Federal Tax Cuts Offer New Option
FOR IMMEDIATE RELEASE:
January 21, 2011
MONTPELIER – The extension of the Bush tax cuts passed recently by Congress gives Governor Shumlin and the Legislature another option for balancing the state budget in fiscal 2012 and 2013. A new analysis shows that the top 5 percent of Vermont taxpayers will save $190 million as a result of the federal tax cut extension.
“We’re not suggesting that these taxpayers shoulder the entire cost of closing Vermont’s projected $150 million budget gap,” said Paul Cillo, president of Public Assets Institute. “But the fact is, those who are prospering the most in the current economy could close the state’s entire budget gap and still pay less in state and federal income taxes than they would have if the Bush tax cuts had expired as scheduled.”
“What this analysis shows,” Cillo said, “is that Vermont has additional capacity to raise state revenue over the next two years in order to maintain critical public services.”
The analysis of the effects of extending the Bush tax cuts was prepared for Public Assets Institute by the Institute on Taxation and Economic Policy in Washington, D.C. According to ITEP analysis, the top 1 percent of Vermont taxpayers will save a little more than $100 million, thanks to the tax-cut extension. The average personal income for taxpayers in this group is about $940,000 a year. The savings for the next 4 percent of taxpayers will be about $88 million.
The Bush tax cuts were contained in bills passed by Congress in 2001 and 2003. These bills reduced income tax rates, lowered taxes on capital gains, and cut the estate tax, among other provisions. The cuts were scheduled to expire at the end of 2010, but in a lame duck session in late December, Congress voted to extend the cuts for another two years.
Vermont, along with the other states, had federal stimulus funds to help maintain critical services during the recession. Those stimulus funds run out this year, and without additional revenue or further spending cuts, Vermont’s projected budget deficit for 2012 will be about $150 million.
Public Assets Institute is a nonprofit, nonpartisan organization that promotes sound budget and tax policies to benefit all Vermonters. Additional information is available at www.publicassets.org
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