(Host) Vermont's economy is likely to be a major issue in this year's gubernatorial race.

The two announced candidates -- incumbent Republican Jim Douglas and Progressive Anthony Pollina -- share similar goals to stimulate the economy. But they have very different ideas of how to pay for their plans. 

VPR's Bob Kinzel reports:

(Kinzel) Douglas and Pollina both agree that the best way to jump start the state economy is by building affordable housing units and by repairing Vermont's roads and bridges.

Douglas wants lawmakers to pass a housing plan that relaxes environmental regulations in certain parts of the state to encourage the construction of new housing units.  The plan has been rejected by the House and is now being reviewed in the Senate.

Douglas says the plan could stimulate almost $100 million in economic activity over the next 3 years:

(Douglas) "It creates construction jobs not only directly but indirectly through sub contractors it raises the value of grand lists and helps the property tax burden in our communities, it gives individual families a chance to build equity in what in most cases is their largest single asset so for a variety of reasons a good strong housing program is critical to economic success."

Douglas is also backing a plan to spend an additional $80 million over the next 3 years to repair roads and bridges - it's financed through a combination of small bonds and transferring programs from the Transportation Fund to the General Fund.

Transportation is the centerpiece of Pollina's economic plan. He's backing a $75 million bond to fix up Vermont's transportation infrastructure.  The debt service on this bond would be roughly $5 million a year.

Pollina pays for his economic package by eliminating the state exemption for capital gains income.  He argues that unearned income should be taxed at the same rate as earned income and he says his plan would raise roughly $20 million a year:

(Pollina) "My theory is on the one hand you cut programs cut jobs and throw people out on the street on the other hand what I would prefer to do is put people to work fixing streets and building homes and creating more energy efficient buildings I think  that's a better investment and I think in the long run it's the way in which we going to create a stronger economy."

Douglas supports eliminating the capital gains exemption but only if the money is used to lower income tax rates for middle and upper income Vermonters:

(Douglas)"The purpose of an economic stimulus program is to encourage more investment the creation of more jobs more entrepreneurs making a commitment to Vermont and we're not going to do that with tax increases."

But Pollina argues that there's no difference between a tax increase and asking Vermonters to pay higher fees for a variety of programs:

(Pollina)"The fact is when they make low income people pay more for health care, when they make senior citizens pay more for prescription drugs when they raise various fees when they allow my health insurance premiums 10 or 20% a year what's the difference between increasing those costs and increasing taxes?"

Pollina is also targeting affordable housing in his plan. He wants to spend $20 million, over a 4 year period, for the construction of new, energy efficient, affordable housing units.

For VPR News I'm Bob Kinzel in Montpelier.