This will be a somewhat abbreviated post because the News Guy moderated a debate among Northeast Kingdom legislative candidates last evening and there is only so much one fellow can do in one day.

Oh, all right. Full disclosure. In addition to this public duty, the News Guy herewith admits another factor. As revealed in an earlier post (the one about Centennial Field and the Lake Monsters Take Us Out To the Ball Game? July 3, 2009)  among the News Guy’s private passions is that exotic past-time known as baseball, to which he devoted the latter part of the evening.

So for today, just a correction or two, a little mopping up, and then a tale, a true story that may or not be cautionary.

Wednesday’s post reported news of an “inter-active map showing poverty rates by state and county in 2009 when the poverty reached its highest levels in 51 No big surprises.”

Obviously that should have been the poverty rate which reached its highest levels in 51 years, period, end of sentence.

A few paragraphs later, the post listed the poverty rates for Vermont’s counties, but left out two of them. Thanks to the reader who pointed out the omission, and for those who read the post early, scroll down. All 14 counties are in there now.

And to the reader who asked what the under-five-year-old poverty rate is by county, stay tuned. The search is on.

Another reader had a good point on that post, and this time it was not just any reader but Doug Hoffer, the Democratic candidate for Auditor. Read Hoffer’s full comment (just go down to the bottom of Wednesday’s post and click on “3 comments,”) but his main point was that it isn’t good enough for Vermont’s poverty rate to be lower than in most other states; ten percent in poverty still too high and we’re all too willing to accept that state of affairs.

An interesting comment which deserves a full treatment soon.

Later in that same post was the report of a poll showing that “45 supported the idea, 36 percent opposed it, and 19 percent were undecided.”

No doubt you all figured this out for yourselves, but just for the record, that’s 45 percent.

The October 11 post, Ethical Quandary, reported that Lt. Gov. Brian Dubie was once a member and chairman of the school board in Essex. It was Essex Junction. Apologies to both municipalities and to Dubie.

OK, now to the tale, in which the names shall be changed to protect the innocent. So let’s call them Mr. and Mrs. Jones. They live in Charlotte, in the same house they had built more than 40 years ago. It isn’t a big house. Fifteen hundred square feet, Mr. Jones said.

The Joneses are not young. He’s 81. She’s 75. They’re not rich either. Last year, they said – and emailed tax records to back it up – their taxable income was $44,000. Because they own their home free and clear, they no longer have to make mortgage payments. They just have to pay their utility bills, buy food and fuel, whatever clothing they might need, and some incidentals.

Oh, and of course property taxes on their house. This year, their property tax bill is $11,252.

No, that’s not a typographical error. The Jones pay more than $11,000 – one quarter of their taxable income – for property tax.

Wait a minute. Doesn’t Vermont’s property tax system include an “income sensitivity” provision that protects middle-income homeowners from sky-high property taxes?

Yes, but earlier this year the Legislature passed a bill (H 783) effectively abolishing income sensitivity  when “the equalized value of a housesite (is) in excess of $500,000.”

That covers the Jones’s 1,500-square-foot house that they had built in 1967 for $22,000. It is now assessed at $1.4 million

No, neither of those was a typo, either.

The Joneses have made some improvements to their house over the years. But that’s not why its assessment shot up. It was, said Mrs. Jones, the much larger houses built all around them over the last several years that raised the assessed value of all the homes in the neighborhood.

The Legislature acted after some news stories in the Burlington Free Press and the Valley News (for some reason unavailable on its web site) that some residents of opulent homes were paying modest property tax bills based on their incomes.

The Legislature acted out of a combination of opportunism and controlled panic. The lawmakers were scrounging for all the revenue they could find. And they worried about being attacked for coddling the “wealthy,” even if these supposedly wealthy people earned average incomes.

It was not an unreasonable decision. Like the others so targeted, the Joneses will not suffer economically. They can sell their home, probably not for $1.4 million in the Recession, but for several hundred thousand dollars, which will allow them to live out their lives in comfort.

But they don’t want to move.

“This is our home,” Mrs. Jones said. “It’s where we raised our three boys. At my husbands age, moving will be hard on him.”

Surely this is not what the Legislature intended. But nobody has repealed the law of unintended consequences. And legislating on the basis of a few “horror stories” is a good way to activate that law.

So they are and so it is. But Vermont is not alone. In the other 49 states, millions are struggling to find jobs and the unemployment rate is higher than it’s been in 30 years.

In fact, the unemployment rate is lower in Vermont than it is nationally or in most other states. In August, according to the Bureau of Labor Statistics, only four states had lower unemployment rate’s than Vermont’s 6.0 percent, which was more than a third less than the national rate.

Brian Dubie agrees that job creation is vital, and he says jobs are scarce because “it’s harder to start a small business here, harder to earn a good living here, harder for a small business to hire and grow…than in almost any other state in America.”

Dubie has some evidence to support his assertion, a 2009 survey by Forbes Magazine finding that Vermont had one of the least “business-friendly environments” in the country. As evidence goes, though, this survey was decidedly unimpressive, and there are no actual data supporting the claim that small businesses are less likely to succeed in Vermont than elsewhere. Until the Recession began, business start-ups outnumbered business failures in the state, and the success rate was comparable to the rate in other states.

Different though their outlooks may be, Dubie and Shumlin are both acting in accordance with what seems to be Vermont’s real – if unofficial – motto: “Woe is Us.”

Speaking of no data, there are none to prove that Vermonters tend to complain any more than Tennesseans, Kansans, or Oregonians. In recent years, whining has emerged as the national pastime as various regions, generations, and subcultures claim to be more put-upon than everyone else.

To be fair, there is plenty to…well, whining never did any good, but there is plenty to complain about and rail against these days. In many ways, the country is in bad shape. The current Recession is the worst since the Great Depression (unemployment went slightly higher in 1982, but it was a far more manageable downturn). In real money terms, many people earn no more than they did a decade or so ago even as the cost of necessities such as health care and education keep rising. Life in America is not easy these days.

But all these are national (and some cases global) troubles. There is nothing particularly Vermont-ish about them. In fact, for the most part, Vermont is getting through these troubled times better than most states. Depending on who is doing the counting and when, the home foreclosure rate in Vermont is either the lowest or the second lowest in the country. As mentioned, the jobless rate, while higher than before the Recession, is relatively low, as is the poverty rate, and even the much-discussed pending state government budget deficit pales in comparison with many other states.

One reason to suspect that Vermont is whinier than most other states is that Vermonters were kvetching well before the Recession. To some extent, this is one consequence of being a generally liberal state. Complaining – sometimes with good cause, sometimes not – is built into a liberal’s DNA.

But if anything, it has been the state’s conservatives who have voiced the loudest gripes. Led by Gov. Jim Douglas, Republicans and their allies have kept up a steady chorus caterwauling that Vermont’s tax structure and environmental regulations are stifling economic growth.

It’s not impossible that there is some basis to this critique. But it faces one problem at the outset: there really isn’t much evidence that Vermont’s economic growth has been stifled at all.

