Editor’s note: Rep. Thomas F. Koch, R/D, represents Barre Town in the Vermont House of Representatives. This column is a reprint of his May 5 “Scribblings,” an occasional newsletter from the Legislature.
It’s been so long since I’ve written an issue of “Scribblings” that it’s difficult to know where to begin. Part of the reason for the interlude is simply that the workload has been so heavy that I haven’t had enough time to do any writing. This is probably the busiest session I’ve seen in the 21 years I’ve served in the Legislature. A lot has been happening. Unfortunately, not much of it has been good.
A good place to pick up again is probably taxes: education property, transportation and miscellaneous.
The base education property tax rate for the coming year has been raised 5 cents, from 89 cents for homestead properties to 94 cents and from $1.38 to $1.44 for non-homestead properties. Of course, those are not at all the final rates for any particular community, due to the various factors by which the base rate is adjusted for each individual community, including the CLA (common level of appraisal) and overall education spending in the community, which result in an effective tax rate in any given community that is substantially higher than the base rate. And fair warning: the current projection is that the tax rate increase next year will be even greater than the increase this year!!
Officially, the explanation for these tax increases in that it’s not the Legislature’s fault, but rather because school boards and voters keep approving larger budgets. That might wash, except for the fact that many school boards, including the Barre Town and Spaulding High School boards, have done their very best in recent years to keep expenses down. They have established new student-teacher ratios, negotiated fair but frugal contracts, maintained prudent energy conservation programs, and in other ways tried to protect the taxpayers’ interests while providing excellent educational opportunities for our children. Yet taxes continue to rise.
A more accurate explanation is that Act 60/68 is structured in such a manner as to make it difficult for any one school district to control its own tax rate, because the budget adopted by each school district affects the tax rate of every other school district around the state. Furthermore, the falling property values associated with the recession result in a countervailing increase in the property tax rate. And finally, special education costs and numerous state-mandated programs drive up the cost of operating our schools. So much for “local control.”
It’s fine for politicians to claim that they are not to blame for rising education property tax rates; but it is well to remember that when those tax rates were falling during most of the last decade, those same politicians were quick to step forward and claim the credit!
In my view, the Act 60/68 school funding system needs a complete overhaul. Unfortunately, there is no perceptible interest in such an overhaul on the part of present leadership in Montpelier.
The next group of taxes would be transportation taxes, and in this case I have to confess that I was “for them before I was against them.”
When the annual transportation bill came out on the House floor, with its numerous construction and maintenance projects, it proposed a combination of fuel tax increases and new bonding to close a $36 million gap between available revenues and spending. A large part of that requested revenue was for the purpose of matching $74 million in federal funds that otherwise could have been “left on the table.” I see maintenance of our roads and bridges as a legitimate government function, as opposed to many of the programs we fund in Montpelier, and as I travel around the state, I certainly see roads and bridges that are badly in need of repair. Simply driving between Barre and Montpelier on I-89 reveals patches of missing pavement and ruts that can bounce a vehicle from side to side. And there are numerous other examples wherever you go.
The principal source of revenue for the Transportation Fund is fuel taxes, especially the gas tax. The trouble is that the Vermont gas tax has always been a flat tax — until last week, 19 cents per gallon — and due to the price of gas, the general state of the economy, more fuel-efficient vehicles, and other factors, people are purchasing less gas. For that reason, gas tax revenues have actually fallen at the same time that the price of asphalt, machinery, labor and other costs of highway maintenance have kept rising. Clearly, there is a need for greater capacity in the Transportation Fund to support its stated purposes.
The final set of taxes is the annual “miscellaneous tax bill.” “Annual” means that no year goes by without some form of tampering with our taxes: some go down, but most go up, and some get repealed, but more get passed. For the taxpayer, it’s not a winning game!
There are ways to solve the revenue shortage, however, that do not involve raising taxes. One way would be to recognize that of the six percent purchase and use tax on motor vehicles, one-third of that amount (or about $29 million) goes to the Education Fund, not the Transportation Fund where it belongs. These are revenues generated by transportation activities, and they should be used for transportation purposes, but that suggestion has been summarily rejected by the majority. Another way would be to reduce some expenditures in the T-fund. My personal suggestion would be to eliminate the Amtrak subsidy, which began at a level of $600,000 about 15 years ago and has now grown to over $6 million per year, or nearly $55 per ticket! Supporters of passenger rail service, however, go apoplectic when you make that suggestion! And, of course, we could stop “raiding” the T-fund to pay for General Fund expenses.
When the T-fund had a surplus a number of years ago, the Legislature began the habit of paying for non-transportation expenses from the T-fund. In recent years, we have taken steps to reduce these expenditures substantially, but not completely. Stopping the “raid” would solve the T-fund revenue shortage, and eliminating the raid gradually would be a great help. For that reason, I sponsored an amendment that would phase out the T-fund transfer to the state police over a period of years, requiring that department to be supported by the General Fund. My amendment, however, was defeated, 49 to 88.
