“What wealthy people want, I think, are strong, stable communities. And that means they need their neighbors to be doing well, [said Sen. Pollina]”
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Article published Dec 22, 2010
Pollina, longtime progressive, pitches tax hike on the rich
By Peter Hirschfeld
Vermont Press Bureau
MONTPELIER — The extension of Bush-era tax cuts will spare wealthy Vermonters considerable increases in their tax bills over the next two years.
But an incoming state senator has an idea of what to do with some of their savings: Use them to reduce the $112 million shortfall in next year’s general-fund budget.
Anthony Pollina, a two-time gubernatorial candidate who won a seat in Washington County, will propose a surcharge on the incomes of Vermonters making more than $250,000 annually.
Vermont legislators, he said, can keep the promise that President Barack Obama broke.
“President Obama and Democrats in Congress promised to end tax breaks for people making $250,000 and more,” said Pollina, a Progressive-turned-Democrat. “They broke their promise and these cuts will have a serious impact on Vermonters, leaving us less money to keep people warm and feed or put people to work.”
The tax deal cemented by Congress last week will spare the richest 2 percent of Americans about $130 billion in tax increases over the next two years. By Pollina’s rough estimates, the approximately 4,000 Vermonters making more than $250,000 annually will save between $60 million and $100 million per year as a result.
He said Tuesday that if Vermont can capture 5 percent of that money by assessing a surcharge on wealthy residents’ incomes, the state could generate between $3 million and $5 million in additional revenue, and minimize the effect of budgetary shortfalls on human-service programs for needy residents.
Pollina said revenue lost due to the extension of the tax cuts will mean less federal aid for Vermont’s human-service coffers.
“What I want to do is be able to remind people as often as possible that we are, in fact, losing revenue because of tax cuts provided by Washington and we should be prepared to recoup some of that money,” Pollina said.
A spokeswoman for Gov.-elect Peter Shumlin said the incoming governor supported the repeal of the tax cuts nationwide. But she said Shumlin will not support Pollina’s proposal.
“While the governor-elect is sympathetic to asking the wealthiest Americans to pay their fair share, we have to remember that Vermont is not an island,” Shumlin spokeswoman Alex MacLean said. “When you choose to implement such tax policies at the state level, you run the risk of driving people and businesses out of Vermont, which is especially dangerous at a time such as now when we desperately need job growth.”
Pollina said rich Vermonters — who enjoyed a disproportionate surge in wealth as a result of economic growth over the past decade — would enjoy direct benefits as a result of the surcharge.
“When Vermonters don’t have food to feed their families or fuel to heat their homes, we all share in the challenges that creates for people,” Pollina said. “What wealthy people want, I think, are strong, stable communities. And that means they need their neighbors to be doing well.”
Bill Driscoll, head of Associated Industries of Vermont, said the small population on which Pollina proposes to increase taxes includes small-business owners, managers and investors. Assessing new taxes on them, Driscoll said, would squelch job growth and hurt the lower-income Vermonters Pollina aims to help.
“When you’re imposing new taxes on these people, you’re not helping the state recover from recession because you’re not encouraging the creation of new jobs,” Driscoll said. “If you’re making changes in the tax code, you should be making changes that encourage better-paying jobs and more capital investment, which means looking at positive incentives, not additional surcharges.”
Driscoll said Vermont’s progressive tax system means wealthier Vermonters already contribute disproportionately to overall income-tax revenue. According to the Vermont Department of Taxes, Vermonters making between $45,000 and $75,000 annually paid about 2.4 percent of their salaries in state income taxes. Vermonters making between $500,000 and $1 million, by contrast, paid close to 6 percent of their earnings in state income taxes.
“It’s tough to make a fairness argument that they aren’t paying enough,” Driscoll said.
Pollina said he has yet to bring his proposal to Senate leadership. But he said the idea has resonated with advocacy groups bracing for the significant program cuts they fear will appear in Shumlin’s budget address next month.
“People can’t believe that in what is a really hard time economically, Congress decided to give tax breaks to millionaires and wealthy people,” Pollina said. “I think it’s important that we at least have this conversation and put this idea on the table.”