By Rep. Anne Donahue

This past week’s House session should leave all Vermonters reeling, if they have been following the news.

I usually try to avoid speaking in partisan terms in my updates. It is impossible not to, when discussing the action of the supermajority to plow through with $131 million in new taxes in just a few days, while claiming its “balanced budget” was practically equivalent to the governor’s proposed budget.

By refusing to include major expenditures in three bills that passed separately, which caused the need for the taxes, it created a deceptive budget.

I tried for public transparency with an amendment to include the extra $26 million in the budget we were passing, because it is, in fact, an additional part of the House budget proposal.

It was rejected 97-41, but I was honored by the fact that four Democrats broke from party lines along with two Progressives and two Independents to support it.

The program expansions belonged in a more thoughtful overall budget that kept them in line with our revenues by balancing among priorities.

They added new positions in the Judiciary to address court backlogs, Medicaid expansions focused on our older, low-income Vermonters, and housing programs, partly to try to add housing units but also for expansions to the emergency housing (hotel) program.

I was deeply disappointed by the Medicaid bill because the Medicare support component came from a bill I introduced and believe to be vital, but it jumped levels too quickly and was combined with other expansions so that it cost much more; plus, it was not included in a balanced budget.

Pieces of Tax Burdens

In order to re-balance the actual budget, new taxes were required for the general fund.

Why $130 million in taxes to pay for $26 million in program expansions?

Because the budget increase in those bills for this year only gets them started. The new taxes coming in will be raising the funds for much larger full costs next year.

It’s like that with many programs and taxes. It takes them a while to get up and running; the impact hits later.

Last year, motor vehicle fees were increased by 20 percent; those are now being felt as renewals come due. The $100 million payroll tax to increase childcare support that was passed last year will go into effect this July.

The historic property tax increase is also looming and in the next week, it seems probable that another new tax will be created in order to reduce that impact.

This would be “property tax relief” to at least a small degree, but it will not be tax relief, because the statewide education funding will still be paid with taxes; just another type.

All of this comes in the face of significant increases in tax revenues over the past ten years in all categories – increases that far exceed inflation. It is spending, not inadequate revenue, causing the shortfall.

Outside of direct taxes we are also piling on major new costs in home heating when last year’s “clean heat standard” bill kicks in. That will require more electrical energy use, and we will be paying much higher electricity rates, thanks to the most expensive version of revisions to the Renewable Energy Standard bill, also passed last week.

And finally, we moved forward with a bill that will make it harder and more costly to build new housing in most of the state. In the middle of a housing crisis!

Taxing the Rich

The new tax bills were developed mostly behind closed doors: presented to the committee of jurisdiction the prior Thursday morning and voted out that afternoon.

They are being promoted on the premise that they are directed only at the very wealthy and big business. That requires a deeper dive.

The income tax increase is imposed only on those earning more than $500,000 per year. Surely, they should pay their fair share.

Those tax filers represent about 3,500 taxpayers. That represents one percent of all income taxpayers. They currently pay 35 percent of all personal income taxes in the state. They are already supporting the rest of us.

When we demand more, and become the state with the second highest upper bracket tax rate in the country, some will choose to move away, and others will not move in.

We kill the goose laying golden eggs. At a high tax-revenue-per-person, it only takes a small number leaving to create an overall revenue loss.

Another of the new tax bills increases the corporate tax rate. The bill would make Vermont the state with the highest corporate tax state in the country.

We do not live in a vacuum. Businesses choose locations based on costs of doing business.

And over the past 10 years, the revenues we’ve received from corporate taxes have tripled. If they make more money, they do paying higher taxes.

We are sending a message to businesses: we do not want you, or your jobs, here.

Some of the new taxes were embedding the program policy bills, even though the revenue goes to the general fund and is not guaranteed to specifically fund them.

I went through procedural gyrations to force a vote on the corporate tax alone before the vote on the full bill. The tax passed, 97-40.

The housing bill expressed an intent to spend $900 million over the next ten years. The tax on high income, raising $17.5 million in the start-up year, passed 92-43. Of that, only $7 million actually goes towards new housing.

The Act 250 Bill

The most contentious bill – one that divided some majority Democrats in the debate from their colleagues – was the “reforms” to Act 250.

Act 250 is our decades-old land planning law that protects the environment through tight oversight of development.

It has been highly successful in doing that, and the major complaints over time have not questioned that aspect. The complaints have been how unwieldly it is, costing excessive bureaucracy and time, meaning high costs even for good development.

Given the housing crisis, there has been pressure for reform to ensure that we do not have unnecessary barriers for new construction. But this bill adds them. It creates requirements that most of our smaller communities will not be able to afford as a trade-off for easing the burdens in very small, contained areas in large towns.

There are no estimates of how much land will be added to the protective class for highly restricted use because the new Environmental Review Board it creates will be setting those higher thresholds.

The most bizarre aspect of the new bill is that the Board that sets the standards is the same body that would hear appeals of permit denials based on those standards. That part of the bill drew an amendment from a tri-partisan group of legislators (including me); bill supporters opposed it saying it would “gut the bill” of its intended process. It failed on an 89-53 vote, splitting the majority party to a virtually unheard-of degree, with 14 Democrats supporting the amendment. Most of them later voted against the bill itself.

Other Stuff

Those were such major subjects that other bills that would usually make bigger news received less attention – but not necessarily less debate, resulting in several late nights on the floor.

A few key bills included:

A bill expanding emergency housing, replacing past, pre-Covid rules. The changes would go into effect under this year’s budget, then become law next year. The former “adverse weather” rule, for example, intended to shelter any person who is homeless in frigid temperatures, would become an automatic entitlement from November 15 through March 15 – five months of the year – under a new “Winter Shelter” part of the bill. The policy allowing hotel shelter to be discontinued for criminal activity was not included.  Vulnerable individuals would be eligible for more extended time frames. Other changes include broader definitions of who is eligible and a requirement that if a shelter is full in one county, the individuals must be given access to a hotel/motel room even if there is available space in another county.

A statewide ethics bill is halfway through the floor debate process. There have been concerns expressed about the new mandates on municipalities, including training costs, all imposed by a state board.

I was very disappointed that a bill that will allow retail cannabis establishments to receive a license endorsement to sell to medical-use patients – which thus includes those under age 21 – did not add language requested by the Human Services Committee (where I serve) to require rules that protects underage buyers in that new environment.

Instead, it added language saying that rulemaking by the Cannabis Control Board must include “rules requiring access for patients who are under 21 years of age.”

And Good Stuff

Some broadly supported bills:

A revision of the law on how a person accused of child abuse is placed on the registry, which can be a lifelong impairment to access to many jobs. It maintains the protections for children but improves the fairness of the process.

A new disclosure requirement of flood history for home sales and rentals. I was gratified that the committee included my bill for rentals of lots for mobile homes.

I will not easily forget the couple I met who were among those who lost everything in the July flooding at the Berlin Mobile Home Park, who had moved in two months earlier with no knowledge of the flooding history. Their home was a wedding gift from their parents.

Finally, after months of Agency of Human Services insistence that no state licensing was required for a new psychiatric residential treatment facility for adolescents that will be funded by the state, I pressed the issue enough so that the agency reversed its position.

Just hours before the House was to adopt bill language to mandate licensing, the agency decided to agree to it. We still included language I drafted prohibiting use of state money to place youth there prior to the licensure. It seemed wise, based on the foot-dragging that had occurred.

Author is State Representative for Northfield and Berlin (Washington-1).