One budget cut the governor opposes

The Vermont Legislature gets kudos this week for voting to postpone the increase in the domestic production deduction, an obscure federal business tax break that passes through to Vermont corporations.  Vermont’s tax structure is tied to the federal system, which is boosting this tax break by 50 percent this year.  This tax expenditure increase would cost the state at least $1.7 million in fiscal 2011 and about the same in 2012, according Vermont Tax Department estimates.  The Center on Budget and Policy Priorities in Washington, D.C., applauded Vermont’s decision to block the expansion, at least temporarily. According to the Center, Vermont is one of 25 states that allow this federal deduction to pass through.

Despite feverish efforts by elected officials to find cuts to close a $154 million budget gap next year and even larger gaps looming in future years, this is one budget cut Gov. Douglas doesn’t like. He was chiding the Legislature this week for not giving businesses a bigger tax break.