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Turning politics on its head

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The move Tuesday by Democratic House Speaker Gaye Symington to abandon plans to close a loophole on a capital gains tax exemption initially proposed by Republican Gov. James Douglas turns state politics on its head. Since when do Democrats fail to close a tax loophole to the wealthy for potential gain to the common good?

Yet, that’s what happened.

Not that there would not have been difficulties proceeding with the proposal. The Democratic Legislature and Gov. Douglas had disagreements over how to spend the estimated $21.4 million annually. Douglas wanted to give the windfall to middle income Vermonters as well as to the very rich. Democrats wanted to split the amount three ways: $4.2 million for targeted property tax relief; $8 million for the highway and bridge program and $7 million to pay off a portion of the $55 million the state owes on school construction projects (the latter two of which would also indirectly lower local property taxes for most Vermonters.)

Because Douglas objected to spending the money for the common good (as detailed above — no new programs, just meeting existing obligations of the state) and because he would be denied the possible campaign claims of saying he had reduced income taxes, a political battle was looming on the horizon. Both sides of the political aisle saw it coming and the decision to bail was greeted by sighs of relief from both parties.

Interestingly, the administration was relieved because it meant Democrats wouldn’t spend the money — even if the expenses had already been committed or, go figure, were for property tax relief. (Why Douglas would support income tax relief, but not property tax relief is unclear.) Many Democrats, on the other hand, were relieved because of the future economic uncertainty and the very real possibility that legislators might need to tap that ready source of income in the near future for critical needs.

“We’ve seen numbers for fiscal 2010 that project as high as an $80 million (budget) deficit,” said House Ways and Means Chairman Michael Obuchowski, D-Rockingham. “The exciting thing to me is we are keeping our powder dry for the unknown fiscal future.”

Still, it says something about the Legislature when Democrats are so unsure of their ability to control spending that they would rather leave intact a tax loophole that everyone agrees has been unfairly advantageous to the wealthiest few and that very few other states allow, rather than close the loophole and use that annual windfall responsibly.

Angelo S. Lynn

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