Notes from Montpelier
by Rep. Bill Frank

I enjoyed visiting with you at the Town Meetings in Bolton, Jericho and Underhill.  Each meeting has a slightly different format but all are really the essence of local government and community discussion.  Town meeting is usually considered the midpoint of the legislative session and referred to as “cross-over date” - the date when bills from one body must be completed in order for the other body to take them up.  Since this year town meetings were the earliest they can be, the first Tuesday in March being March 1, cross-over was moved to March 11.  My Human Services committee is working to finish two bills before cross-over, dealing with Hospice and Palliative Care for Vermonters, and Early Childhood Educators.  I have written a brief description about these two bills and bills being discussed in other committees as a Town Meeting Report.  This report is posted on my web site, RepBillFrank.com.  If you would like a printed copy please call me and I will send it to you. Senator Bill Doyle’s Annual Town Meeting Day Survey is also posted on my web site.  You may fill it out and email it to me and I’ll include it in the totals I send to Sen. Doyle

I also really enjoy visiting with so many of you who visit the State House during the legislative session. Some of you come to testify in committee on a bill, maybe as an “expert” on the subject but more often just to give your opinion, pro or con, on the topic.  Many of you come with an organization who is visiting the State House and we sit and discuss your organization.  Jericho Elementary’s fourth grade classes, Mrs. Randall’s, Mr. Botzojorns’s and Mr. Driscoll’s, all had tours of the State House and Vermont’s History Museum in February.  The classes had some extra time after lunch before their bus arrived and Rep. Till and I met with them, answering some of their many questions.   Rev. Kevin Goldenbogen, pastor of the United Church of Underhill gave the morning devotional in the House Chamber on February 18^th.  There are many of you who just come to visit “the people’s house”.  When you come, write a note and give it to a page, they will find me and we can meet.  I’m glad so many of you visit.

I have written about the Blue Ribbon Tax Structure Commission that the legislature formed to evaluate Vermont's tax structure.  The charge to the commission was to create recommendations within a context of revenue neutrality i.e. all changes in rates or amounts raised by our tax system would not produce more or less revenue for running state government. It was formed with the following principles:

1. Fairness, Actual and Perceived
2. Economic Competitiveness
3. Simplicity
4. Transparency
5. Tax Neutrality
6. Sustainability
7. Executive and Legislative Accountability to Tax Payers
8. Revenue Neutrality and Interoperability

The report of the Commission brings to light the myths about our tax code which gives us pause when considering any changes to the tax code. There were six myths the commission considered.

1)  That some Vermonters are not paying their fair share of taxes. It turns out when the progressive income tax, regressive sales tax, and bumpy property taxes are considered together all Vermonters pay between 8% and 9% of their income on taxes.

2)  That Vermont’s marginal rates are too high relative to other states. In reality, because Vermont uses a narrow definition of taxable income, our rates appear higher than other states. If we use a broader base (say, federal AGI) our rates would be in the middle of the pack.

3)  That changing purchasing patterns have negatively affected Vermont’s sales tax receipts. Although loss of sales at Vermont’s eastern border are significant, sales taxes have been affected more dramatically by the shift in purchasing from goods to services and from purchasing on main street to purchasing on the internet.

4)  Tax Expenditures Form a Shadow Budget that Requires Greater Scrutiny. The tax system loses over $1 billion annually due to insufficient oversight. Tax expenditures are policy choices made within the tax system, and they lack sufficient transparency

5)  That wealthy Vermonters are fleeing Vermont. The facts say that, on average, tax payers moving to Vermont earn 18% more than tax payers moving out. Furthermore, more than half of the taxpayers in the highest income tax bracket do not remain in the highest tax bracket the following year.

6)  The Complexity of Vermont’s Education Funding System Obscures Basic, if Difficult, Tax Structure Issues. Actually, mechanics of the tax are complex, but the basic tax structure tension is rooted in equity. This manifests itself in the discussion regarding what is the “right” tax to fund education. Transition toward a tax system rooted more in property value or income would trigger a tax shift that puts pressure on the tax principles of equity and competitiveness

The recommendations of the Commission are:

1)  Expand the base on the income tax to federal AGI and reduce the rates to raise roughly the same amount as the current income tax. In addition, eliminate all deductions and exemptions. Replace the standard and itemized deduction with a tax credit limited to $800.

2)  Broaden the sales tax base by eliminating all exemptions, except food and prescription medications, including those on services. Move aggressively to capture internet and catalogue sales.

3)  Enhance scrutiny of tax expenditures by looking at them as budget costs which will shine the light of understanding of the expenditures and bringing transparency to this shadow budget process.

4)  Develop or use a tax incidence study so that the Legislature may understand the full ramifications of its tax policy choices.

Are our taxes a Burden or a Responsibility? Do we have a collective responsibility to maintain our roads, educate our children, help those disabled and disenfranchised to survive? Don't we Vermonters take pride in the state we live in? We live here because of the quality of life our great state provides, not because of the high cost of living that the dispersed population, harsh climate, and rugged topography Vermont provides.  The House Ways and Means Committee have drafted a bill which embodies the recommendations as faithfully as possible and are currently taking testimony on it.  A link to the bill, H.243, is on my web site.