Blue Ribbon Tax Commission Report

[Chris Santee]

from Representative Carolyn Branagan

Two sessions ago, the legislature formed a commission to take a look at the state’s tax structure and make some recommendations. The Blue Ribbon Tax Commission was asked to prepare a structural analysis for us of the state's revenue system and offer recommendations for improvements that would provide for long term sustainability, appropriateness and equity.

The Commission’s report has drawn a lot of attention from the media and has been widely discussed among legislators. The report contains some interesting findings and recommendations.

Right off the bat, the report points out six common 'misconceptions':

1. The vast majority of Vermonters do pay taxes. Claims that some Vermonters don't pay taxes usually ignore tax payments beyond the income tax and rising income inequality.

2. Vermont's use of taxable income as a base for state income tax calculations makes the marginal rates higher than needed.

3. Changing consumer buying patterns are eroding the Sales tax base. Vermonters are actually buying more services than ever.

4. The tax expenditures form a shadow budget that is rarely reviewed by the legislature. These tax giveaways total more than $1.3 billion per year.

5. There is insufficient data to claim Vermonters are migrating out of state because of high taxes.

6. The complexity of the state's Ed Funding system hides basic tax structure problems within the statewide school property tax system.

The Commission's report makes four recommendations:

1. The personal income tax should be restructured so that Adjusted Gross income is used as the tax base, not taxable income. Vermont should get rid of all deductions that occur after AGI is calculated. Rates, brackets and filing status options should be changed to:

Joint filers

Incomes $0-$50,000            3% tax rate

             $50,000-$150,000  4.5%

             $150,000- up         6.95%

Single Filers

Incomes $0-$30,000          3% tax rate

             $30,000-$90,000  4.5%

             $90,000- up         6.95%

*Since release, this recommendation on income tax has received the most discussion. There will probably be a change to the income tax structure, probably lowering the rates and using AGI as the base.

2. The sales tax base should be broadened and the rate lowered to 4.5%.

*This recommendation to change the Sales tax seems to have little support. There is quite a bit of discussion however on lowering the tax rate to 2% and including EVERYTHING purchased, including all kinds of services.

3. The tax expenditures are really an invisible budget rarely reviewed by the legislature.  The expenditures need to be reported, including a legislative intent statement and cost estimates. All expenditures should have a sunset.

*Some version of this recommendation on the tax expenditures will probably be implemented. There is ongoing discussion on several of the specific expenditures.

4. The Commission recommended the legislature develop a tax incidence study so the full ramifications of tax policy choices could be better understood by the legislature.

*This recommendation is very expensive, so..... though important, it will probably not be implemented due to fiscal realities.

Contact me at cbranagan@leg.state.vt.us

Representative Carolyn Branagan
Franklin-1, Fairfax/Georgia
Vermont House of Representatives

[Carolyn Branagan]

Thanks Chris.  I still can't figure out how to make a comment or add stuff to Henry's site from the statehouse. Thanks for your  help.

My committee is still working on this. I'll be happy to share info with folks at Town Meeting in Fairfax Saturday.

Carolyn B.

[Chris Santee]

Thank you, Carolyn, for all the hard work you do in Montpelier and at home,
helping keep Vermont affordable for my family.

[mkr]

Carolyn, you may need to login to his web site at the State house in order to post; then log out.