Vt. House advances bill levying sales tax on soda

MONTPELIER, Vt. (AP) -- The Vermont House on Wednesday advanced a wide-ranging package of tax increases that would raise collections from upper-income households, levy the sales tax on soda and candy and add 50 cents to the tax on a pack of cigarettes, among other things.

Supporters said the package, which is up for final House action Thursday before moving to the Senate, is needed to meet a variety of needs for new revenues, including increased child care subsidies and money for low-income heating assistance.

"It asks Vermonters who can afford to contribute more to do just that," said Rep. Chris Pearson, a Burlington Progressive. "It allows us to avoid cutting anti-poverty programs at a time when poverty is on the rise in Vermont."

Critics said their constituents can't afford higher taxes and complained that taxes on soda, cigarettes and other items would drive more Vermonters to take their business to New Hampshire, which has no sales tax and a lower cigarette tax.

"This is an economic development plan for the state of New Hampshire," said Rep. Mike Hebert, R-Vernon, whose town is just across the Connecticut River from the Granite State. "This bill will harm our economic development."

The tax package is likely to see big changes as it moves to the Senate and as negotiations continue between lawmakers and Gov. Peter Shumlin, a Democrat who often says he opposes expanded sales taxes and higher income taxes on the wealthy.

"It's early in the process," the governor said repeatedly at a news conference earlier Wednesday. He reiterated calls for Vermonters to judge his performance and that of the Democratic-dominated Legislature by what laws emerge at the end of the 2013 session, several weeks away.

The debate in the House on Wednesday was similar to that held about proposed tax increases for years. Critics argued that new taxes would hurt Vermont's continued efforts to emerge from the recent recession, while supporters said it was time to raise revenues after several years of underfunding key programs.

Among the tax changes supported in Wednesday's 85-55 vote:

— Lifting the sales tax exemption on soda, candy, bottled water and dietary supplements. The state would levy its 6 percent sales tax on those items in conformance with a multistate sales tax agreement under which items containing flour would not be considered candy. Critics had been displaying candy bars around the Statehouse in recent weeks, asking people to guess which ones contained flour and might be taxed and which ones didn't have it and were exempt.

— Limiting itemized deductions for upper-income taxpayers and tweaking Vermont's tax brackets to raise more revenue from them.

— Ending one tax — the "employer assessment" — on companies that don't offer health insurance to workers.

The House action followed last week's approval of a gasoline tax increase of about 7 cents per gallon to be phased in over two years.