Having been beaten back on every effort to avoid a gas tax increase by substituting alternatives, when the final vote on the House bill came, I reluctantly supported the bill that included a gas tax increase. The bill then went to the Senate, which revised the tax increase substantially. A compromise was then negotiated, and after listening to many Barre Town residents who let me know that they opposed the tax, examining the provisions of the compromise, and realizing that at best, it was only a temporary fix that would require a new round of transportation tax increases in a couple of years, I voted NO on the compromise. It passed, however, the governor promptly signed it, and it took effect on May 1.
The final set of taxes is the annual “miscellaneous tax bill.” “Annual” means that no year goes by without some form of tampering with our taxes: some go down, but most go up, and some get repealed, but more get passed. For the taxpayer, it’s not a winning game!
This year, the House Ways and Means Committee decided that it needed to raise an additional $20 million. So a week or two later, when the bill emerged from committee, it proposed a net addition of $27 million! (So what’s seven million, more or less?!) There were a lot of changes, but the most significant proposals to raise this new revenue were the following:
• subjecting bottled water, soft drinks, and candy to the sales tax;
• raising the tax on cigarettes by 50 cents a pack;
• applying the meals tax to sales made through vending machines;
• raising the meals tax from 9 percent to 9.5 percent for one year, repealing the increase on July 1, 2014 (Anyone want to buy a bridge in Brooklyn?);
• applying the sales tax to any clothing that costs more than $110;
• collapsing the highest two income tax brackets, so that those who are now in the second highest bracket will end up paying the highest rate; and
• limiting itemized deductions allowable for Vermont purposes to two and a half times the amount of the federal standard deduction.
My position on all of this was simple: control spending like real Vermonters do when ends don’t meet, and you don’t need this new revenue. (By the way, the bill had some automatic tax increases built in for next year, to the tune of $8.2 million, on top of the $27 million this year.) I voted NO, but of course, the bill passed and went on over to the Senate.
The Senate took a very different approach. In the first place, their version of the bill raises “only” $10.2 million this year and $2.5 million additional next year. They do it this way:
• taxing satellite TV charges in excess of $30 per month to the tune of 3 percent this year, 4 percent next year, and 5 percent the following year;
• taxing break-open tickets at a rate of 3 percent;
• limiting itemized deductions for mortgage interest to $12,000 per year;
• increasing taxes on liquor; and
• applying the sales tax to bottled water.
That proposal passed the Senate this past week and was sent back to the House, which refused to concur and asked for a conference committee (which is routine on a bill like this.) Three senators and three representatives will now meet and try to work out a compromise, which both houses will then be asked to approve. Interestingly, if you compare the two versions, there is very little in common. The conference on this bill has the potential for being long, contentious and drawn out. It could delay our adjournment.
So that’s the broad view. However, it always pays to read the “fine print.” Section 8 of the Senate’s bill consists of one sentence that reads:
Sec. 8. 32 V.S.A. §3102(l) is added to read: The Commissioner shall provide the Joint Fiscal Office with state returns and return information necessary for the Joint Fiscal Office or its agents to perform its duties, including conducting their own statistical studies, forecasts, and fiscal analysis.
The reference to the “Commissioner” is the commissioner of Taxes. The Joint Fiscal Office is an arm of the Legislature that helps us with issues relating to budgets, taxes, and the financial impact of proposed legislation. The Joint Fiscal Office is supervised by and works primarily under the direction of the Joint Fiscal Committee, which is composed of senators and representatives in the leadership of the legislative fiscal committees.
Note that there is not a word about redaction of personal identification information that would necessarily appear on tax returns. Nor is there any provision in this section providing for confidentiality of the information, or restricting its distribution beyond the confines of the Joint Fiscal Office! So if this section is enacted, can your tax return — or mine — be turned over to Joint Fiscal staff to peruse at their pleasure? Are they free to share those returns with any Joint Fiscal Committee members who request them? I certainly hope not, but if this section is going to become law — and I still haven’t heard a good reason why it should — it needs to have appropriate confidentiality provisions written in before it passes!
For me, the bottom line on the miscellaneous tax bill is simple: We don’t need it, and I will vote NO! The governor has made it clear that he doesn’t like either the House version or the Senate version, and it seems unlikely that he will favor some combination of the two. He has refused to say the word “veto,” but if he does choose to use a well-deserved veto on this bill, he will have my support and most likely the support of every other House Republican.
My reasons for opposing the bill and the governor’s reasons are quite different, however. In the governor’s case, he has opposed increasing any “broad-based” taxes. Tellingly, the governor keeps repeating that this is “not the time” to raise broad-based taxes. What he reveals in saying that is that “the time” will, indeed, come. That time will come when we have to raise between $1.6 billion and $2.0 billion in new taxes to support the governor’s Green Mountain Care, single-payer, health reform program, and he needs to save all the taxing capacity the state has in order to pay for that program. When that day comes, many a tear will be shed, but for now, that’s a different story.
In my view, we can trim a little spending — somewhere between $10 million and $27 million out of a five billion dollar budget is indeed “a little” — and then we don’t need a tax increase. Of course, cutting virtually any amount will bring out the cry that “we’re balancing the budget on the backs of Vermont’s most vulnerable citizens!”
Horsefeathers. Vermont’s most vulnerable citizens are the taxpayers!