For the last half century, this state has gotten steadily bigger and richer. In 1960, the Census counted 389,881 Vermonters. That rose to about 445,000 in 1970, some 511,000 ten years later, almost 563,000 in 1990, almost 609,000 ten years ago, and an estimated 638,000 this year. Experts project the population to reach 678,000 by 2025.

As it has grown larger, Vermont has grown richer. One of the poorest states in the middle of the last century, it now has the 21^st highest median household income. According to official federal figures from 2007 to 2008 (the latest figures available) Vermont’s Gross Domestic Product grew by 1.7, more than twice the nationwide rate of 0.7 percent.

Vermont does have economic problems, but the evidence suggests that these problems stem less from what Vermonters do (government policies) than with where they do it (on farms and in small towns) and who they are (white, Anglo, educated, relatively affluent).

Vermont is one of the most rural states in the country, with only one official metropolitan area (Burlington and environs). In today’s economy, the advantages go to concentration and consolidation. With rare exceptions, economic opportunity is found in the big cities and metro areas. That’s home to the big economic drivers – the big universities, the health care and research centers, high finance, the arts. That explains why Chittenden County is the most affluent part of the state. It has at least some of all of the above. Considering that the rest of the state has very little, its prosperity is impressive. Somebody is doing something right.

One thing Vermonters are not doing much is having children, so one real concern is that the average age of the state’s residents will progressively rise. But there’s not much that can be done about that. Educated, white, Anglos aren’t having children anywhere in America, all of which is getting older. Nationwide, the share of the population over age 65 is projected to rise from 12.9 percent this year to 17.8 percent in 2025.

Vermont does have challenges. Like the rest of the country – but more than most states in the Northeast – income inequality is growing. The immigrants tend to be affluent retirees or educated folks who come to work at Fletcher-Allen, IBM, or the University of Vermont. The emigrants tend to be the less educated who can not find the jobs in factories, farms, or forests that supported their parents and grandparents.

That’s a real problem. But – again – hardly unique to Vermont. It is a problem that stems from great progress. Oversimplifying just a bit, the prosperous half of the world has solved the production-of-goods problem. People can produce more machinery, food, and fiber with a fraction of the workers needed a few decades ago. Among the functions that need fewer workers are forestry and dairy farming. Milk, wood pulp, and saw logs will continue to be produced here, but by many fewer people. To live decent lives, the rest will either have to get the kind of education needed in the new economy, or go somewhere else (though pretty soon, going somewhere else won’t do much good, either).

For the most part, then, Vermont’s problems are the country’s (and even the world’s). Sure, there are a few things this state could do better, or different. It’s even possible – though hardly proven – that cutting taxes and easing the regulatory process might be among them. Meanwhile, it could be a good idea for both Democrats and Republicans to see if they can avoid grating Vermont the distinction of being the whiniest state in the union.

It just seems that way.

Truth in political advertising may still be a slogan and a policy. But it is more often a contradiction in terms because it is exempt from law. Coke may not claim that Pepsi will give you hives, nor Ford allege that General Motors cars are unsafe without risking a lawsuit.

But in a campaign commercial, candidate Smith may say just about anything about candidate Jones without legal consequences. If the allegation is false, Jones can’t sue, at least not with any hope of winning. The only remedy for dishonest political speech is – and ought to be — honest political speech, on the part of the accused candidate, decent citizens, and assorted opinion leaders.

Oh, and on the part of the press, or, to use the (sadly) more current term, the media. Applying the same standards to all candidates, journalists ought to scrutinize political ads for accuracy and honesty. Herewith, then, the first of what will be several “ad-watch” posts on the Vermont governors race.

But let’s add a third standard to accuracy and honesty: a little subtlety, a recognition that, in politics at least, not every statement is either the truth or a lie. As noted in an earlier post, “lie,” is a harsh word that should be avoided unless the facts allow no alternative. Sometimes people are just wrong. In their enthusiasm, they often fail to see the whole picture.

Or maybe they decide not to see the whole picture.

Besides, in politics it’s easy – and infernally common – to make a statement which is not false – which is technically factual – without really being the truth, or at least the whole truth. Political commercials can be true and not true at the same time.

Take the Republican Governor Association ad on behalf of Republican candidate Brian Dubie saying this about Dubie’s Democratic opponent, Peter Shumlin: “As a proud architect of Act 60, he’s raised your property taxes. Last year, Shumlin led the effort to raise over $20 million in taxes on the working families of Vermont.”

The second sentence is accurate. Shumlin did help lead the effort to raise taxes by about $20 million, and it’s reasonable to assume that those taxpayers were Vermonters, members of families, and “working,” in that they were, in one way or another, gainfully employed.

Very gainfully, as it turn out. In common parlance, “working families” suggests (though it does not explicitly state) middle-income folks – cops, teachers, store clerks, salespersons, keypunchers, and the like. Those are not the people whose taxes Shumlin helped raise. They were, in fact, the people whose taxes he helped lower, while the top two or three percent of the income distribution ladder paid the higher taxes.

As to the first sentence quoted above of the RGA ad, it’s at least half true. Shumlin was one of the architects of Act 60. Whether that means he’s “raised your property taxes” is debatable, and probably depends who “you” are.

Property taxes have gone up since Act 60. But they would have gone up anyway. More? Less? Who knows? But differently, and as a careful analysis in Tuesday’s Free Press demonstrates, many Vermonters, perhaps most, are paying less in property taxes than they would have under the previous school finance system.

Do not suppose, however, that only Republicans produce political commercials in which debatable allegation is treated as absolute truth. A Shumlin ad entitled Hold It says that Dubie “pushed for a $100 million property tax increases for middle class Vermonters.”

This assertion can not be branded false. Dubie did support Gov. Jim Douglas’s January, 2009, proposals to shift some obligations from the General Fund (financed largely by the income and sales taxes) over to the Education Fund (largely financed by the property tax). The Shumlin campaign provides credible estimates that over a two-year period, the additional burden on the Education Fund might have been $100 million.

But the Ed Fund also gets some money from other sources. Furthermore, in theory, at least, schools could have cut their budgets to offset part of the tax hike. In other words, Dubie never proposed a $100 million property tax increase. He supported proposals that Democrats argue would have imposed that increase. Not exactly the same thing, even if the Democrats seem to be more right than wrong.

Alas, there is one political commercial on the air in Vermont these days making claims that are simply false. This is the Dubie ad  (Dubie’s ads are not available on his web site) claiming that Shumlin plans to release “nearly 800 nonviolent criminals from prison,” and  “turn… drug dealers and child pornographers out on the street long before their sentences were served.”

Shumlin has made no such proposals, though the wording in his “Vision for Vermont” document talking about “transitioning Vermont’s 780 non-violent officers to become productive members of society,” could lead a casual reader to think that the candidate was considering a large-scale prison exodus. But a closer look at the six paragraphs in his document dealing with corrections policy leaves little doubt that he envisions a far more intricate change under which many non-violent offenders wouldn’t go to prison to begin with.

