2010 Budget Letter 6.10.09

[Gary Gilbert]

The great budget divide that is being heralded by those laying the groundwork for the next political season is much narrower than their overblown rhetoric would imply. There was general agreement on what needed to be done. The differences became even narrower as the declining financial picture of the state became clearer. Both the Administration and the House Leadership came to recognize that reductions in state spending and increased revenues would be necessary to address the magnitude of our fiscal problem. But disagreement continued about tax fairness or how to share the pain. The Federal Stimulus package (ARRA) of $175 million made it possible to spend more while raising less money from Vermont taxpayers than last year. The only reason the total budget increased was due to the use of ARRA funds.

Those who take the easy argument that we should tighten our belts and spend less are in error. Neglecting to use ARRA funds to stimulate the local economy at a time when firms and individuals are cutting back is the worse thing we could do. It would create greater needs for middle and low income citizens while depriving the state of the means of meeting those increased needs. But we need to use these funds carefully.  We could create a financial cliff when the funds run out if we were to use them for new programs that were not sustainable. We will avoid creating a cliff if we use the funds to build capacity among our state workers and school personnel by improving their skill sets and creating ongoing efficiencies and cost savings. If we were to refuse to use ARRA funds to their capacity as some suggest,  and also cut programs to levels of immediate State revenues, we would be creating that cliff today rather than preparing for the future. Such self-inflicted wounds would only be reasonable if there were no hope of the current recession ever ending.

         The proposal offered by the administration during the last few weeks was the same fiscal request presented by the Governor in January. It was a cost shift where educational cost that had been covered by the general fund would become the ongoing responsibility of the education fund and thus have a direct impact on the homeowner’s property tax. It was a plan that did not share the burden equitably. It would have required a tax increase on residential property while making it appear that the general fund was balanced. The Joint Fiscal Office assessed the impact of this plan on every town in the state. In Fairfax, 190 families would have an average increase of  $333. In Georgia 197 families would see theirs rise by $353. This really attacks the middle class homeowner while giving a slight decrease in taxes for those making over $200,000. The House had previously voted on this concept on April 24th when Representative David Zuckerman offered the governor’s plan as an amendment to the budget bill H.442. It was defeated 0-130 as no one was willing to support it then; and no one was willing to defend it in June.
 
          The great budget divide is therefore a myth created to set the scene for the next election cycle. The real budget differences are a matter of degree and tax fairness rather than a chasm. The legislative budget that I voted for reduces income-tax rates slightly for low and middle-income earners and increases taxes on those with incomes over $200,000 a year without the disastrous shift to the property tax that would have cost Vermonters a great deal more and attacked a homeowners life time savings. It was a budget that included millions of dollars in difficult cuts while maintaining a safety net of critical state services. It addressed a $291 million revenue short fall over two years with reductions, ARRA funds, and only $21.3 million in new state revenues distributed among many different taxpayer groups. The alternative would have done none of these and would have effectively placed more of the burden on two wage earner families and decrease the burden on those with very high incomes. If supporting hard working middle-income families is a partisan vote, we should have more of it. And more of us should be willing to work for the interests of all Vermonters as we begin the next battle to address the public pension and health care obligations and shortfalls that could have as great an impact on our available resources as this depression has had.

Representative Gary Gilbert
Fairfax/Georgia
849-6333
ggilbert@leg.state.vt.us

[special ED]

what ever happened to the Democrats of my parents days??are there any left that are still conservative???is there any that are still for the common guy????is there anyone that will still take responsibility for goofy crap that the government has been trying to get away with??GARY you cant blame the governor for this one it`s all on you and your buds in montpeculier

[edakrupp]

Thank you Gary for setting the record clear. It's good to know that the middle and lower classes (Those families earning less than 200,00 a year) will be relieved in their financial responsibilities to the state. I am glad that taxes are going up for the people who can afford it. I am glad that the educational funding stays where it its. I am glad that the lay offs are being done in baby steps and I am glad that vital services for the people who need them is staying intact. Thank you.

Now lets get to work and support small business, and help Vermont become a fiscally responsible state that supports and aids business grow so we can all make more money!

[trussell]

I generally stay out of political debates here, but could someone please explain this to me:

When I was 14, I started saving and investing and had enough for a respectable house down payment the same year I graduated from college... so that makes me ineligible for assistance with my mortgage.

I was responsible and didn't have a kid at age 15... so that makes me ineligible for state assistance with paying my bills.

I have worked hard all my life, managed to get through college, I have a great job that I love, and make a respectable (though far from huge) salary... so that means that I should automatically be responsible for a higher percentage of taxes?  How can that be considered "fair"?  Just because someone is making a higher salary than you doesn't mean that they should subsidize everyone else!  Isn't that called socialism?

