The House did some good work last week by passing a shoreline protection bill, along with revisions to the current use program. But, the lion’s share of activity on the floor was devoted to the interrelated FY 14 revenue and budget bills. Needless to say, there was a good deal of rhetoric about taxes and spending, but in the end no one followed through by turning the easy talk into the real walk. The only amendment that sought to reduce spending was withdrawn prior to debate. I don’t know if the naysayers just didn’t have the analytical ammunition to make a coherent case, or if they ran headlong into the reality that cutting programs and services sounds a heck of a lot easier than it actually is. In any event, here’s a rundown on some of the details:
Revenue – The Governor’s fiscal plan for FY 14 depended upon $34 million in new revenue; $17 million coming from a new “break-open ticket tax”, and $17 million generated by a reduction in the State’s Earned Income Tax Credit (EITC). The former entailed the assessment of a 10% tax on the games of chance tickets used by the likes of the Eagles, VFW and American Legion, while the EITC recommendation contemplated a significant reduction in the State tax credits offered to about 40,000 lower income working Vermonters. Because it became fairly clear early in the session that neither of these ideas had a great deal of traction in the House, the Ways and Means Committee (my committee) began a laborious, in-depth analysis of alternative revenue raising measures. After listening to 49 witnesses, and considering scores of different options and ideas, Ways and Means finally landed on a diverse, balanced tax package; one that largely avoids rate increases and relies on removing tax expenditures (eliminating exemptions, deductions, etc…) from the tax code. For FY 14, this plan extends the sales tax to candy, soda, bottled water, dietary supplements and clothing costing more than $110 (like it was prior to 2006). It also increases the cigarette tax by 50 cents, raises the tax on smokeless tobacco products by 88 cents and extends the meals tax to food in vending machines. And finally, it raises the meals tax rate by 0.5% (to 9.5%) for a one year period, and asks those in the highest income tax bracket to be taxed at 6.8% on the first $57,650 of their taxable income (they are currently taxed at a 3.55% rate in that first bracket). In all, this will raise about $23 million in general fund revenue. Moreover this legislation imposes a roughly $30,000 cap on itemized deduction, starting in tax year 2014. Part of this new revenue stream will be used to eliminate the current $15 million employer health care assessment. This legislation moved forward on an 85 to 55 preliminary vote on Wednesday (Wilson voting with the majority) and won final approval by voice vote on Thursday (3/28). There’s no such thing as a perfect or popular tax package, but this one at least, does a pretty darn good job of spreading the pain. It’s now on to the Senate for their consideration.
Spending – On Friday (3/29) the House approved the Appropriation Committee’s proposed FY 14 state budget by a vote of 91 to 49 (Wilson voting with the majority). In all, when taking into account all funds (General, Transportation, Education, etc…), the fiscal blueprint for the next fiscal year totals $5.2 billion, an increase of 4.4%. This comports quite closely to the Governor’s recommendation, although the House version spends about $15 million less from the General Fund. Some of the new spending items include:
- $1.3 million to help address the deficit at the Vets Home in Bennington;
- $6.0 million to address Federal cuts in the LIHEAP (low income heating assistance);
- $10.6 million in additional Medicaid spending for providers (hospitals. doctors, etc…) to help address the “cost shift” to private insurance that comes with inadequate Medicaid reimbursement for health services;
- $3.3 million for early childhood education (day care);
- $4.4 million to help Vermonters on VHAP and Catamount Health with the transition to the new Federal Affordable Care Act next year;
- About $9 million to bolster reserves, knowing that Federal sequestration and other cutbacks are bound to cause problems sometime over the next 15 months.
Of those voting against the budget, some members explained that they thought it was too big (too much spending), while others thought it was too small (not spending enough to mitigate health care costs and/or reigning in “Reach-up” too much). This bill, like the tax bill, now moves over to the Senate for that bodies review and consideration.
– Jeff Wilson, Manchester, Vermont, State Representative