Instead, Shumlin said, the state should provide “community mental health, substance abuse,…affordable housing…and adult education services…to allow (non-violent offenders) to become successful and productive members of society,” while at the same time saving millions of dollars.

The wisdom of this policy is debatable. It can be attacked as naïve or unworkable. But it has nothing to do with letting offenders out on the street before they’ve served their terms. Nor would it include “drug dealers and child pornographers” whose offenses, while “non-violent” in common parlance, are either “listed” in Vermont law (the most serious crimes) or were made the functional equivalent of “listed” earlier this year.

Corrections Commissioner Andrew Pollito (via email)  said that “Act 157 (S.292) of this past legislative session defined nonviolent felony as, ‘a felony offense which is not a listed crime… or an offense involving sexual exploitation of children.’”

Shumlin may have been a bit sloppy in explaining his corrections policy. His estimate that it could save $40 million a year is a rough one, as campaign manager Alexandra MacLean acknowledged,  and very possibly too optimistic. His claim that Vermont incarcerates a higher percentage of non-violent offenders than any other state really can’t be confirmed, according to Sen. Dick Sears of North Bennington, the Chairman of the Judiciary Committee. (identified by the Shumlin campaign as its corrections expert).

It’s also possible that many people hearing Shumlin came away with the impression that he did plan to save that $40 million immediately by releasing hundreds of prisoners. But that’s not what his campaign statement said, and the Dubie campaign did not reply to an email asking for some documentation that Shumlin had ever said he would release prisoners before their terms expire.

Furthermore, according to Sears, there is nothing unusual about the kind of policy Shumlin proposes. Sears, who meets with lawmakers from other states on law enforcement matters, said the policy is known as “justice re-investment,” and is being pursued (or at least carefully considered) in Kansas and Texas, among other states.

It should save money, he said. The kind of community services Shumlin has in mind would cost about $6,500 per offender per year, Sears said, far less than the $40,000 or more it costs to hold someone in prison in the state, and even less than the cost of the prisoners Vermont farms out to private correctional facilities in other states.

The Dubie ad, it seems, is not an example of  truth in advertising. If it isn’t quite a lie – there’s a touch of confusion about just what Shumlin might have meant – it’s close.

Would you like to know how much lower your taxes would be if Brian Dubie gets elected and his tax cut plans are enacted?

Sorry, that information is not yet available, possibly not even to Brian Dubie. So far, though Dubie has been more specific about his tax plans than any other candidate, he has said only that “to help make Vermont more competitive with other states, we must aim to lower the top rates to the middle of the pack, from the current 9% to between 6-7% (which) still does not meet the regional average of 5% as seen in Maine, Massachusetts, and Rhode Island.”

(Yes, if you think you read those same words on this site the other day, you’re right; there’s a reason for repeating them. As also noted in the previous post, that’s not what the top rates are in those other states, and information gathered in the last few days shows that Dubie got the facts even wronger than first thought. Back to that below; first, to Dubie being specific)

Or maybe not all that specific, but at least there are numbers attached to his tax plans. He wants to cut the top rate from nine percent to six percent (using common practice, the News Guy spells out single-digit numbers and ‘percent,’ though Dubie’s document did not). Elaborating a bit, Dubie spokesperson Kate Duffy said the idea was to lower the rates of the other brackets by one third, also.

For households in the lowest tax bracket – up to $56,700 –that would drop the tax rate from 3.55 to 2.38 percent of a household’s taxable income, or from $2,012.85 to $1,349.46, a saving of $663.39, or a little more than one percent of its taxable income.

Unfortunately, it’s impossible to determine exactly how other taxpayers would be affected because the Dubie campaign has not released more detail. For instance, after a household earns $336,550, its additional income is taxed at 8.95 percent (not nine, as Dubie said, but close, and at another point he did acknowledge that the rate was slightly less than nine percent.).

Cutting 8.95 percent by a third brings it down to six percent. A household with $500,000 in taxable income, then, would see its tax cut by at least $4,821, a slightly smaller percentage of its income than the lower-paid household.

But that assumes a reduction only in the top rate of the wealthy household. If it also pays that lower rate (2.38 rather than 3.55 percent) on its first $56,700, plus lower rates on the other brackets, there could be a “cumulative effect,” in the words of Vermont Tax Department statistician Bill Smith.

“It very much depends on the structure,” Smith said. “If people at the top actually get the benefit of reduced rates for all the lower brackets, then the higher your income, the more your benefit is.”

But that might not be what Dubie intends. If all the rates were cut by a third for all taxpayers, total revenue would drop by a third (or even more). That would amount to more than a billion dollars over the next few years, while Dubie’s plan is to cut taxes by only some $240 million.

Absent more details from the Dubie campaign, voters will have to wonder how much his proposal might save them. The campaign could not provide that information yesterday because it was busy with its 26-hour “marathon” of campaigning from early Tuesday to mid-morning Wednesday. In a statement, Dubie tweaked his Democratic opponents, who were holding their own campaign tour, but mostly during normal business hours. Their schedule, he said, meant they were “apparently blind to the needs of working Vermonters who do not get to be home in time for dinner.”

Dubie, in short, is staying “on message,” which does not include discussing details of his tax proposal. Do not consider that remark a criticism of Dubie. Or more, accurately, a criticism of Dubie as opposed to other candidates. Peter Shumlin, the presumptive Democratic nominee (pending a recount), has provided somewhat more details about his proposal to bring a “single-payer” health care system to Vermont than Dubie has about his tax plan. But only somewhat, and nothing about how Shumlin would finance his health plan without raising taxes, which he has said he will not do.

So it’s not the individual; it’s the age. There was never a political golden age in which campaigns centered solely around detailed public policy debates. But there was a time – and not long ago –when a major party candidate would not dare to propose cutting tax rates by a third, and….and that’s it. There would have been some table of how the plan would impact the various brackets. The campaign would have identified – and made available to reporters – the economist who had helped work out the details.

That was then. This isn’t, and it’s hard to blame the candidates. With few exceptions, reporters (and especially television correspondents) don’t ask about policy details. Maybe the voters don’t care, either.

Now to those inter-state comparisons: Vermont does have a higher top marginal income tax rate than its neighbors, but the gap is much smaller than Dubie claimed. Rhode Island reduced its top rate earlier this year. But to 5.99 percent, almost 20 percent higher than what Dubie claimed. The new law also eliminated some tax preferences (sometimes called ‘loopholes), most of which benefit the highest earners, so reducing the top rate was not totally advantageous for upper-income taxpayers.

Massachusetts has a lower top rate – 5.3 percent. But Massachusetts, like most states, taxes capital gains as ordinary income. Vermonters can exclude 40 percent of some of their capital gains (again; this preference was eliminated in 2009, partially restored this year), effectively reducing the top rate for many wealthy taxpayers. Massachusetts households earning as much as $100,000 a year pay more in income taxes than do comparable Vermonters.

