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2002 Tax Issues

01/23/02 12:00AM By Ellen David Friedman

On a recent VPR Switchboard program, a worried school board member called in to ask Governor Howard Dean about state funding for education this year. He was concerned about rising costs that were out of his control -- particularly in special education and employee health insurance. If the state block grant were only level-funded, he asked, wouldn't these added costs just be shifted to the local property tax payer?

The Governor was sympathetic regarding federal mandates for special education that come without sufficient federal funding. But then he inquired if the school board was currently negotiating with their teachers? Yes, the gentleman responded, and we're having a tough time of it. Then, the Governor advised -- essentially -- that it was up to the school board to make hard decisions. You don't have to pass these costs along to the local taxpayer, he suggested. Well, the message was clear to me -- as I assume it was to the school board member: The solution to underfunding from the state is to try and make the teachers pay more out of their own pocket for health insurance.

But I find couple of problems with this approach: For one thing, the simple truth is that teachers are already paying much more for their health insurance than they once did -- more in premiums, more in deductibles, more in out-of-pocket expenses -- just like all Vermonters. But this has neither slowed health care inflation nor reduced school budgets. It has just shifted the cost onto the teachers themselves. And, since teachers are already among our lowest paid professionals, it has contributed negatively to the teacher shortage. In fact, the number of unlicensed teachers in Vermont has grown exponentially in the last couple of years. Make the job even less attractive, and we're looking at more unqualified people in the classroom.

But my deeper concern about the Governor's answer relates to tax policy. I know we are in the throes of a recession that may go on for some time. I know unemployment is a serious and growing problem. And I know that the demands on state government -- both in education and social services -- are high. All of which is precisely why the state -- both the legislative and executive branches -- should be looking at fair and sustainable revenue sources. The last thing they should be doing is cost-shifting onto working Vermonters through higher property taxes and greater individual health care costs.

Here are some revenue recommendations: First, close the capital gains loophole. Vermont is one of only three states that taxes people at a lower rate on their stock sales than it does on their wages. And, since the 1990's was a boom time for many stockholders, they can be asked to pay their fair share. Next, let's return to the progressively tiered income tax approach used by Governor Richard Snelling in the early nineties. If those exact rates were re-established, we could raise one-hundred-and-thirty million dollars in additional revenue, according to the Joint Fiscal Office. However, if we wanted to hold working Vermonters harmless -- say, those earning below thirty-five thousand dollars - that's achievable. It's been calculated that we could add two tax brackets at rates higher than our current twenty-four percent and still bring in about forty million dollars.

Are we worried that wealthy people will leave the state if we raise their taxes? I'm not. We've been taking very good care of them. In 1999 there was a cut in the state income tax -- and fifty-seven percent of that benefit went to the top nine percent of the wealthiest taxpayers. In tough times, we should all be asked to do our share.

I'm Ellen David Friedman in East Montpelier.

--Ellen David Friedman is Vice Chair of the Vermont Progressive Party and has been active in the Labor movement for 25 years.
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