The governor's plan to eliminate an exemption on the first 40% of capital gains from taxation by the state was greeted with mixed reviews. Here and here. Cairn Cross, the state's lone venture capitalist, and a Vermont Tiger contributer, had this pithy reaction to the governor's proposal:
As someone who is in business of primarily investing in Vermont companies (for an expected capital gain) this is perhaps the dumbest idea for taxation I have ever heard.
Still, the governor and his supporters insisted that they were not proposing a tax increase. What the state took from treating capital gains as ordinary income, it would give back by cutting tax rates.
Now, the legislature has looked at the plan and decided it likes the item in Column A but isn't so hot on the one in Column B. The state stands to see about $21 million in additional revenue by closing the capital gains "loophole." (It should be noted here that the money that is making the money has already been taxed once. But for many legislators, once is never enough.)
Rather than use the increased revenue from capital gains to offset reductions in the marginal tax rate on incomes, Speaker of the House, Gaye Symington proposes that
About $8 million of that increase in revenue would go into town highways and bridges under her plan, about $7 million into school construction, $5.4 million in additional money for the "income sensitivity" property tax reduction and $1 million in startup funding for towns and school districts to try out new ways of cutting costs.
"Tax relief" in Montpelier reminds one of the immortal James Burnham line:
"Just as good ... isn't."
Ouch!
Posted by: GreggB | February 04, 2008 at 01:00 PM
Well it didn't take long for the legislative Leadership to grab onto the Governor's proposal re eliminating the capital gains exemption. This is what so many of were afraid would happen when he firt proposed this elimination. For me, personally, much of my retirement income is associated with capital gains. One plans for retirement and then the rules change - what is fair about that? I am now going to look seriously at moving.
Oh, and this will help economic development? I think not!
Posted by: John Stewart | February 04, 2008 at 02:33 PM
Hey! What's not to like? All that nice new money.
Posted by: Lazarus Long | February 04, 2008 at 08:22 PM