I'm not purposely trying to attack anyone personally (though I'm sure someone will be offended).  I consider myself very fortunate for what I DO have and I agree that many jobs, especially government-based, have salaries that have gotten out of control (ie- the recent story on VSAC exec's).  But just because a person has worked hard and worked their way up in life shouldn't mean that they be required to pay a higher percentage of taxes.  That's like a punishing someone for doing well!

Wow.

[Loctavious]

Hmmmmmmmm, i think you may be on to something here - PAY-METERS on EVERYTHING!  Thus those who use .....'whatever' the most - pay the highest/most for it....... there's a way to be TOTALLY fair with taxes.  You got 3 kids in school - you pay more in taxes.  You own more land, you pay higher rates of tax, you travel/commute a lot to work, games, recreation, etc...., you pay more toll money.  You eat alot, overheat or overcool your house ( acceptable range discussion excluded), drive an XUV or gas-guzzler, and flush your toilet too much - you pay higher taxes.

Allowing people to pollute, over-consume, deforestate, resource-waste or anything else harmful to the planet as long as they pay a HIGH price IS NOT THE ANSWER.  It' a liberal way of 'allowing' citizens to choose whether to do the right thing or do what they want to.  I've been called a liberal - but i don;t agree with the above-mentioned allowance system.
     

[special ED]

YOU HAVE SEEN THE LIGHT .....

[edakrupp]

There is one critical problem... If the people who use more/earn more= pay more, what motivates the lower income families to want to earn more? If they know that their needs will be covered by the "wealthy" then why should they save, bust the hours, and be financially responsible? It's a catch 22 no matter where you go.

I  am solid middle class- and am comfortable, not poor, but have to make choices and am a careful shopper, I use coupons, and watch for sale, I save what ever extra money we have for our children's education and our retirement, we usually have money for a vacation 2X a year, live in a respectable house and earn way less than the 200,000 year cap.

 If you earn 200,000 a year that's a lot of money! If I made that much I would feel really comfortable, all my needs covered, and paying taxes wouldn't hurt my grocery bill, or heating plan. Heck if I made 200,000 a year I could even drive my car and not even feel the pinch at the gas pump!

The money needs to come from somewhere. Everyone needs to pay. Perhaps people who have more, who are above the 200,000 mark, just pay a percentage that reflects the same amount of hurt as the little guy.

[cedarman]

"spend more while raising less money from Vermont taxpayers than last year" but later in the article, it states raising only $21.3 million in NEW state revenue?   

something doesn't add up here.

[cedarman]

"Now lets get to work and support small business, and help Vermont become a fiscally responsible state that supports and aids business grow so we can all make more money!"

FYI - a lot of small businesses are in that category that you want to tax heavier.  How do you think higher taxes will affect the businesses ability to create more jobs? 

Here are some common cliches you might be familar with:  "No Pain, No Gain."  "No Risk, No Reward."

This attitude that everyone is the same or equal is ludicrous.  Yes, we should receive equal treatment under the law (hahahaha), but when it comes to peoples personal efforts, life style choices, and even personal abilities/aptitudes, we are NOT equal.

We all pay in different ways.  Those who don't work as hard, or position themselves for success pay by struggling to pay basic living expenses.   Some of those who do work hard, and position themselves for success pay in non-monetary ways like loss of time with their families when they are working 12+ hrs a day, or spent 8 years in college and invested a fortune just to finish a degree.

I manage a comfortable life for my family on a joint household income under 100K. I worked hard in college, and have worked hard in my job to be in a position that I didn't get laid-off when some of my peers did.   I certainly don't want to be taxed to the point that feel the same financial "hurt" as the little guy.  To make a statement that those earning over 200K a year should be taxed at a rate to reflect the same hurt as the little guy is UNFAIR.   At what point do we level the playing field.  Would you like to be taxed to the point that you live on the same amount of money as a highschool drop out making 18K a year.  IF you don't want to play on that "LEVEL" playing field, then you should expect or ask that anyone else does either.

[edakrupp]

FYI - a lot of small businesses are in that category that you want to tax heavier.  How do you think higher taxes will affect the businesses ability to create more jobs? 

Well If higher taxes mean better benefits (medical, compensation and social security) and programs that support your small business (generaring less that 1/4 million a year) then tax the established business (over 1/4 million a year) to help the younger companies get started and established, then when they grow, it would be their turn. We have to help build small businesses and one way to get businesses started here in Vermont is by offering good employee packages, some of which could be funded by our tax money, lower utility costs, and better create access to highspeed technology and easy transportation. All of which could be enhanced with more state dollars generated by taxing those companies that are generating 'enough' money.

[cedarman]

Higher taxes do NOT mean better benefits.  They mean LESS benefits because the businesses paying those taxes end up spending money that could have been used for benefits and higher pay to pay taxes to the government (and benefit people who do NOTHING in increase the businesses success).