Maine’s highest tax rate is not five percent but 8.5 percent, and it kicks in at just under $40,000, according to Mike Allen, the director of economic research at Maine’s Department of Revenue Services. That means a Maine household earning as much as $300,000 a year pays substantially more in state income taxes than a Vermont household with the same income. It’s only when the income goes much higher that Vermonters usually pay more.

They rarely come out and say so, but advocates of lower top rates know this. In fact, it’s just what they want – lower rates for the very rich. No, this does not brand them as plutocrats. They are convinced that in order to have a healthy rate of economic growth, a state (town, county, whatever) needs lots of rich folks to provide the investment entrepreneurs need.

Is there any evidence to support this conviction? To be examined, along with some other tax questions, soon (but not, remember, Friday, when there will be no post).

Do Vermonters really pay (as a percentage of income) the highest property taxes in the country, as Brian Dubie says in his economic policy document? Earlier this year, a study by the Tax Foundation concluded that Vermont’s property tax was fourth highest.

It all depends on what’s being counted. The Tax Foundation was counting property taxes paid by “owner-occupied housing.” Information about the study on which Dubie relied, by the Vermont Economy Newsletter, is available only to subscribers. But Art Woolf of Northern Economic Consulting (the newsletter’s publisher) helpfully confirmed via email that its study dealt with all property – residential and otherwise.

Whether the average family will be relieved to find out that its property tax bill is “only” the fourth-highest in the land is questionable.

But not as questionable as the conclusion that it is, in fact, the fourth-highest in the land.

The Tax Foundation study, released earlier this year, found that Vermonters paid $1,869 in property taxes per person in 2008, the seventh highest per capita but fourth as a percentage of per capita income.

But hold on. A subsequent Tax Foundation study revealed that the 2008 figure was  a reduction from the 2007 number ($1,994), a 4.9 percent decrease. Vermont was one of only four states in which total property tax collections per person actually went down in 2008. 

Besides, these statistics, while legitimate (they are taken from U.S. Census numbers) are based on aggregate payments. Researchers add up all the property taxes (or the residential property taxes) paid in Vermont, divide by either population or income, and…Voila! A ranking.

But that ranking does not mean that Mr. and Mrs. Typical Vermonter are paying the fourth, seventh, or fourteenth highest property taxes in the country. In fact, it may not mean anything at all.

The point here is not that there is anything wrong with these studies, or anything dishonest about Dubie’s use of the Vermont Economy Newsletter. The point is that like all economic statistics (but probably even more than other economic statistics) tax data can confuse at least as much as they can clarify, meaning they are easily misunderstood if not misused. The prudent citizen, then, would be well advised to cast a skeptical eye on any candidate’s claims about taxes.

For instance, Dubie proposes lowering Vermont’s top marginal income tax rate “from the current 9% to between 6-7%,” which “still does not meet the regional average of 5% as seen is Maine, Massachusetts and Rhode Island.”

Actually, judging from the tax tables in those states, the highest earners in Maine and Rhode Island would seem to pay more like eight percent of their taxable income in state income taxes.

That still leaves Vermont with a slightly higher top rate. But most Vermonters do not pay higher income taxes than their counterparts in those other three states. According to Rhode Island’s tax tables, for instance, the lowest-earning taxpayers (less than $56,700 in taxable income) pay 3.75 percent of their taxable income in state income taxes. Vermonters earning the same pay 3.55 percent. Even a Rhode Island household with $100,000 in taxable income pays more ($5,157) than its Vermont counterpart ($4,040). In Massachusetts, a household with $80,000 in taxable income pays $4,239 in state income taxes, almost $600 more than it would pay in Vermont.(all these estimated comparisons are for married couples filing joint returns).

There is at least one other problem with these state-by-state tax rankings. The “scores” are often very close. Sometimes taxpayers in the fourth, fifth, or seventh ranked states don’t pay much more than the folks in the states ranked twelfth, eighteenth, or twentieth.

Two years ago, a reporter (OK: full disclosure: this reporter in another guise) estimated how much a typical Vermont family would save in taxes if it moved to Delaware, ranked right in the middle, tax- obligation wise, in a study by the Federal Reserve Bank of Boston.

The conclusion, tilting the evidence Delaware’s way for every estimate and every assumption, was that they might save as much as $700 a year, though probably less, and none at all if they moved into one of the school districts with higher property tax rates (which are, not surprisingly, the districts with the highest-rated schools).

Seven hundred bucks ain’t chicken feed. But our hypothetical new Delawareans would probably pay that much and more were they to buy or rent a house comparable to the one they left in Vermont. Not to mention that they’d be in Delaware, a nice place but a lot hotter, flatter, and more crowded, which many a Vermonter would probably find it worth $700 to avoid.

What all this boils down to is that these state-by-state tax comparisons are close to meaningless, especially when they consider only taxes, not other economic data.

If tax minimization is one’s goal, one should consider moving to Alabama. Taxes are much lower than they are in Vermont. But so are salaries, by almost $10,000 per household. Vermont is 19^th from the top in median household income; Alabama is fifth from the bottom.

In general, the lowest-tax states are also the lowest-income states. There are states where the taxes are somewhat lower than Vermont’s and the median income as high or higher. But in most of them, houses are much more expensive than in Vermont, and of course, the pace of life is more hectic.

The big (if partial) exception is New Hampshire which is prosperous, and which has neither a general income nor general sales tax. Property taxes are quite high in some localities, but on balance, a Vermonter moving to New Hampshire would have smaller tax bills and a higher income.

Well, a higher income if he or she moved to southern New Hampshire, which is not small-town and rural like most of Vermont, but urban, suburban, and effectively (though not officially) part of the Boston metropolitan area. Southern New Hampshire is where one finds most of the people and most of the prosperity. That’s also where one finds expensive houses and higher property tax rates.

Dubie and others often use New Hampshire as “proof” that lower taxes lead to faster economic growth. New Hampshire does have lower taxes than Vermont, and, in most recent years (though not all) faster economic growth. But New Hampshire’s proximity to Boston has a lot to do with its growth, and many states with lower taxes – Delaware, for one, these days — grow much more slowly than Vermont.

As it happens, there is an obvious refutation of the ‘low taxes equals high growth’ argument: the United States of America, where a 1981 tax cut was followed by 16 months of economic decline (which reversed itself only after a tax increase in 1982); where a small income tax hike for upper-income earners was followed by years of non-inflationary economic growth; where tax cuts in 2001 and 2003 were followed by several years of economic torpor and then the worst collapse since the Great Depression.

Only a fool would argue (a few have) that the tax increases caused the economic growth which followed them. But only a bigger fool could argue that lower taxes always lead to a faster-growing economy. It isn’t that taxes don’t matter. They do because everything matters. But because everything matters, taxes are only one of many things that matter.

If Brian Dubie has his way, taxes are going to matter a lot in this campaign. By framing the issue as he has – tax cuts for everyone but an emphasis on lowering the top marginal rate for the top earners – he has both put the Democrats on the defensive and left himself open to the charge that he’s favoring the rich.

