (The E-Board includes Gov. Phil Scott and the chairs of the Legislature’s four “money commitees” — House and Senate Appropriations, House Ways & Means, and Senate Finance. All of whom are women, it should be noted.)

Their report is posted as a downloadable file on the Legislative Joint Fiscal Office website. It’s recommended reading; it’s full of economic information beyond the basic tax projections. Video of the E-Board meeting available here.

Considering the pandemic and all, the news is astonishingly good. The new outlook for FY2021 predicts a very slight dropoff in total revenue, about $20M in all. That’s peanuts compared to earlier dire predictions. For FY2022, which begins in July, the new forecast predicts $77M in additional revenue. Carr and Kavet also predict a big increase in revenues for FY2023.

(Now, if you’re concerned about the federal deficit, it’s not all good news. Since 2018, deficit spending has gone from 105 percent of GDP to 135 percent. Covid relief is one driver of the increase; the other is the Trump tax cuts of 2017.)

How can this be? One simple explanation: A tsunami of federal recovery funds. And with Democratic control of the presidency and Congress, Carr and Kavet expect at least one more big infusion. (President-elect Biden has proposed a $1.9 trillion relief package.) So far, federal relief funds to Vermont account for a stunning 20 percent of the state’s gross domestic product.

“Without the federal money, I’d be declaring a five-alarm fire on Vermont’s economy,” said Carr. “We’re all Keynesians now. If we throw enough money at a problem, we can mitigate the damage in the aggregate.”

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Panel Recommends Complete Overhaul of State Tax System Yada Yada Yada

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Best: Durfee, meh background but great lighting, sharp business apparel. Worst: Tie between The Invisible Mattos and Breakfastin’ Jim Masland.

A major study of Vermont’s entire tax system, two years in the making, had its debut Friday morning before the House Ways & Means Committee. The panel recommended wide-ranging reforms, each of which would be a very heavy political lift. These include shifting education funding from property tax to income tax, eliminating virtually all exclusions from the state sales tax (which would mean a lowering of the tax rate), imposing an annual registration fee on electric vehicles to replace lost gas-tax revenue in the coming transition to electric transportation, and replacement of the Telephone Personal Property Tax with a comprehensive levy on all telecommunications.

The Tax Structure Commission’s report was labeled a “draft.” It wasn’t made clear how much work remains, and how many changes might be made, before a “final” report is released. (The report can be accessed through the Ways & Means website.)

Commission member Deb Brighton began with a cheery reminder of the typical fate of tax-reform panels. “Every five years or so, the Legislature decides it wants a fresh, hard look at taxation,” she noted. Left unsaid was the fact that these reports are usually consigned to a dusty shelf, because real tax reform means a whole lot of sacred cows get whacked. In light of this SIsyphean history, one can easily conclude that this report is also destined for the dustbin of history.

The most recent tax panel, the Blue Ribbon Tax Structure Commission, delivered its report in 2011. Many of the TSc’s bullet points are strikingly similar to the BRTSC’s. The earlier panel’s fate was partly a matter of realpolitik, but each commission, coincidentally, faces competition from a natural disaster. The Blue Ribbon report was issued less than eight months before Tropical Storm Irene devastated Vermont. The new report, need I say, comes in the middle of a pandemic and resultant economic devastation.

Any tax reform is a complicated, time-consuming process. When it has to compete with a natural disaster, it has almost no chance of getting through. Not that this report is doomed. Just that I’m not sanguine about its chances, even though reform is badly needed.

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Tell Me Again Why a Wealth Tax Is a Terrible Idea

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From the Public Assets Institute’s “State of Working Vermoint 2020”

An income tax surcharge — permanent or temporary — is a political nonstarter in Vermont. It was one of Lt. Gov. David Zuckerman’s major proposals in his bid for governor, and look what it got him. I am fully confident that a wealth tax would fail to draw anywhere near a majority in either the House or Senate Dem/Prog caucuses, let alone escape Gov. Phil Scott’s ever-ready veto pen.

