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Vt. lawmakers discuss ways to close annual budget gaps - WCAX.COM Local Vermont News, Weather and Sports-

Vt. lawmakers discuss ways to close annual budget gaps

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MONTPELIER, Vt. -

The Vermont Senate is closer to unveiling its tax plan as lawmakers seek to close a budget gap in the tens of millions of dollars. But while members look for a patch this year, they're looking for a system overhaul next year.

Lawmakers say they're sick of looking for new revenue in dark corners of the tax code every year, and argue if they can find a way to close persistent annual gaps, businesses and residents will have the confidence necessary to grow the economy.

Finance Committee Chairman Tim Ashe, D/P-Chittenden County, sees two key challenges as he and his colleagues attempt to steer Vermont toward a balanced tax and spending plan. The first is finding $35 million by limiting most but not all tax deductions and eliminating the sales tax exemption for soda to help cover the $113 million hole in the budget set to take effect in July. The other is finding a future path that won't leave the Legislature searching and scrounging for every penny each year as it has since the recession hit in 2008.

"What we're really starting to do this year is have a roadmap to have predictable taxes out into the future so that we don't have to keep coming back and doing crisis management each year the way it's become the practice since the recession began," said Ashe.

Ashe's big idea is to begin charging sales tax on services like dry-cleaning, accounting or architectural work, but not health care, education, social services or those purchased by businesses. He says expanding the tax base would allow the Legislature to lower the rates currently 6 percent on goods to 4.75 percent on goods and services. Ashe says the change makes sense as the state economy shifts from good-based to service-based.

"Our sales tax base has been eroding and online sales only add to that problem when we lose $50 million a year," said Ashe.

"Everybody in the building knows once you open a door on a tax that door is never shut," said Sen. Joe Benning, R-Caledonia County.

Republicans from Caledonia County don't like the idea though. Benning argues taxing services would hit economically depressed areas like his too hard. He suggests cutting back on government services and streamlining others like merging the human rights commission with the commission on women without reducing the scope of work.

"We have always been trying to do too much for too many for too long with too little," said Benning.

Ashe's pitch is one the Blue Ribbon Tax Commission suggested years ago, but despite how long the proposal has kicked around, the Senate Finance Chairman knows convincing many of his peers will be a tough task.

Early this year Benning did concede that the Legislature would likely need to raise existing taxes or create new ones. However, he says that doesn't mean he supports the idea.

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