Again, I ask, do YOU want to be taxed until you feel the same financial pain (struggling to have 3 meals a day and a roof over your head) as someone making $20K a year or less?

Where do we draw the line on WHO gets taxed until they feel the financial pain of those making less money?  When there are no longer enough people making over $200K a year to support the poor masses, do we lower the level at which we apply a higher tax?  At some point, it lowers to a family income of 180, then 160, then 140, then 100K (getting nervous yet?).

Keep in mind, the people you are willing to tax are not all wealthy business owners, or corporate executives.  It could impact:
 - farmers who have been forced into selling their family farm due to low milk prices no longer making the farms viable,
 - survivor benefits (think about grandma or the spouse of a soldier/officer/firefighter trying to figure out how to live the rest of her years on $250K in life insurance money  - Do YOU want to take even more away from her than she has already lost?)
 - retiring business owner who has struggled to make a living for decades, and now that (s)he's retiring and selling a successful small business (that never made over $200K a year), but is worth more than that, (s)he'll be taxed even heavier on his/her life work

When we are setting arbitrary numbers about WHO should pay more, we get so focused on the number, and not how people arrive at those numbers.

The only "High income" people we should be taxing heavier than everyone else are winners of lottery jackpots.  That is truely easy money.  Easy come, easy go.  Other than that, if YOU do not want to pay more to support someone making less $$ than you, do NOT ask someone else to do the same.

[edakrupp]

So what's the answer? Businesses pay taxes and cant provide benifits. If we dont focus on numbers what can we focus on? If this was a socialist state we could all be on a level playing field, but that isn't going to happen- curruption always ensues and everyone get's short changed to feed the greed. So what's the answer,and how should we set the taxes to be fair for everyone. No one likes to pay and it's harder on some than on others but it has to get done, unless of course there are any new inspiring insights out there that we could consider and instate as new reforms.

[special ED]

is there a place on the web that you can go to see the budget ,and actually see it line by line what is getting spent?

[cedarman]

How about a low flat tax rate (everyone pays the same percentage on their income tax).  The rate would be determined by those on the lower end of the income spectrum.

Then, the state can make up the difference with higher sales tax.  That way, the state generates MORE revenue from out of staters, and people have some control over how much they spend on taxes by controlling what they buy.

Here are two examples of taxes from: http://www.retirementliving.com/RLretire.html

VERMONT
Sales Taxes
State Sales Tax: 6% (medical items, food, equipment and fuel, residential fuel and electricity, clothing and shoes with a purchase price of $110 or less, prescription and non-prescription drugs are exempt); Local jurisdictions may add an additional 1%.  Tax is 9% of prepared foods and restaurant meals and lodging.  10% on alcoholic beverages served in restaurants.
Gasoline Tax: 20 cents/gallon
Diesel Fuel Tax: 26 cents/gallon
Cigarette Tax: $1.99/pack of 20

Personal Income Taxes
Tax Rate Range: Low - 3.6%; High - 9.5%
Income Brackets: **Lowest - $32,550; Highest - $357,700
Number of Brackets: 5
Personal Exemptions: Single - $3,500; Married - $7,000; Dependent - $3,500
Standard Deduction: Federal amount
Medical/Dental Deduction: Federal amount
Federal Income Tax Deduction: None
Retirement Income Taxes: No exemptions, except for Railroad Retirement benefits.  Out-of-state government pensions are fully taxed.



TENNESSEE
Sales Taxes
State Sales Tax:  7% on tangible property (prescription drugs exempt); 6% on food and food ingredients.  Counties and cities may add another 1.5% to 2.75% to the total of either rate (click here).
Gasoline Tax: * 21.4 cents/gallon
Diesel Fuel Tax: * 18.4 cents/gallon
Cigarette Tax: 62 cents/pack of 20; 77.5 cents/pack of 25

Personal Income Taxes
Salaries, wages, Social Security, IRAs and pension income are not taxed.  A 6% tax is levied on stock dividends and interest from bonds and other obligations.  The first $1,250 in taxable income received by a single filer is exempt ($2,500 for joint filers).
Retirement Income Taxes: Persons over 65 with a total income of less than $16,2000 (single filer) or $27,000 (joint filer) are exempt from the above tax.

[cedarman]

The lower diesel tax rate also helps with commerce because it cost truckers/delivery services less to transport goods.

The financially well-to-do will still buy all of the goods and luxury items they want which will generate additional tax revenue from them, but it will be by their own choice.

This system ultimately gives the individual more power over his/her finances.

It is no coincidence that a LOT of people are moving to Tennessee.  NorthFairfaxBoy mentioned to me that there are 6 people with ties to fairfax within an hour drive of him in TN.   That is just Fairfax people!!  I wonder how many people overall that VT and other high income tax states have lost to TN.   I doubt TN has lost many people to VT, MA, or NY.