Vermont Senate OKs Tax

The Senate wrapped up two days of stop-and-start deliberations on a $24.3 million tax package Friday with a 20-8 vote of support, followed quickly by a nearly unanimous vote for a $4.68 billion budget to operate state government next year.

The tax bill, which the Senate had to pass to fund its spending plan, included a 53-cent cigarette-tax increase, a compromise between the Senate Finance Committee's proposed $1 increase and Gov. Peter Shumlin's demand for no increase at all.

Senators rejected an amendment to raise income-tax rates on the two highest tax brackets for three years in order to raise an additional $16.7 million a year, but the lengthy debate Friday morning showed that more than just seven senators likely would support an income-tax increase in the future.

The cigarette tax compromise turned out to be unexpectedly difficult to achieve because Shumlin and Senate President Pro Tempore John Campbell, D-Windsor, took their differences to the Senate floor for a vote Thursday. Shumlin won a narrow 16-14 victory on a motion to delete the dollar increase, but he failed to persuade senators to go along with his alternative: a tax on dental services.

The Senate voted Friday to replace the proposed $1 increase in the cigarette tax with the 53-cent increase and a bigger tax on medical and dental insurance claims.

The Shumlin administration's dental-service tax is off the table. The final version of the tax package, which the House and Senate begin to negotiate next week, almost certainly will include an increase in the cigarette tax -- despite the governor's objections. The House proposed a 27-cent increase.

Sen. Anthony Pollina, D/P-Washington, suggested the $24.3 million revenue package wasn't enough. He argued the budget, which only he had voted against when it came up for preliminary approval, made too many cuts -- $38 million -- to important programs.

He said Vermont's wealthiest residents -- about 4,000 tax filers -- should be asked to share their resources with their neighbors in need. He reminded senators that people in the highest tax brackets benefited from significant tax savings as a result of Congress' decision to extend federal tax cuts.

"We talk a lot about values in this chamber," Pollina said. "There is no better reflection of our values than how we raise and spend Vermonters' money."

Sen. Richard Sears, D-Bennington, disputed Pollina's description of the harshness of the Senate's budget. Sears, who helped write the budget as a member of the Appropriations Committee, noted, for example, that only $1 million had been cut from a proposed appropriation of $200 million for the Choices for Care program, which helps keep elderly Vermonters in their homes rather than having to enter nursing homes.

"I'm dumbfounded by some of the conversation about the budget," Sears said.

Senate Finance Chairwoman Ann Cummings, D-Washington, made the case against supporting an income tax increase now.

"I would like nothing better than to vote for this amendment," she said. "I think I will -- but not until next year."

She said the Legislature likely would have to consider an income-tax increase and revisions to spending once it become clear how much Congress will shrink federal funding in order to bring down the deficit.

Sen. Randy Brock, R-Franklin, opposed the income-tax increase, too, saying people in the state's top tax brackets include small businesses. He called it poor policy to raise taxes on job-generators when the state is trying to expand employment opportunities and revitalize the economy.

Democrats split on the income-tax amendment, with seven supporting an increase now and 15 opposed. The Senate's seven Republicans stood together in opposition.

Senators made several other tweaks to the tax package before the final vote.

Lt. Gov. Phil Scott had to cast his first tie-breaking vote on one amendment that would extend an education property tax exemption to three nonprofit skating rinks used by public schools. He tipped the balance in favor after a 14-14 tie.

"These skating rinks provide for the physical education of Vermont students," Scott said in a statement released after his vote. "Without them, Vermont's schools would not have the facilities to support their hockey teams. This exemption reduces the financial burden on those rinks. I was proud to support Vermont schools with my tie-breaking vote today."

Senators seemed to have no energy left when it came time for final debate on the budget.

Sen. Vincent Illuzzi, R-Essex/Orleans, credited Appropriations Chairwoman Jane Kitchel, D-Caledonia, with leading the Senate to a spending plan that addressed as many needs as possible within significant financial constrictions.

"It was an open-door process, and everything was on the table," Illuzzi said. "The litmus test has been there have been only a few technical amendments offered."