Tax bill will likely stir opposition, competing amendments

first_imgby Anne Galloway www.vtdigger.org(link is external) March 20, 2011 There’s a reason why it’s called the ‘miscellaneous’ tax bill. How else to describe the House Ways and Means Committee’s laundry list of changes to the tax code?The litany of slight alterations in percentage points, penny charges and statutory phrasing can seem arcane, but that hodgepodge of small and large changes can add up to big tax bucks, and so it tends to garner a lot of opposition from the business community. This year is no different. Members of the committee heard from accountants, CEOs, business associations, hospitals and dentists ‘ all of whom wanted to make sure their businesses or clients don’t get hit with a tax increase.Lawmakers, too, will be giving the miscellaneous tax bill their undivided attention when it comes out on the floor this Tuesday. If the hours-long debate over the so-called ‘pee’ bill last week (the legislation that requires employers to give workers bathroom breaks) is any indication, there will be a lot of lawmakers looking for opportunities to find the men’s or ladies’ rooms when the House takes up three big bills this week: the miscellaneous tax bill, the so-called ‘single payer’ proposal and the budget legislation, in that order.The miscellaneous tax bill will likely be assailed on the right and the left, according to Statehouse sources. GOP House members are dead-set against the $24 million in provider taxes embedded in the legislation. On the left, a coalition of Democrats, Progressives and an independent are trying to drive a groundswell of support for an amendment that would place a surcharge on upper-income tax brackets to raise $30 million to $40 million to cover cuts to human services.The biggest item on the tax agenda this year came from the governor’s office in the form of new assessments on health care providers ‘ managed care organizations (MVP and Blue Cross Blue Shield), dentists, hospitals, nursing homes, home health organizations ‘ about $24 million worth of net taxes.The committee dropped the governor’s proposed 3 percent dental tax for now, and instead of imposing a tax on managed care organizations, the legislation puts a 0.8 percent claims assessment in place on a wider net of insurers, including Cigna and self-insured companies and individuals. (The state already has a mechanism for collecting claims assessment taxes.)There are two other notable tax increases approved by the committee ‘ a 27 cent hike on cigarettes (which partially covers the dental tax change) and a penny increase in the state property tax rate to cover a $23 million decrease in the General Fund transfer to the Education Fund.Rep. Janet Ancel, chair of the House Ways and Means Committee, said it was a difficult bill to put together ‘ in large part because of the necessary ‘choreography’ required with the Appropriations Committee, which also is working to pass a bill out of committee on Monday for consideration in the House next week.‘It was a tough set of decisions for the committee,’ Ancel said. ‘I don’t think anyone was thrilled with the final package, but I feel we did what we were asked to do in terms of coming up with revenue for work happening upstairs (House Approps).’On Friday, the House Ways and Means Committee finalized the miscellaneous tax bill after many hours of negotiations, and with few exceptions, the committee incorporated the gist of the Shumlin administration’s proposals in the legislation. The bill passed on a committee vote of 7-1-3. Three members were absent at the time of the vote late Friday afternoon, and the lone dissent came from Rep.Oliver Olsen, R-Jamaica, though Rep. Bill Johnson, R-Canaan, voted ‘no’ on an earlier version of the bill. Olsen said he voted against the bill because he believes the health care provider tax represents ‘a hidden tax on health care.’ He said the burden will be shifted onto private health insurance plans.‘I think if we’re going to be increasing taxes that have a broad-based impact, we shouldn’t try and obfuscate that,’ Olsen said. ‘It troubles me that we’re adding to the increasing cost of health care with this taxpackage, yet, at the same time, advocates for a single-payer health care system led by Gov. Shumlin continue to bemoan the increasing cost of health care and use that to justify the governor’s proposed for single-payer initiative.’On Friday, the committee came to consensus on a couple of key sticking points:â ¢ The dentists, who would have been assessed a 3 percent tax in exchange for an increase in Medicaid reimbursements, won a temporary victory. After days of intense lobbying, crowned by the delivery of a protest petition with 4,500 names to House Speaker Shap Smith, the committee, which had been considering a 1.5 percent assessment on dentists, dropped the proposal altogether. The dentists get a pass this year, but the committee has asked the Joint Fiscal Office to collect data for future consideration of a similar measure that would also tax dentists and funnel money theincentive payment for dentists who take Medicaid patients.â ¢ A proposal adapted from the Vermont Blue Ribbon Tax Structure Commission’s report to assess taxes on adjusted gross income rather than taxable income was stripped from the bill. The shift from TI to AGI was originally a part of the miscellaneous tax bill, along with a change in the capital gains tax. (The committee proposed removing the 40 percent capital gains tax loophole, with exceptions for timber sales and farmland.) Ancel says the income tax code changes would be taken up in separate legislation.Ancel anticipates lively discussion about the miscellaneous tax bill this week.‘The debate over the budget is going to be a difficult debate, and the discussion over tax bill will also be difficult,’ Ancel said. ‘One of the concerns several people have expressed and that I agree with is, we have some bad news coming to us from Washington. It’s a pretty sure thing that there will not be as much federal support. To the extent that there is taxing capacity, we need to keep that so we can respond to federal cuts when they come.’Opponents of the bill on the right will likely contest the education property tax increase, the construct of the provider tax and a $1 million giveback to taxpayers in school districts that are a part of supervisory unions that met the Challenges for Change targets, according to Olsen. Olsen said the governor is closing the $176 million General Fund gap in part through a $23 million reduction in the General Fund transfer to the Education Fund. To make up the difference, Shumlin proposed raising the statewide property tax by a penny, from 86 cents per $100 of assessed residential property value to 87 cents.‘We are balancing the gap on the backs of property taxpayers,’ Olsen said. ‘The increase in the tax rate is a consequence of how the budget has been structured. That’s very significant.’Olsen said the 1-cent property tax break for school districts in supervisory unions that met the Challenges target is also problematic. There are some school districts that cut their budgets by 2 percent, as recommended, that are a part of supervisory unions that didn’t meet the Challe 28nges goal. The taxpayers in these school districts will not see a 1-cent reduction in propertytaxes. Olsen said this disproportionate distribution of the tax break isflawed.Opponents on the left ‘ a group of House representatives who are unhappy with the Democratic leadership’s decision to make cuts in key programs, many in human services (similar reductions were implemented under the Douglas administration last year).Rep. Chris Pearson, P-Burlington, said the lawmakers will propose an amendment to the miscellaneous tax bill that would increase rates for upper-income tax brackets based on H.401.Here’s a rundown on some of the details of the miscellaneous tax bill:â ¢ A new threshold of $100,000 in sales taxes on gross sales of entertainment tickets for nonprofit entities (the current threshold that kicks in on April 1 is $50,000 based on the previous year’s receipts; on July 1, the $100,000 level will be in effect);â ¢ The Vermont Blue Ribbon Tax Structure Commission is repealed and the legislation sets aside $210,000 for a property tax study to be conducted by an outside consulting firm;An extension of a $380,000 tax credit from the Orleans-based manufacturer, Ethan Allen, Inc., furniture manufacturer, through fiscal year 2013:â ¢ A study to assess the value of residential and commercial renewable energy projects;â ¢ About $1 million for a 1-cent property tax break for school districts that reduced spending by 2 percent under the Challenges for Change government restructuring targets;â ¢ Self-employed individuals would be able to deduct health insurance premiums from their household income. The estimated impact to the Education Fund would be $700,000 for fiscal year 2013. Source: Anne Galloway is editor of vtdigger.orglast_img