Press Reports On Pearson Legislation

The proposed tax hike on Vermonters earning more than $171,000 is the most public display yet of liberal lawmakers breaking ranks with the Shumlin administration and legislative leaders, who have said broad-based tax increases should not be used to help fill a $176 million budget deficit.

Rep. Chris Pearson, the leader of the Progressive Caucus in the House, said the soon-to-be introduced legislation will have more than a dozen other sponsors.

“When we consider the budget cuts over the last few years and the impact it’s brought to human services and other critical roles in state government, it’s clear we must find an alternative to more cuts,” Pearson said.

Gov. Peter Shumlin has proposed a budget that uses a $44 million reduction to the Agency of Human Services to help resolve the deficit, a cut that advocates and some lawmakers say would profoundly affect the elderly and people with mental-health problems.

Pearson and other legislators said the income-tax increase would generate just less than $17 million and help offset some of the proposed reductions.

Pearson said the tax hike, which would affect the top two income brackets, is part of a broader economic recovery plan.

Pearson unveiled the plan Thursday with Sen. Anthony Pollina, Sen. Dick McCormack and Rep. Susan Davis, who called on the government to buy local products and hire local companies for publicly funded projects, and to pass a bill that would recover the roughly $2 million to $3 million in unclaimed bottle deposits from beverage distributors.

McCormack, a Windsor County Democrat, said the proposed tax increase is not a scheme to “eat the rich,” but a method for going where the money is.

“The people who will pay this if this passes will be rich after they’ve paid their taxes,” McCormack said.

Under the plan, the top income tax rate would increase from 8.95 percent to 10.45 percent and the second highest tax bracket would increase from 8.8 percent to 9.8 percent, said Pearson.

The top bracket includes Vermonters making more than $370,000, and the legislation would mean a $10,137 average increase for them, lawmakers said. For the next bracket down, which starts at $171,000, it would mean an average increase of $589, Pearson said.

Nearly 4,000 Vermont taxpayers would be affected, said Pearson.

It’s hard to gauge at this point how many other legislators would back an income-tax hike, but proponents of the bill claim the support for the idea seems to be growing.

“There are a lot of people who want this out on the table and are eager to have the conversation,” Pollina said.

As he has circulated the bill, Pearson said, other lawmakers are saying: “Yeah, we’re going to have to do something, and that basic understanding is out there.”

House Speaker Shap Smith does not support raising taxes “at this point in time,” he said.

“I think we need to figure out what we need to spend — and I don’t think we’ve done that yet — before we can determine if we need to raise additional revenue,” Smith said.

Smith, a Democrat from Morrisville, acknowledged the rumblings among some Democrats who want to raise taxes to fill the budget gap, and pointed out it happens every year.

“It’s fine to have those discussions,” Smith said.

Raising taxes is not the best way to solve the budget problems, said Senate President Pro Tem John Campbell, but it’s got to be on the table.

“To me, it’s irresponsible for someone in my position to say there’s no way we’re going to raise taxes,” Campbell said.

Gov. Peter Shumlin remained steadfast Wednesday in his opposition to income-tax increases, though the Democrat supports similar efforts on a federal level. He said imposing the surcharge unilaterally will put Vermont at a competitive disadvantage.

“Vermont is not an island,” Shumlin said. “We all know people will pay a certain amount of taxes on the state level and when those taxes become disproportionate compared to neighboring rates, they migrate.”