Gov. Peter Shumlin objects to any increase in the cigarette tax because he predicts sales and, thus, tax revenues would drop if Vermont's tax rate exceeds that in neighboring states. Lawmakers expect a $1 increase would raise $9 million in new revenue.
The Shumlin administration also argues the cigarette tax is regressive, meaning it has a higher impact on low-income Vermonters.
Shumlin would have preferred to see a tax on dentists, similar to the tax applied to hospitals, nursing homes and home health care providers -- but the House and Senate tax-writing panels rejected that choice in favor of higher cigarette taxes. The House bill proposed a 27-cent increase.
"We still maintain it is appropriate to do an assessment on dental practices," Finance Commissioner Jim Reardon said after the Senate Finance Committee's vote.
The Senate committee chose to study whether the provider tax should be expanded to dentists and other health care groups.
Still, the Finance Committee didn't leave dentists unscathed in its bill. A new tax on health insurance claims would also be applied to dental insurance claims.
The Legislature's fiscal advisers estimated the tax on dental health claims would raise about $420,000 in the first year. The tax on other health insurance claims would raise $8.7 million.
"It's a new tax on dental services," said Peter Taylor, executive director of the Vermont Dental Society. "We will have to evaluate its impact."
The Finance Committee approved an increase in provider taxes, but adjusted the way the tax on hospitals would be calculated. The hospital tax would raise $7.4 million.
Michael Del Trecco, vice president for finance at the Vermont Association of Hospitals and Health Care Systems, noted that the House and Senate versions of the tax bill asked for less than the $17 million the Shumlin administration proposed.
Other actions pending in the Legislature could bring the total financial hit to hospitals to $15 million, Del Trecco said. That level of loss would be difficult to manage at a time when their revenues were already shrinking, he said.
The Finance Committee may have found a way to avoid a second confrontation with the governor -- this one over a provision in the House tax bill requiring online retailers who have affiliates in this state to charge sales tax to purchases by Vermont customers.
Amazon, an online retailer, has sued New York over a similar law. The Shumlin administration worried Vermont affiliated businesses would be hurt.
The Senate bill suggests Vermont adopt a law similar to one in South Dakota that would require online retailers to give notice on its website that Vermont purchasers may owe sales tax.
Senators also avoided a fight with the governor over an income tax increase -- at least for now.
Senate President Pro Tempore John Campbell, D-Windsor, has huddled with many lawmakers individually over the past few days to urge them to drop proposals to put a surcharge on income tax rates as part of the tax package.
As a result, Friday afternoon shortly before the Finance Committee voted on its tax bill, Sen. Richard McCormack, D-Windsor, withdrew from consideration his proposal for a graduated surcharge ranging from 3 percent to 9 percent.
Campbell has also discouraged efforts to raise more than the $24 million in new revenues the Shumlin administration said was needed to fill a $176 million revenue shortfall.
"One of the reasons we aren't raising additional revenue this session is because we don't know the full impact of federal cuts," Campbell said. Congress has yet to make its budget-cutting decisions for next year, but Vermont lawmakers are bracing for a significant impact. "There have been some projections of $20 to $30 million," Campbell said.
"If we find it is necessary to raise revenue and we feel the income tax is the area to look to, there is a chance we will come back in a special session in the fall," Campbell said.
The tax bill will come up for a vote by the full Senate next week. The Senate has to act on this measure before it can take up its version of the budget to operate state government.
source: www.burlingtonfreepress.com
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