All of which makes it worthwhile to examine the details, such as they are, of his tax proposal, a task for Wednesday.

NOTE: The News Guy is taking the day off Thursday, so there will be no post on Friday.

The fight is on, and it promises to be a humdinger.

Attack and counter-attack. Quick response. Thrust and parry. Jab and hook. Give no ground or quarter. The best defense is…well, you get the picture.

All of which is lots of fun, but threatens to obscure the meaningful substantive differences between Republican Brian Dubie and either Peter Shumlin or Doug Racine.

In fact, “obscure,” may understate the case. “Pervert” could be more appropriate. The barbs each side is throwing at the other seem designed to convince voters that the opposition is extremist: that the Democrat would raise everybody’s taxes; that Dubie would permit the poor to starve on the sidewalks.

Not hardly.

As mentioned here the other day, the winner will be governor, not emperor. Even if Shumlin/Racine wanted to raise everybody’s taxes, the Legislature would not. Nor would it allow the poor to starve on the sidewalks.

Besides, the Democrats, who are prudent, do not want to raise everybody’s (or anybody’s) taxes, and Dubie, who is decent, does not want the poor to suffer at all, much less starve on the sidewalks.

“People who depend on vital state services are not going to be abandoned by state government,” said Dubie campaign spokesperson Kate Duffy.

Even the semi-defensible attacks are a bit over the top. There is some justification for Shumlin to argue that Dubie’s economic policies would lead to “deficits, unending deficits, tax cuts for the wealthiest Vermonters and budgets that don’t balance.”  Dubie’s determination to cut taxes and his vagueness about what programs he would cut do complicate the budget-balancing task.

But in addition to redundancy (deficits are “budgets that don’t balance”), the attack ignores Dubie’s pledge that tax cuts “won’t happen in one big step or one year,” but would be “incremental.”

Similarly, Dubie may not be dead wrong when he claims the Democrats have “only two solutions for the challenges we face: more government spending and higher taxes.” Both Shumlin and Racine are on record in the past favoring new programs and higher spending. But while they still favor  some new state initiatives, they are not for higher taxes.

Besides, there’s another candidate who proposes new government spending: Brian Dubie. The jobs plan in his “Pure Vermont” document calls for the state to “increase support for (Vermont Economic Development Authority’s) highly successful interest rate subsidy program,” “ increase public investment in the new Technology Lending Program,” “add support for (Small Business Development Center) counseling,” and create an investment tax credit.

All that costs money. Yet the heart of Dubie’s campaign is to hold the state budget to spending increases of  two percent a year. Because revenue is projected to rise at a higher rate, a Dubie Administration could then cut income taxes by a total of $240 million over four years.

This means, said  Duffy, that Dubie’s plan “is not making any cuts.” State spending, she said, would continue to rise, just more slowly than it has been rising, and more slowly than revenue would rise.

Dubie’s arithmetic is correct, except that he first pledges to close the projected $112 million deficit for the coming Fiscal Year (2012). That would require a spending cut of more than 9 percent, creating a new base. Increasing spending by two percent a year for the next four years on top of that new base would mean that spending would fall by an annual rate of about three-quarters of a percent over a five-year period. Extend the same policy out another five years, and spending does go up, but only at an average annual rate of slightly more than one percent.

That might be the smallest growth rate of state spending in decades, if not a century, raising questions about how realistic the plan is. Dubie claimed that in the early 1990s, Gov. Howard Dean actually level-funded (no increase) spending over a three-year period, a harsher reduction than Dubie’s proposed two percent growth.

Not really. Check the esoteric document available from the Joint Fiscal Office web site’s “Appropriations” page,called “Budget History FY 83-present.” It shows that while the General Fund budget actually went down for one year under Dean, it then started up again, and over a five-year period it rose by an annual rate of 3.4 percent a year.

That document provides other interesting information, both casting doubt on the assertion that Dean really “level-funded” spending and confirming that budgeting is a creative art. In those same recession years that Dean was spending less out of the General Fund, some new expenditures are recorded in the Transportation Fund.

Could it be that the state was using Transportation Fund money (financed from gasoline taxes, auto registration, etc) for non-transportation purposes? The document suggests, but does not prove, that the answer to that question is in the affirmative.

If so, it would not be unusual, in Vermont or elsewhere. One reason for that $112 million projected shortfall for the next Fiscal Year, for instance, is that the Legislature and Gov. Jim Douglas have been effectively filching from the Education Fund by not transferring into it as much General Fund money as the law required. (Legislatures and governors, who make laws, can change them as an alternative to obeying them). Reached at home where he did not have access to his records, Joel Cook, the executive director of the Vermont National Education Association, estimated that the shortfall was at least $50 million.

If the Legislature doesn’t repay that (as it said it would) or come up with enough money again this year, the Education Fund could be short tens of millions of dollars. That would require either deep cuts in school spending or substantial increases in local property taxes.

This poses a potential political problem for Dubie. He wants to cut everybody’s income tax rate by about a third, reducing the top rate from nine to six percent and the lower rates comparably. That’s good politics; everybody likes lower taxes.

But the Democrats will try to convince voters that the result would be higher property taxes, which are the taxes Vermonters really dislike. Democrats are already making that argument as well as claiming that, in Racine’s words, Dubie’s “numbers just don’t add up.”

“He wants to add money for various business promotion efforts…but he wants to cut taxes,” Racine said in a telephone interview. “This sounds like the federal budget discussion. Make promises of higher spending for business and lower taxes for everybody. That’s Washington. We don’t do that here in Vermont.”

That’s harsh, but standard political rhetoric. What came out of the Dubie campaign late yesterday may have crossed the line from standard to…well, to  false. In a statement released yesterday afternoon, Dubie said Racine had wanted to use money from the state’s “Rainy Day Fund” to “expand government-run services,” and that he opposed the “Challenges for Change” plan to make government more efficient.

The first of those accusations is simply incorrect. Racine has suggested dipping into the reserve funds, but only to support existing social service programs, not to “expand” government service. The second charge is minimally defensible, but a stretch. Racine supported “Challenges for Change” during this year’s legislative session, voting for it at least twice,  though he voted against the final Fiscal Year 2011 budget which incorporated “Challenges.”

“Fundamentally, Brian is a decent man,” Racine said. “If he wants to disagree with me, that’s fine. But don’t be deceitful.”

It could be a long two months.

Note One: An Apology– Thanks to the storms of Tuesday evening, the News Guy kept getting disconnected from the Internet. In the rush to finish writing, and to get the post into the system before the connection broke again, confusion prevailed more than it usually does. As some readers noticed, the post got posted twice. As at least one reader noticed, the first reference to the town of Hartford called it “Hartland,” another town entirely, if not that far away. Apologies to all readers and to the residents of both towns.

Note Two: The Next Two Weeks–As previously announced, the News Guy is going to take some time off. Admittedly, not the best timing, what with the primary on August 24, only a little more than two weeks away. But even primaries have to take a back seat to family events and school vacation periods.