But it’s a really good idea, and it’s a real shame we’re not taking it seriously.

First of all, Vermont needs new revenue. We’re threatened with huge budget cuts unless the federal government comes to our rescue. And even if it does, we need major public-sector investment on climate issues, broadband, housing, and higher education. Among many others. Even Scott acknowledges the need for these investments, but then he shrugs his shoulders and says we just can’t do it.

Second, the wealthiest Vermonters, just like the wealthiest Americans, have benefited tremendously from federal and state tax policies that cater to their interests. Zuckerman based his call for a temporary wealth tax on the fact that top earners really cashed in on Trump’s 2017 tax cuts. The lite-guv simply asked them to pay a share of that bounty for the greater good of the state.

But even before Trump, the system was rigged on behalf of the wealthiest. Ronald Reagan started this ball rolling, and it’s just gotten worse and worse since then. The above chart, taken from the Public Assets Institute’s “State of Working Vermont 2020” report, shows the result of these decades of an unbalanced economy and tax system. From the report:

Over the last four decades, there has been a dramatic upward redistribution of income in Vermont and across the country. In 2019, the top 20 percent of Vermont households received almost half (48.4 percenty) of the income earned in the state. The top 5 percent of households got 20.7 percent. Average income for the top 20 percent of households had increased more than 8 percent since 2007, after adjusting for inflation. For the bottom 20 percent, average income was down more than 7 percent.

And that’s just the income part of this equation. It doesn’t address taxation, which is generally very regressive at the federal level and in the vast majority of states.

After the jump: More mythbusting.

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When Fact-Checking Fails the Truth

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PolitiFact came into existence 13 years ago, with a simple mission: Try to discern the factual basis, or lack thereof, underlying statements and claims from political candidates. Dig through the bullshit, uncover the facts, and determine the truth.

It’s a great idea, but it’s very tricky in practice. It assumes that there is an absolute truth buried under the mountain of political bullshit. But what if there is no such truth? In the political arena, “facts” and “Ideology” are tightly interwoven. For instance, Vermont tends to rank near the bottom of the 50 states, or near the top, depending on what’s being measured. If you tried to determine where Vermont “really” ranks, you’d be dancing into a minefield.

In recent years, VTDigger has been part of the PolitiFact network, generating its own fact-checking pieces in an effort to help voters sort through political statements. Its latest effort, unfortunately, illustrates how PolitiFact-style analysis can lose sight of the truth in its search for “facts.”

In last week’s Digger debate, Lt. Gov. David Zuckerman floated his proposal for a temporary wealth tax aimed at the top five percent of earners — those who reaped the most benefit from the 2017 Trump tax cuts. The revenue would fund one-time investments that, Zuckerman says, would more than pay for themselves in economic growth.

Scott counter-claimed that Zuckerman’s “wealth tax” would reach all the way down to households earning $159,000 or more, which he characterized as “middle class.”

Well, as I pointed out in my debate blog, Vermont’s median income is $60,000, a long way from $!59K. Also, if your definition of the “middle class” reaches all the way up to the 95th percentile, there’s something wrong. Unless you’re saying the “middle class” includes everyone between the fifth percentile and the 95th.

“Think about two teachers, married teachers,” Scott said. But according to a 2019 Digger article, the average teacher salary in Vermont is a touch over $60,000. It’s possible for a teacher to earn $80,000, but it’s very uncommon.

Scott indulged in some misleading rhetoric, in other words. And yet, somehow, Digger concluded that Scott’s argument was “True,” the highest possible rating.

And the headline on the story was the real whopper: “Would Zuckerman’s wealth tax on the top 5% impact the middle class?”

The answer to that question is clearly, unequivocally “No.” And Scott’s claim, as restated in the headline, would properly be evaluated as “False.”

