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).

Tags: Bill Smith, Brian Dubie, Maine, Massachusetts, Peter Shumlin, Rhode Island

This entry was posted on Wednesday, September 8th, 2010 at 12:16 am and is filed under Politics & Elections, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.