Douglas Should Cut Tax Loophole Save Jobs
April 13, 09
Rather than threatening to throw up to 600 state employees out of work, Governor Douglas should close what he admits is a “grossly unfair” tax loophole, to raise revenue and avoid the job cuts.
The Douglas Administration keeps attacking state workers and government services in the name of closing the budget gap. He claims there is just no alternative to massive layoffs if state workers don’t agree to even more wage cuts and higher health care costs.
First, let’s note, state workers have offered significant concessions.
Second, let’s be clear: the Administration is wrong to say there is no alternative to job cuts. Like the false notion that Vermont is the highest taxed state in the nation or “Jim Equals Jobs,” it is political spin to push a political agenda – undermining state government.
Third lets realize that Vermont taxes workers’ wages more than capital gains income from the sale of stocks and investments. If a dollar is a dollar why does Vermont tax a dollar earned plowing the interstate more than a dollar made selling a stock. It makes no sense. Only nine states do it. Vermont has since 2002. We can’t afford it any longer.
And, a new analysis by the Institute on Taxation and Economic Policy (released in Vermont by the Public Assets Institute) says closing our capital gains tax break will generate up to $35 million in new revenue annually, more than enough to avoid job cuts.
Douglas knows it is the right thing to do. Last year, he called for closing the loophole in his State of the State address. He said; “[A] working man or woman in Vermont making $50,000 a year pays nearly 50 percent more tax than someone who does not work and simply lives off investment or trust fund capital gains income in the same amount. Our state is one of only a few that has such an unfair penalty for doing an honest day’s work. This is grossly unfair. We must close this loophole and eliminate this working tax penalty.” Yes, that’s Jim Douglas (of course he wanted to use the new revenue and give a tax break to wealthier Vermonters. But he did get the capital gains part right). But, now that we need it most, Douglas changes his tune. Insisting working Vermonters pay more or lose their jobs altogether.
What does closing the loophole mean? Most Vermonters see no change in taxes. People making $50,000 or less have very little capital gains and it does not affect retirement accounts. 75% of the new revenue is paid by the wealthiest 1% of taxpayers, (with incomes over $369,700). And, keeping the loophole does nothing for our economic development because the extra money the wealthiest get from it is invested anywhere in the U.S. or the world, not necessarily in our local economy.
But, the new revenue will help Vermont reduce our budget deficit and avoid job cuts.
Some say ending the break will raise less money than estimated in the weak economy. They may be right. But, any new revenue is needed. And, even gaining half the estimated income would save hundreds of jobs.
Douglas likes talking about making tough choices.
The Douglas approach throws up to 600 state employees out of work and onto unemployment. They need state services (no longer available), pay less tax, spend less at local businesses, can’t pay their mortgage or afford college tuition. Some leave looking for work elsewhere.
This alternative brings new revenue into our state budget. Hundreds of people keep their jobs. The wealthiest 1% who benefited from the tax break since 2002 along with the Bush tax cuts share the sacrifice. Instead of being unemployed, our neighbors pay their bills and taxes and support our local businesses and families.
And, Vermont does the right thing; taxing wages the same as investment income, closing a tax loophole we cannot afford and Douglas admits is “grossly unfair.”
Now, how tough is that choice?
To view the report: www.publicassets.org or www.itepnet.org
Thanks
Anthony Pollina