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Mr. Milne’s Recycling Bin

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Scott Milne tried to make up for his two previous statewide campaigns, which were remarkably issue-free, by releasing a lavishly illustrated and ridiculously detailed 60-point policy agenda this week.

His Tuesday announcement got lost in what turned out to be a very big news day, including Dr. Anthony Fauci’s guest appearance at Gov. Phil Scott’s Covid-19 briefing and Scott’s veto of the Global Warming Solutions Act.

I felt a little sorry for Milne at the time. But having taken a dip in his mile-wide-but-inch-deep policy pool, I decided it’s probably better for him that this stale batch of recycled ideas didn’t attract much notice. The package is dominated by conventional Republican tropes, failed Scott administration proposals, and plenty of filler to make the agenda seem more impressive than it is. You’d think a guy who’s reinvented himself as an edgy cryptocurrency investor would have some fresh ideas to contribute.

What’s even worse is that Milne completely fails to address some of our most critical challenges. There’s nothing about our raging opioid crisis, not a mention of racism, justice, policing or corrections, and barely a nod to climate change.

Since Milne’s document is searchable, we can quantify that. “Opiates” and “racism” are nowhere to be found. The word “climate” occurs precisely once in the 33-page document. And that’s a reference to Vermont’s economic climate.

After the jump: YOU get a tax incentive! And YOU get a tax incentive! EVERYBODY gets a tax incentive!!!

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Way Down In The Hole

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[Not Exactly As Illustrated]

Brookfield Asset Management, the alleged developer of Burlington’s infamous hole in the ground, continues to be frustratingly vague about its plans and its timeline for actually building something on the former site of the Burlington Town Center. And folks, this could turn out to be the defining issue in the March 2021 city elections, when incumbent Mayor Miro Weinberger is expected to seek a third term.

And, to craft the ultimate in mixed metaphors, that hole may become a millstone around his neck.

Demolition of the old mall began nearly two years ago. Original developer Don Sinex began boasting of big plans for the site way back in 2014. He tapped out earlier this year, and Brookfield stepped into the void.

(Sorry.)

(Although Sinex’s grand vision for Burlington CityPlace can, for shits and giggles, still be seen on its splashy website. Maybe cityplaceburlington.com been declared a historic monument or summat.)

City leaders are pressing Brookfield for some measure of certainty about its plans. Brookfield has failed to miss planning benchmarks since it took over the property. It presented sketches of a site plan to for the site to city council last month, but many crucial details remain to be filled in.

Weinberger, who was a loud and vocal supporter of Sinex and has now, a little more cautiously, tossed his hat into the Brookfield ring, is sounding a little antsy. Seven Days:

“We are looking for them to do more, quickly, to prove … that, in the end, it’s going to succeed,” Mayor Miro Weinberger said. “We are looking for some further confirmation on that.”

Good luck with that, Mr. Mayor. And good luck running for re-election if the hole is still a hole in early 2021. Which is not terribly farfetched; every step on a project of this scope is going to take time, especially in a micromanaging community like Burlington.

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Phil Scott’s charity appears to be violating state tax law

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Wheels for Warmth is a great thing. It turns an unutilized resource (winter tires sitting in garages) into money for emergency home heating assistance. It also gives many a Vermonter a chance to buy perfectly good snows on the cheap.

Win-win, and a testament to Phil Scott’s community-mindedness.

But when you run a charitable enterprise, no matter how noble, you have to play by the rules.

Charities that sell stuff to raise money are supposed to collect and pay sales tax. And as far as I can tell, Wheels for Warmth doesn’t do so.

An inquiry to the Tax Department produced the following information courtesy of Kirby Keeton, Tax Policy Analyst Interim General Counsel for the Department.

The state “cannot disclose tax information related to a specific taxpayer,” Keeton wrote. However, it can say whether an entity is registered to collect and pay sales tax.

Wheels for Warmth is not so registered.

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