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Saturday, May 11, 2013

Statehouse Standoff: Shumlin and the Legislature Reignite Tax Fight

Posted By on Sat, May 11, 2013 at 11:36 AM

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For three peaceful days this week, Gov. Peter Shumlin and the Democratic legislature appeared to have resolved a months-long feud over taxes. But in a dramatic turn of events on Friday, that harmony dissolved into discord — stalling the legislature's adjournment and prompting the very real threat of a gubernatorial veto. 

Suffice it to say, "Kumbaya" is no longer playing on the Statehouse jukebox.

Dividing the Dems is a push by leaders of the House and Senate tax-writing committees — Rep. Janet Ancel (D-Calais) and Sen. Tim Ashe (D/P-Chittenden) — to enact progressive reforms to the tax code in the closing days of the legislative session. While declining to fully describe their plan, they say it would lower income taxes for the vast majority of Vermonters and raise them for a small minority — all in a revenue-neutral manner.

But the governor deeply opposes the plan, saying it violates the terms of an agreement he reached with House Speaker Shap Smith (D-Morrisville) and Senate President Pro Tem John Campbell (D-Windsor) earlier this week to avoid new taxes and spending. Shumlin claims that despite the legislators' assurances, their "on-the-fly" reforms would result in higher taxes overall and put at risk a recovering economy.

Throughout the Statehouse on Friday, the question on everybody's minds was whether the legislature would complete its business late Saturday and adjourn for the year. To do so, conference committees writing the budget and tax bills had to wrap up their work early Friday afternoon — but that deadline blew by without any signs of progress. 

At issue was whether Smith and Campbell would side with their committee chairs, Ancel and Ashe, and provoke a confrontation with the governor — or whether they'd pull the two back, close up shop and go home. 

Shortly after 4 p.m., the four convened a meeting in Smith's office to decide the question. But when Smith and Campbell emerged an hour later to face a scrum of loitering reporters in the Statehouse cafeteria, the only definitive thing they would say was that a Saturday adjournment was no longer possible, and that they'd stay in session through Monday to finish the job. (An hour later, they pushed that back to Tuesday.)

Asked during the impromptu press availability whether they felt it necessary to come to an agreement with the governor, Smith said, "We don't have to have agreement with the governor on a tax bill, and we actually don't necessarily have to have a tax bill."

Did that mean they were ready to throw Ancel and Ashe's plan overboard?

"Don't misunderstand," Campbell said. "We didn't say we're abandoning it. We just said we're going to be talking."

Added Smith, "My hope is that we can come to an agreement on a tax bill. We may not. We may. That's what we're going to be discussing over the next 24 hours."

Asked one last time whether they would put forth a plan not to Shumlin's liking, Smith said, "Any option is still on the table."

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Moments later, Shumlin spokeswoman Sue Allen swept through the cafeteria, telling reporters that the governor would hold his own press conference shortly to respond to the news of a delayed adjournment. In his ceremonial office on the other side of the Statehouse, Shumlin made clear his disagreement with Ancel and Ashe's plan — and his displeasure with legislative leaders for considering it.

"I've only heard about proposals. I haven't seen 'em. But the last thing we should be doing is raising income taxes, changing our income tax system on the fly, at the last minute, when we don't need the money," he said. "I've made very clear we should not raise income taxes. We will not raise income taxes. We must not raise income taxes."

Of course, that's not what Ancel and Ashe say their proposal does. They claim that by setting a minimum income tax threshold of three percent for wealthy Vermonters and then capping deductions at 2.5 times the standard deduction, they would raise enough money from high earners to lower overall tax rates and reduce the burden on the vast majority of Vermonters. They say their plan cuts taxes for more than 220,000 filers and raises them for just 16,000.

But Shumlin disputes that math. He said his advisers believe the proposal would generate "millions and millions" in new revenue, violating the terms of his deal with Smith and Campbell. (Neither side would provide documentation to support their respective cases.)

Rather than extend the length of the legislative session, Shumlin said lawmakers should get their work done, "stick with the agreement and go home."

The governor's strategy is clear: Get out in front of the legislature and define Ancel and Ashe's plan before they have a chance to do so. Muddy the waters by declaring it a tax increase and a violation of their deal — regardless of whether it's either. Scare taxpayers by calling it "on-the-fly" tax policy written by a legislature gone rogue — even though all the plan's elements have been debated ad nauseam and passed by one chamber or the other this year.

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So will Shumlin's strategy work?

Yes, if he's the only one whose voice is heard.

Shumlin is a one-man message machine who doesn't mind stretching the truth to make his case. Who cares if the plan actually lowers most Vermonters' taxes?! If the governor keeps saying it's an income tax hike — and nobody responds with a crisp, coherent message to the contrary — his job is easy.

Ancel and Ashe have a strong case to make, but to get it across to the public, Smith and Campbell need to join them in making it. Their muddled press availability on Friday afternoon made clear they're a long way from getting their message straight. And their seeming inability to make a go-no-go decision bodes poorly for bicameral cohesion.

That's a problem. You can't reluctantly back into a veto fight and expect to win. And that's exactly what Smith and Campbell appear to be doing. If they're serious, they need to lock down the support of their respective caucuses and come out fighting quickly, publicly and strongly. 

You can expect that the governor and his henchmen will spend the weekend haranguing centrist Democrats to oppose the plan and activating their network of wealthy and influential supporters to do the same. All Shumlin needs to keep the legislature from overriding a potential veto is one third of either the House or the Senate. And that ain't hard.

So should Smith and Campbell just back down?

They certainly could — and perhaps it would spare them an ugly end-game — but it'd be the second time in a week that they'd look like they were being rolled by the governor. Why would he — or anyone else, for that matter — take them seriously after that? 

After all, they've got a far easier case to make than Shumlin: Their plan would cut taxes for the vast majority of Vermonters. How can you argue with that? 

If Smith and Campbell can't sell that message, then maybe Shumlin's right: Maybe they should just give up and go home.

Disclosure: Tim Ashe is the domestic partner of Seven Days publisher and coeditor Paula Routly.

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About The Author

Paul Heintz

Paul Heintz

Bio:
Paul Heintz is a staff writer and political editor for Seven Days. He wrote the "Fair Game" political column from May 2012 through December 2016.

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