Vt. Senate committee zeroes in on tax changes

MONTPELIER, Vt. (AP) -- The Vermont Senate Finance Committee is expected to finalize a plan by the end of the week that raises $10 million in new revenue toward a roughly $1.3 billion general fund budget, with capping the state income tax deduction for home mortgage interest likely to be part of the package.

The Senate panel's plan is likely to draw less complaint from Gov. Peter Shumlin than the $27 million in new or higher taxes approved by the House last month. Differences between the two plans likely will be worked out in the conference committee made up of three members from each chamber.

The $10 million figure came from Finance Committee Chairman Tim Ashe, a Progressive/Democrat from Chittenden County who led the committee through an afternoon of deliberations Tuesday toward the expected completing of work on the tax bill this Friday.

The committee was expected to approve a cap on the ability of homeowners to deduct home mortgage interest from their state income taxes; as currently written, the bill would cap the deduction at $10,000.

Chris MacDonald, lobbyist for the Vermont Realtors real estate industry group, complained that lawmakers seemed to think the cap would affect only wealthier homeowners. He said an estimated 51 percent of tax filers affected have household incomes below $100,000.

The bill also calls for increasing Vermont's cigarette tax by $1.50 a pack, from its current $2.62. The House version of the tax bill called for a 50-cent increase.

Ashe said in an interview he wanted to raise the cigarette tax mainly as a public health measure — to discourage people from smoking. He said he might seek to pull the levy out of his committee's bill and have it reviewed as separate legislation by the Senate Health and Welfare Committee. Other committee members said they favored a somewhat lower figure than $1.50.

"I don't think we should just be whacking the heck out of people who are addicted to something they just can't get off of," said Sen. Kevin Mullin, R-Rutland.

The bill expands the sales tax to covered bottled water; it does not levy the sales tax on soda and candy, as the House version would.

The bill also imposes a new 3 percent tax and new regulations on so-called "break-open tickets," a betting ticket sold in service clubs and bars. Bettors rip open the tickets to see if they have a winner in which symbols on the outside match those on the inside. Shumlin proposed a 10 percent tax; the House tax bill would not tax the tickets.

Committee members rejected a plan to save the state's coffers $1.4 million by scrapping a tax credit designed to encourage families to save for college. Ashe complained that the benefit went mainly to upper-income Vermonters.

The bill also calls for new attention to future tax policy: It calls for a study of tax-exempt properties belonging to churches and charitable organizations.

The bill also delves into tax policy with an eye toward future changes.