So there will be no posts next Monday or Wednesday. There will be one on Friday, and it will be an in-depth analysis of the economic policy proposals of the five Democratic candidates for governor, one of which is not scheduled to be released until next week. (Republican candidate Brian Dubie has said he will release his after the primary).

There will also be no posts the following Monday and Wednesday (August 16 and 18), but there will be one on Friday, the 20^th, after which the regular Monday-Wednesday-Friday schedule will resume.

Note Three: A Clarification– Chris Roy, one of the two Republican candidates for Secretary of State, took issue with the News Guy’s assessment in last Friday’s post, Getting Tetchy, that he “seems to be losing” the primary race to Jason Gibbs.

Roy may have a point. He agreed that Gibbs has more money in the bank,(though Roy who has been running far longer, has raised more overall), has the support of Gov. Jim Douglas, and has been more successful in getting his name into the news.

But, Roy said, in what is likely to be a very low turnout, his “targeted” campaign, based on “a very focused mailing program and very focused phone call program” could propel him to victory.

So it could. At any rate, he provides a worthwhile reminder. Much attention has been paid to the likely Democratic primary turnout, with estimates ranging as low as 40,000. But at least the Democrats have a real race for governor, the highest-profile position. On the GOP side, though, nobody is challenging Dubie or U.S. Senate candidate Len Britton (whose prospects against Sen. Patrick Leahy are bleak anyway). Yes, there is a three-way contest for the U.S. House seat. But it is among three little-known long shots against Rep. Peter Welch, and therefore not likely to arouse much enthusiasm among rank and file Republicans. The Republican primary turnout could be really anemic.

Note Four: An Assessment– Speaking of the Democratic primary, has anyone noticed that it is one of the weirdest political campaigns in recent years, and not just in Vermont?

That’s because of what has happened in the race: nothing. Usually, in political campaigns, the process creates its own dynamic. Either Candidate A makes a fool of him/her-self, or Candidate B gets accused of some misdeed or peccadillo, or Candidate C makes a magnificent speech that captivates 5,000 cheering supporters in an arena, or some bizarre event not directly connected to the campaign plays to some candidate’s strength, or….well, or something.

If nothing else, in a close race the candidates start attacking each other. Or at least the candidates who are behind in the polls start attacking the front-runner. Rarely do these attacks enlighten, but they often get folks more interested.

Not here, at least not yet, and there’s not much time left. This race is about where it was when it began. It pits five honorable, responsible and not very exciting mainstream Democrats battling each other for the biggest share of the primary pie. Not one of them has stumbled. Not one of them has really caught on.

As to attacking, it isn’t certain that any of them knows how. Or, perhaps more likely, all are reluctant to start attacks because they know the attacker would be hurt as much as the attackee.

Just from the political perspective, the major recent development was Peter Shumlin’s decision to start television ads last month. The ads are pretty good, but as far as can be determined (not very far, there being no public polls) they haven’t much changed the structure of the race. Maybe, it being midsummer, voter are simply not paying enough attention.

All this is good news for Deb Markowitz, who started as the best-known, best-liked of the contenders, and seems not to have lost a step. True, as a candidate Markowitz is not exciting. But she’s likeable, and the other four haven’t inspired the voters to mobilize behind their banners, either.

Note Five: A Critique—The good news that came out of the Associated Press’s interviews with all six candidates about how, if elected, they would deal with next year’s likely budget shortfall, is that one candidate had a very specific idea which would clearly save money, and the candidate knew how much money the idea would save.

The bad news is that it would save only $16,000.

The idea was Markowitz’s pledge not to accept the $61 per diem allotment for the governor’s meals. She said the governor of Vermont earns enough to pay for her own meals.

From other candidates, the responses ranged between imprecise and arguably inaccurate. Bartlett said Vermont could save money by bringing home some of the prisoners it now sends to out-of-state facilities, though one reason the state sends prisoners elsewhere is that it’s cheaper. Shumlin said the state could save as much as $50 million by more closely policing some $250 million of outside consulting work, which might cut costs as much as 15 percent.

But 15 percent of $250 million is $37.5 million, not $50 million.

Then there was the candidate who, asked how he would reduce the budget gap, proposed increasing it.

That was Dubie, who told the AP he would make the budget easier to balance by cutting taxes.

“A gradual reduction in taxes will put more money in the hands of hardworking Vermonters,” Dubie said.

Yes, it will. And with more money in their hands, Vermonters (including the ones who don’t work all that hard) will pay more in taxes. But not enough more to offset the revenue loss the tax cuts will create. Whether cutting taxes is a good idea is debatable. That it will reduce revenue and therefore make the budget gap bigger, not smaller, is not. It will.

The head of a statewide business organization claims that the state’s “bureaucratic, arbitrary, time-consuming and expensive regulatory system” weakens the state’s “business climate.”

A small businessman argues that the high cost of workers compensation makes for a poor business climate.

Citing the ratings of business magazines, a legislative candidate laments the state’s standing “as one of the worst states in the nation for job growth and business climate.”

A pro-business think tank reports that the state has “one of the most difficult business climates in the nation,” and a pro-business journal notes that the state has “a well-documented bad business climate.”

No surprise, right? Vermont’s “poor business climate” has become a statewide mantra, and is already a factor in this year’s governor’s race.

Except that the above examples are from, in order: New Jersey, California, Wisconsin, Washington (State, not D.C.), and Maryland.

No doubt all these states have their economic problems, as do the other 45. It may be significant, though, that they are among the more prosperous states. Maryland and New Jersey have the highest median household incomes in the county. California isn’t far behind. Before the start of the Great Recession, Washington had the tenth highest per capita income in the country. Wisconsin had the 20^th largest economy, just about what it ought to have considering its population.

So why all the complaints about the “poor business climate”?

Because in almost every state, some (though not all) business leaders and their supporters in politics and academia complain abut the “business climate.”

They’d be fools not to. It’s a good argument for getting what business leaders often want: less regulation and lower taxes. Most business leaders are more wealthy than not, meaning that in state’s with (relatively) progressive income taxes their tax bills are (relatively) high (though, in Vermont at least, lower than they were a decade or two ago).

As to regulations, many of them are at least a big pain in the neck (forms to fill out and all that) and often a profit-reducing cost.

Furthermore, many businessmen think that they do not need most of the services financed by their and everyone else’s taxes. As it happens, they are at least partly wrong here. This year the Legislature approved more transportation spending than ever, according to House Speaker Shap Smith. Business interests did not complain. Roads are, among other things, a subsidy to businesses; the taxes they pay are a lot less than it would cost to build and maintain their own highway systems.

Schools are a subsidy to business, too. Vermont schools may be expensive, but firms would spend a lot more if they had to teach all their workers how to read, write, and do arithmetic.

Just because complaints about “business climate” are heard in almost every state does not make them totally invalid. In most states, a few costs could probably be cut and a few regulations eased to lubricate economic activity without harming workers, consumers, the needy, or the environment.

