Ways Means Committee deliberates sale tax proposals

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(Host) The House Ways and Means Committee is taking a serious look at a plan to impose the state sales tax on all Internet purchases as part of a compromise Act 60 bill. Backers say the proposal could raise as much as $70 million a year, but they acknowledge there are some problems with this approach.

VPR’s Bob Kinzel reports:

(Kinzel) For the past few weeks, members of the House Ways and Means Committee and the Douglas administration have been meeting in an effort to find a compromise solution on Act 60 reform. The committee is supporting a plan to shift tax burdens from the property tax over to the income tax and an expanded sales tax.

The Senate is taking a different approach. Last month it gave its approval to a bill that links a town’s statewide property tax rate to their spending level on education. The governor has made it very clear that he doesn’t support the House plan to impose an income tax surcharge because he feels it will hurt economic development efforts. Douglas is also very unenthusiastic about the Ways and Means plan to tax virtually all professional services in the state.

Now a new proposal is emerging that seems to have the support of the Ways and Means committee and the Douglas administration. It’s part of a national effort to allow states to impose their sales tax on Internet purchases and all mail order sales. As many states face severe financial problems, the so called “streamlined plan” is gaining a lot of momentum. Ways and Means Chair Dick Marron (R-Stowe) thinks it holds a lot of promise:

(Marron) “Which would generate, on the estimates that we’ve seen, an additional $71 million in revenue for the state of Vermont by 2006. And that’s revenues we’re not currently getting from e-commerce transactions. So that’s almost a penny and a half on our current sales tax or even more than that so I think that there’s other avenues we need to explore.”

(Kinzel) There is a downside to the streamlined plan. In order to participate in the measure, states cannot have exemptions such as Vermont’s $100 exemption on clothing. Marron says the trade off may be worth it:

(Marron) “The draft bill that we have has those exemptions, would have to expire I believe sometime in 2006. But then again we might, you can exempt all clothing and that’s not an issue. And you can also have sales tax holidays. We have to look at that issue and that’s probably one of the stumbling blocks in the streamlined sales tax proposal.”

(Kinzel) The committee plans to discuss the proposal with members of the House Appropriations Committee next week.

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

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