Free Press: As Revenues Plummet, New Tax is Proposed

MONTPELIER — A Democratic lawmaker wants to revive the income tax increase that the late Republican Gov. Richard Snelling persuaded lawmakers to enact to help the state cope with a 1991 financial crisis.

Rep. Michael Fisher’s call for consideration of new revenue to help solve the state’s financial crisis comes as the Gov. Jim Douglas and the Legislature have learned that revenue plunged in January — down $14.05 million compared with a target economists set just a few weeks ago.

Secretary of Administration Neale Lunderville said he could not recall a larger one-month drop in revenue. Most of the decline came in personal income taxes.

“The situation is getting more serious day by day,” said House Ways and Means Chairman Michael Obuchowski, D-Rockingham. “All the tools that we have available have to be on the table and are most likely going to be utilized.”

Those tools, Obuchowski said, are cuts, efficiencies and revenue.

The plan Fisher resurrected would raise about $40 million, he said. “I’m calling it the Snelling surcharge because it’s not really my idea,” Fisher, D-Lincoln, said. “The bill is really identical to what Snelling did in 1991.”

The legislation would impose a 3 percent surcharge on the state tax liability for incomes between $46,700 and $171,950, 6 percent on tax liability for incomes between $171,500 and $307,050, and 9 percent above $307,050. Fisher offered examples of the tax that would be added: A person making $46,700 would pay an extra $66. A couple with the same income would pay $50. A couple earning $70,000 would pay an extra $92.

Fisher explained his decision to propose the tax.

“I sit on the Human Services Committee, and I’m a social worker when I’m not here,” he said. “I know what it means to cut services that support Vermonters who are in crisis. I know what it means when the shelter is full and you have a family with young children sitting in your office.

“The administration continues to propose cuts to essential services, essential state government,” Fisher said. “I’m not suggesting we can tax our way out of this mess, but revenues have to be part of the answer.”

Gov. Jim Douglas, a Republican who served on Snelling’s staff in 1979, remains steadfastly opposed to any tax increase to make up for declining tax revenue, his deputy chief of staff said.

“For lawmakers to try to apply an 18-year-old patch over a current crisis is really ignoring the uniqueness of this economic downturn,” Dennise Casey said. “It is irresponsible to ask more from Vermonters when they are earning less — especially when we know there are areas of state government that, regardless of the economic downturn, are growing at unsustainable levels.”

Lunderville suggested adding to Vermonters’ tax burden would be counterproductive to efforts to stimulate the economy.

Douglas’ plan to deal with shrinking revenue includes 600 layoffs, $34 million worth of changes in human services, $8.2 million in transportation-related fee increases and a shift of $40 million in teacher retirement expenses to the Education Fund.

Democratic leaders say Fisher’s bill deserves consideration.

“I would expect Ways and Means to look at this as part of my request that they look at all revenues,” said House Speaker Shap Smith, D-Morristown. The question, he said, is whether it would be a viable means of raising revenue — “if we decided to go that route.”

“It isn’t aimed solely at high-income earners,” Smith noted. “It is an effort to have everyone participate.”

“The speaker and I have been saying you can’t solve all our problems with cuts,” said Senate President Pro Tempore Peter Shumlin, D-Windham.

“We are in an unprecedented crisis,” Shumlin continued. “This session is going to test the very core of Vermonters’ values. Throwing the people who need us so badly under the bus has never been a part of those values.”

House Republican Leader Patti Komline of Dorset said it was premature to propose a tax. “I can’t imagine that the Legislature would consider a new tax until we look at where we can make cuts.

“They keep saying everything is on the table,” Komline said, referring to Democratic leadership in the House and Senate. “Well, now is the time you have to take a look and make the tough decisions, before we look to a tax. I feel like we aren’t making the tough decisions and cuts because of the stimulus money.”

Komline also has specific worries about raising the income tax, noting that high earners “are people who can leave, and they do leave.” She named three neighbors who are six-month-and-a-day residents of other states. “The reason they have money is they are really smart with their money.”

Contact Nancy Remsen at 578-5685 or