But not much. Otherwise, those costs would have been cut, those regulations eased. Almost all of them exist because they provide goods, services, and protection that people want.

What the near-universality of the “poor business climate” slogan does mean is that the phrase is meaningless. It is self-interested bumper-sticker drivel that does not deserve to be taken seriously.

Neither do the “studies” by some pro-business “think tanks” or business magazines that purport to rank states according to their “business climate.” These rankings are based on extraordinarily selective criteria, as if the studies were designed to promote a policy agenda rather than to examine the subject honestly. They were.

The studies do take into account a state’s spending, taxes, regulations, and labor union strength. They tend to ignore the state’s health care, education system, recreation and cultural amenities, and other factors which attract the educated, higher-income people who have money to spend, and are therefore good for business.

Among academic economists, who acknowledge that, as one of them put it, “exactly what constitutes a good business climate is not entirely clear,” there is no agreement on whether state taxes, regulations, and labor union power (weak in Vermont) have any discernible impact on economic activity at all.

“Considerable empirical evidence suggests that state and local taxes do not significantly impact the geographic distribution of economic activity,” noted economists Bruce L. Benson of Florida State University and Ronald N. Johnson of Montana State at the outset of an article in the journal Economic Inquiry hIn general, the consensus among economists who have carefully studied the data is that if these factors do affect a state’s economic performance, they do so minimally, and are therefore easily offset by the positive outcomes (good schools, parks, health care, etc.) taxes and regulations provide.

In Vermont, for instance, where the term is bandied about almost daily, the “poor business climate” argument faces an obvious challenge. If the business climate is so poor, how come the economy is relatively so good?

The “relatively” is emphasized because right now Vermont’s economy is not good at all. But that’s only because the national (and in fact the global) economy is not good at all. But compared to most other states – and especially most other states in its region – Vermont’s economy is somewhat better.

Its unemployment rate, though higher than it was a couple of years ago, is lower than the national or regional average. So is its poverty rate and its home foreclosure rate. Vermont seems to be coming out of the recession somewhat faster than most other states, based on the unemployment and job creation numbers.

That doesn’t mean that, from the perspective of some businesspeople, state laws and taxes are not a serious problem. But it obviously isn’t a big problem for all of them, or they wouldn’t be hiring more workers and planning new facilities, as many of them are.

Vermont’s regulations probably have their greatest impact on builders and developers. All states have environmental restrictions, but Vermont’s are among the most stringent. That helps explain why builders, developers, and realtors are among the most vocal critics of the state’s business climate.

But those regulations help other businesses, such as the software developers discussed in Friday’s post.   The regulations help attract affluent, educated, newcomers to the state, and John Canning of the Vermont Software Developers Alliance said that’s good for the software business.

The bottom line, to put it in business terms, is that objective examination of the “poor business climate” claim can not even define the term, much less find persuasive evidence of its existence in any state. Vermont, like the rest of America, is pro-business, and would be foolish to be otherwise. Everybody benefits from a strong economy, which in turn depends on the healthy profitability of businesses.

The “poor business climate” moan is just the whine-of-choice of some segments of the business community and the politicians pandering to them. In fairness to that community, they are hardly the only whiners these days. But as members of the wealthiest and most powerful faction in the land, they have less excuse.

OK, who won?

Now that the palavering, posturing, and pontificating of the 2010 session of the Legislature is over, it’s time for at least a preliminary evaluation as to who did and did not come out ahead.

Not just by the measurement of raw politics, either. This assessment will also taka a look at whether the day-to-day lives of regular folks were affected by what the lawmakers and Gov. Jim Douglas wrought these last four-and-a-half months.

The short – and possibly welcome – answer is: not too much. A large majority of Vermont citizens who are neither rich nor poor will note little if any change in their bank accounts, their job security, their children’s education, their retirement benefits, their recreations, or their passions because of any legislation passed and signed into law this year.

Welcome news indeed to those who remember the old phrase about how “no man’s life, liberty or property are safe while the Legislature is in session.”

But there were exceptions. No one should be shocked by this news, but in general, the very wealthy came out ahead, while the poor and near-poor did not, especially the poor and near-poor who are ill or otherwise in need of social services.

And some 7,700 middle and upper middle-income households will face higher property taxes, quite a bit higher in some cases.

The results do not mean that impoverished Vermonters are going to be begging in the streets, their open sores exposed to the elements. Legislative sessions, especially as they wind down are: (1) dramatic; and (2) insular. The drama takes place in an enclosed space in which the same relatively small number of people – legislators, lobbyists, reporters, administration officials — constantly interact with one another.

What happens then is that all disputes become magnified and the disagreements are assumed to be more polarizing than they really are. Had Douglas gotten all the spending cuts he wanted – and he did not – the state’s social services would not have evaporated, no more than business investment would have dried up had the Democrats blocked all those tax reductions.

The last dispute resolved, for instance, was over whether the capital gains tax would be cut by $1.5 million or $3.2 million. Not an inconsequential sum, but a tiny fraction of a $3.77 billion budget.

But let’s get to the raw politics, because it’s easy and it’s fun.

Douglas won.

Not everything, but a lot. For a lame duck governor, he showed that he still has a fair amount of clout. He did it by being stalwart (or stubborn, depending on one’s political preferences), betting that the Democratic leaders wouldn’t risk a repeat of last year’s budget veto and subsequent veto override vote.

Last year, they won that vote. This year, they might not have won it in the House of Representatives. And even if they had won it, they feared it might play into Republican political hands, allowing Lt. Gov. Brian Dubie to paint them as big spenders who raise taxes.

Which he’s going to do anyway, but a budget confrontation might have strengthened his case.

Under some circumstances, Douglas’s strategy might have been risky for Dubie and the Republicans, giving Democrats the chance to portray them as friends of the ultra-rich but indifferent toward the needy.

But those circumstances would exist only if a leading Democrat started making that argument a few weeks ago. There are five Democrat running for governor, but none of them stepped forward to make that case. That left Douglas and his allies free to set the parameters of the discussion.

That Douglas “won” does not really mean that the Democrats “lost.” In the final bargaining, they gave up more points to him than he to them. But first of all, this isn’t really a game. Besides, they held firm on education financing. There will be no mandatory school district consolidation, nor a required change in the student-teacher ratio.

In addition, both sides could claim “victory” in that they passed a budget despite starting the year facing more than a $150 million projected deficit. They did so in a collegial manner, and they could claim that the budget was “balanced.”

It might be.

Celebrating the agreement and his success, Douglas said that “while other states are cutting programs and raising taxes in response to the fiscal crisis, Vermont, I am proud to say, is moving in a different direction.”

Sounds good. Except that what he and the Legislature did this year was cut programs and raise taxes. They didn’t eliminate programs or raise the key income, sales, or property tax rates. But they raised some people’s taxes (while reducing others) and effectively reduced the quantity – and almost surely the quality – of many public services.

