(Host) The Douglas administration is proposing some changes to its tax reform plan. The changes are designed to benefit farmers and small business owners.
VPR’s Bob Kinzel reports.
(Kinzel) The key part of the plan eliminates the so-called “40 percent exemption” for capital gains revenue. Vermont is one of just five states that still allows individuals to exempt the first 40 percent of their capital gains from taxation. This part of the plan raises roughly $16 million and Douglas wants to use this new money to lower rates for all personal income taxpayers.
Many lawmakers assumed that the capital gains provision would only affect people who sell stock. But as the House Ways and Means Committee looked into the plan it became apparent that the provision had a wider application. The committee heard from people who have owned small businesses for many years who were concerned that they would face enormous tax liabilities when they sold their company. And there were also implications for farmers.
In response to these concerns, Administration Secretary Mike Smith says the governor will back a plan to restore the exemption for any tangible property that is owned for at least a 20-year period:
(Smith) “We are sympathetic to that argument where if you have a small business, buy a small business, you hold it for a length of time and you put sweat equity into that business, or a farm, where you’ve held it and you’re not just turning it over for a short-term gain, we would be sympathetic to amending the legislation to take that into account.”
(Kinzel) Ways and Means Chairman, Dick Marron says the change is a step in the right direction. But Marron says his panel may want to offer tax benefits for assets that are held for less than 20 years:
(Marron) “I think we need to look at that. We’re not trying to take care of somebody who’s trying to get rich quick on short-term basis. But people who invested their life’s work and savings and invested in a business – they deserve a decent retirement which, they probably are not going to have any kind of retirement income other than the sale of their business.”
(Kinzel) Marron says the bottom line is that the tax plan will not raise as much money as originally proposed, so he thinks the tax cuts will have to be scaled back:
(Marron) “I think that’s probably the best and the fairest way to do it.”
(Kinzel) The House Ways and Means Committee plans to study the new proposal over the next few weeks.
For Vermont Public Radio, I’m Bob Kinzel in Montpelier.