Tag Archives: Institute for Taxation and Economic Policy

Phil Scott Makes Tax Cut Plan Somewhat Less Awful

It hasn’t been that long since Phil Scott unveiled his glossy 39-page economic plan, but he’s already acknowledging one major mistake.

As the Vermont Press Bureau’s Neal Goswami reported over the weekend, Scott’s plan to cut capital gains taxes was based on Vermont’s old tax formula. As a result, the Scott campaign has watered down its cap-gains proposal.

Details in a moment. But first, let’s just put this out there:

[Cutting the capital gains tax] would spur tax shelters, generate little new saving, give a windfall to the wealthy, and make long-term budget problems even worse.

That’s from the commie-pinkos at the Brookings Institution. There’s plenty where that came from; the consensus among experts (not employed by the Cato Institute and other right-wing policy shops) is that capital gains tax cuts are, at best, a grossly inefficient way to spur economic growth. At worst, they’re a pointless squandering of resources.

But let’s return to Phil Scott’s plan, before and after. This will get into the weeds of tax policy, so my apologies in advance. I’ll try to keep things simple.

Vermont used to allow taxpayers to exclude 40 percent of their capital gains. That was killed in 2009, in favor of an exclusion for the first $2,500 in capital gains. The change was designed to concentrate the tax benefits at lower income levels; whether you got $2,500 in capital gains or $2,500,000, you got the same tax break.

Scott’s original plan would have restored the 40 percent exclusion.

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