Rep. Anne Donahue
March 9, 2018
As we return from the town meeting week break, the most important bill of this year will be coming before us. Other subjects may capture bigger short-term headlines, but it is taxes and expenditures that are the largest responsibility of government. Several things are combining to raise the possibility of significant changes in our tax structures this year.
First, there has finally been some momentum on changing how we fund education. Second, the changes in the federal tax code for next year have a big impact on Vermont, because our state taxes are currently directly tied to the federal formula. If nothing was changed, it would mean a $30 million bump in state income tax revenues: in other words, a $30 million tax increase. Third, under Governor Scott’s leadership, we are finally trying to address the inequity of taxing retirees Social Security benefits. Vermont is one of only six states that fully taxes them.
The House Ways and Means Committee has voted out a bill that addresses these things together, which allows for some trade-offs between the lines. Trade-offs meaning, if we stop taxing the first $40,000 (single) or $60,000 (2-income) of Social Security benefits as per the plan, the money has to come from somewhere else. So although the new proposed structure for the Vermont income tax is intended to keep everything as much the same as possible for individuals, not all the money will be returned.
The new system would mean we will no longer be able to file Vermont returns by just transferring numbers from our federal returns. There would be a state personal exemption, standard deduction and charitable deduction, and a new, lower marginal rate. (Don’t forget: lower rates do not automatically mean lower taxes – a lower rate on more taxable income would mean taxes stay the same.)
The education funding proposal would create a new income tax surcharge that would shift about 10 percent of education revenues away from property taxes. The new surcharge on income would be a rate ranging from 0.1 percent on lowest bracket, 0.5 percent for middle brackets, and one percent on highest income brackets. The estimated reduction in the education property tax rate for Berlin (at its $17,465 per pupil cost) would be from $1.78 to $1.65, and for income sensitivity, from 2.94 percent to 2.74 percent. For Northfield ($14,808 per pupil cost) the property tax rate would drop from $1.45 to $1.26, and the income tax rate from 2.45 to 2.09 percent.
This makes a small change in where the taxes would come from – property versus income – so no one should be fooled into thinking that overall taxes are going down just because property taxes dip. In fact, the big concern I’ve heard is that the change could result in an easing of the property tax pressure, resulting in approval of big increases in school budgets. On the flip side, the mechanism would create a more obvious and direct impact on local towns if they are high-spending, instead of those costs being spread across the state. That could make local communities feel more empowered over local budgets. It’s pretty dispiriting under the current system when a community bites the bullet to keep budgets low, only to see taxes still go up because other towns spend more.
The current bill is a big change from what was being discussed just a few weeks ago, which involved a much bigger shift to the income tax and elimination of “income sensitivity” – because the new income tax would have addressed protection of low income homeowners. The revision also means failure of the goal of making the system easier to understand, since much of the structure will remain the same.
All these proposals have a long way to go before becoming law, because once they pass the House, the bill starts anew in the Senate, which may have its own idea about what changes should be made. Stay tuned – and share your input.
Sometimes only the big issues hit the news. For a sense of the backlogs of bills that are on the calendar the day we return (a result of the deadline for bills to be out of House committees if they are to have a chance before the Senate this year), here is just a sampling from the list, from mundane to major.
H. 907 Improving rental housing safety
H. 909 Technical and clarifying changes in transportation-related laws.
H. 910 The Open Meeting Law and the Public Records Act
H. 911 Changes in Vermont’s personal income tax and education financing system
H. 599 Games of chance organized by nonprofit organizations
H. 620 State-owned airports and economic development
H. 707 The prevention of sexual harassment
H. 736 Lead poisoning prevention
H. 766 Creating a homeowner’s rehabilitation tax credit
H. 780 The inspection of amusement rides
H. 802 Rural economic development infrastructure districts
H. 831 Funding for an accelerated weatherization program
H. 854 Promoting television and film production
H. 874 Inmate access to prescription drugs
H. 894 Pensions, retirement, and setting the contribution rates for municipal employees
H. 903 Regenerative farming
Feel free to ask me more if any of these pique your interest.
After this week, the House will begin to focus on what the Senate has sent us, and vice-versa.