By how much? Impossible to say, because the “challenges for change” concept grants the Administration broad powers to cut spending. One of Douglas’s victories occurred when the Democrats gave up on their proposal to allow the state to dip into its “Rainy Day Fund” if the “Challenges” process did not save enough money.

It won’t (for reasons to be explored in a post coming soon). The result will be more cuts in services for the poor, the sick, the mentally ill. It was not a liberal Democrat, but Republican Rep. Anne Donahue of Northfield who said (in Thursday’s Times-Argus), the lawmakers are “pretending that we are restructuring services when in fact we will be cutting services.”

The higher taxes will be the result of some tinkering the Legislature did with the formulas for deciding who is eligible for how much “income sensitivity” in determining their statewide school property tax bills. The tinkering means that more people will benefit less from income sensitivity.

According to figures from the Legislature’s Joint Fiscal Office, some 7,700 households will pay an average of $662 more a year in property taxes, a total of more than $5 million.

The hardest-hit will be 423 households earning between $85,000 and $95,000 a year. Their property taxes will rise an average of $1,639 each. But some households with incomes of $40,000 or even less will pay a few hundred dollars more a year.

The money will go into the Education Fund, holding down the statewide school property tax rate. The beneficiaries here are households with incomes too high to qualify for any income sensitivity, and who pay solely on the basis of the value of their property.

Upper-income taxpayers will also reap most of the benefits from the partial restoration of a capital gains tax break. Under the new law, someone with, say, a $10,000 capital gain from the sale of business assets with a Vermont connection would pay taxes on only $6,000. Douglas wanted the exclusion to apply to all capital gains including stocks, bonds, and homes.

In the end, he accepted a partial victory, and the Democrats agreed, in the hope that lower taxes on Vermont-related capital gains would provide an incentive for more business investment which in turn would lead to more jobs.

The evidence for this assumption – or hope –is…is…well, it may not exist, a mystery worthy of detailed examination next week.

“Everything is resolvable at the end. Unless it isn’t.”

This time, it seems, it isn’t.

The words came from Shap Smith, heretofore known not as a Buddhist philosopher but merely as the Speaker of the Vermont House of Representatives

But it was that kind of day at the Statehouse Tuesday, a day of policy and politics; a day of hope and worry; a day, one might say, of now and Zen.

Occasional spurts of activity were followed by long periods of waiting around. The talk in the corridors was sometimes theoretical, sometimes practical. Optimism clashed with pessimism.

Oh, and Democrats clashed with Republicans.

Politely, to be sure. Everyone from Republican Gov. Jim Douglas to Democratic Senate President Peter Shumlin made sure to tell reporters that their discussions were courteous and friendly.

But by the time Smith uttered his mystical mantra, at about 4 PM, they had not resulted in agreement between Douglas and the Legislative leaders on the Fiscal Year 2011 state budget, nor on the taxes Douglas wants lowered. Without those tax cuts and more budget reductions, the Governor has implied, he might veto the budget bill as he did last year.

Nor was there any agreement by mid-evening, and Smith had made clear that with or without a deal with Douglas, the lawmakers would vote on a budget this week. Hence the possibility that Democrats would pass the budget they prefer, taking the chance that Douglas will veto it.

That’s what he did last year, only to have his veto over-ridden. This year, both sides said they wanted to work together, and at least they have behaved more civilly toward one another. In fact, negotiations continued into the night, both sides clinging to the hope that an agreement would be announced Wednesday morning.

Later in the night, though, negotiations broke down without agreement. It’s not quite the end. In theory, talks could resume Wednesday morning. In theory, everything remains “resolvable.” But the “isn’t” outcome seems more likely, as does a veto and a possible veto override session next month.

All day, in fact, there was conjecture, not all of it by Democrats, that Douglas actually wants to veto the budget bill to provide a political boost to Lt. Gov. Brian Dubie’s campaign for governor. According to this theory, a veto would dramatize the GOP argument that without a Republican in the governor’s office, Democrats would just keep spending more money and raising more taxes.

The fact that in its two-year life this Democratic-controlled legislature actually lowered income taxes – albeit minimally – on a large majority of Vermont taxpayers seems not to diminish the potential force of this argument. In modern America, myth and image outweigh mere fact.

The conjecture about Douglas’s political strategy was, of course,  surmise. But it gained some currency by the fact that all day long (actually, for the past several days), the Democrats kept giving ground to the Governor.

Who kept taking it. And asking for more.

By early afternoon, the Democrats had made so many concessions that one Republican lawmaker crowed, “the Democrats are caving on all the taxes,” and some liberal Democrats were grousing about their own leaders.

One of those Democrats said…well, his precise words are too indelicate for this web site. Suffice to say that he suggested that his party’s leaders were acting as though they were the Governor’s concubines.

But some of those Democratic concessions might have been more symbolic than substantive Take the capital gains tax dispute. Last year, over Douglas’s objections, the Democrats reversed a capital gains preference enacted in 2002. That change is expected to raise some $10 million in revenue in the coming fiscal year.

Smith said he thought a compromise could be reached by restoring the preference, but only on capital gains from investments in companies based in Vermont. Anyone who knew much revenue would be lost by such an amendment (Smith indicated he did) wasn’t revealing it. But probably not much. Wealthy Vermonters (and most capital gains taxes are paid by the wealthy) no doubt invest in diverse portfolios on the advice of financial consultants whose job is to make their clients richer, not to play in-state favorites. One of the great things about capitalism is that it is heartless, with devotion to neither person nor place, but only to money.

Nor would the Democrats be giving up much if they repealed the higher estate taxes they enacted last year. In a few years, the federal estate tax, the terms of which Douglas wants the state’s version to follow, might actually take in more money from wealthy estates (the only kind that are taxed) than Vermont’s. So if the Democrats can find a way to delay the revenue loss for a year or so, they might be willing to compromise.

And there seemed little doubt that the Democrats eagerly – if not desperately – want to compromise, while Douglas and his advisors appeared  willing to accept another veto confrontation. This could be because Smith isn’t sure he has the 100 votes needed to over-ride a veto. (Shumlin has a bigger majority in the Senate, and should have no problem). Perhaps significantly, the Speaker never claimed to have commitments from 100 representatives.

On the other hand, as long as today’s topic is political conjecture (not to mention meditation), here’s another possibility. Remember, Shap Smith knows how to play this game, too, as he proved last year when his House overrode two Douglas vetoes. If he has a problem this year, it would seem to come from a handful of his less liberal members. Continuing to give way on these liberal positions (the two taxes), only to have the Governor continue to rebuff him, might be just what he needs to shore up those votes for the veto override.

Again, conjecture, but, again, perhaps given some currency by another development. Most of those less liberal Democrats are from rural areas, where many influential voters are big landowners who oppose the changes to the Current Use system called for in a bill which has passed both houses, but in different versions.

Smith has been in no hurry to bring an amended bill back to the House floor. He could be holding it as a possible bargaining chip, dropping one or more of its most controversial provisions to placate those rural Democrats.

Log-rolling to please the forest industry. Something Zen there.