House committee struggles with Act 60 reform

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(Host) The House Ways and Means Committee is struggling to put the final touches on its Act 60 reform plan. Governor Jim Douglas opposes the plan and a new economic analysis of the proposal has created some additional concern.

VPR’s Bob Kinzel reports:

(Kinzel) This has not been a good week for members of the House Ways and Means committee. For several weeks the committee has been working on an Act 60 reform plan. The goal of the proposal is to shift some of the financial burden for paying for education away from the property tax.

The plan eliminates most residential property taxes for schools and replaces them with a new income tax surcharge and a one percent increase in the state sales tax. In addition, the base of sales tax would be expanded to include many professional services and a variety of other products that are currently exempted from the tax.

Earlier this week Governor Douglas announced his opposition to the plan. Douglas says he’s concerned that higher income taxes will hurt the state economy. On Friday, a new economic analysis of the plan showed that the income tax provision, which would be a flat rate and capped at $150,000 of income, would raise tax rates the most on moderate income Vermonters. The approach being taken in the Ways and Means Committee is in sharp contrast to the approach taken in the Senate.

Last month, the Senate gave its approval to a plan that determines a town’s statewide property tax rate based on the community’s spending on education. Senate President Pro Tempore Peter Welch says the new analysis of the House plan is troubling:

(Welch) “It’s not going to do working Vermonters a lot of good if we end up with a substitute for the property tax that’s in fact more regressive than what we have now. We can’t have a cure that’s worse than the disease and if we end up having compromised dramatically the fundamental soundness and progressivity of our income tax, that is a big price to pay.”

(Kinzel) The chair of the Ways and Means Committee, Representative Dick Marron (R-Stowe)emphasizes that his committee’s plan is a tax shift and not a tax increase. And Marron says middle income Vermonters do not carry an unfair burden under the bill:

(Marron) “I don’t think that’s the case at all. I don’t think that’s what we’re doing here. We’re not attempting to do it here and anybody that throws that argument into things just doesn’t understand the system. We still are working on it and that’s one of the reasons we asked to have an economic analysis done.”

(Kinzel) Marron says he hopes to have a bill voted out of committee sometime next week.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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