Examples of routine House bills that came through the week before the break that were passed on mostly unanimous voice votes were:
H. 684 Office of Professional Responsibility. Annual update of professions regulated by OPR. I heard a lot of concerns about discontinuance of licensing to permit persons to do ear acupuncture for substance use treatment. Because the committee took in depth testimony on both sides, I accepted its judgement and voted in support.
H. 711 Crime Victims Protections. Requires unpaid time off for persons who need to testify as crime victims.
H. 728 Bail Reform. Prohibits money bail for misdemeanors. Bail – even low amounts for small crimes – can mean that poor folks sit in jail waiting for trial, which those who can afford it, get out. That’s not exactly justice.
H. 901. Health Information Technology. A bill passed by my committee setting strict standards for the Vermont Information Technology Leaders (a public-private partnership in charge of Vermont’s health information exchange) to get its act together or face defunding next year. VITL has been flying under the radar for years, getting state funds and not showing good results.
H. 378. Creation of an Artificial Intelligence Committee. Do we need to regulate this newly emerging technology? Maybe not – but we better find out.
H. 615. Prohibiting use of drones near correctional facilities. Now, that was a no-brainer!
H. 726. Creating a voluntary pollinator-friendly solar-generator standard. An effort to prevent false claims that a solar site is being managed to provide greater benefits to pollinators and shrub-dependent birds.
H. 614. Sale and use of fireworks. Prohibits use between 10 p.m. and 7 a.m., except for New Year’s and the Fourth of July.
The contentious bills of last week:
H. 237. Saliva Testing. A roadside test is now available that shows whether one of seven drugs (including legal ones) are in your system, but without any indication of whether they are at a level that can impair driving. Yet, allowing this test could result in an officer deciding to hold you, or release you, on what is essentially invalid evidence. Even an amendment that required that testing devices meet the same standards as breath testing devices failed. There was extensive debate over two days on this bill. I voted no; it passed easily. I think the legitimate anxiety about increased driving with marijuana-impairment after legalization on July 1 drove this bill forward. It’s a valid concern but a bad way to address it.
H. 675. Conditions of Release. This small, non-controversial bill clarified the right of judges to order defendants to not possess weapons when released pending a trial on criminal charges. Because any bill can become a “vehicle” for other topics as long as they are germane to the underlying bill, it turned into the most controversial bill since the marijuana debate in January.
The Senate had just passed its “Extreme Risk Protection” bill on a 30-0 vote, creating an avenue for immediate judicial orders to take away a person’s weapons in cases where a crime had not occurred, but there was evidence of significant danger to a person (suicide) or to others (homicide.) The Senate had taken weeks of testimony to strike a balance between safety and defendant rights, but the House Judiciary Committee had just passed a bill based on two days of rushed process that changed that balance, setting a lower standard for taking guns away, and allowing it for a year instead of 60 days.
House Judiciary had added its own domestic violence bill, which had passed the House last year but was sitting in the Senate because it had become unnecessary – the Extreme Risk bill covered those circumstances, and many more. I had voted against the House bill last year because of constitutional problems.
The Senate bill could have gone straight to the governor the Friday before town meeting if it had passed the House. Any changes meant a long delay with conference committees between the two bodies. I tried to get the Senate bill in front of the House through amending H. 675 to incorporate what the Senate had passed. The House leadership then called a two-hour break to propose an amendment that matched the bill that House Judiciary had passed.
Since the Speaker has discretion over which amendment to take up first, she chose the House Judiciary version of the Extreme Risk bill. After extended debate, it passed, 93-46. The domestic violence portion, which had been changed to allow judicial review in one day, passed 112 to 28, with my support, since the due process issue had been corrected. After that, the handwriting was on the wall. My deferred amendment gained some crossover votes from those who had voted for the House version to match the Senate bill, but failed, 85-53.
There will be much more to come on gun safety initiatives in the weeks to come, and many long conference committee hours before we have final House and Senate votes. Unfortunately, most of the remaining proposals are “feel good” reactions that actually address nothing about the true safety issues.
Please stay in touch as you hear about issues affecting you and to keep me informed about your views. You can reach me at email@example.com. Thank you for the honor of representing you. My blog of legislative updates can be found at representativeannedonahue.blogspot.com.