Tuesday, April 28, 2015

So I just returned from the Senate Finance Committee where I was the first of 21 witnesses to testify about the latest draft of the tax bill. I commented on sections 49-54, the extension of the sales tax to services. I know some of you have already written to your senators stating your opposition and for that we thank you. I did not want to address the issue of the increased administrative burden on you if the tax is enacted. Instead, I went after language in the bill that I found confusing and troubling. Here’s some of what I said. 

In Sec 49, the definitions section, “business to business” transactions are exempt. Over lunch today talking with a local lawyer he raised the following hypothetical. If he were to do title work, for example, for a husband and wife he would need to collect a sales tax. But if that husband and wife were to form an LLC or partnership, they would be exempt from the sales tax!

If “business to business” transactions are exempt that would mean that the tax would only apply to individuals who are perhaps the least likely to be able to absorb and afford such a tax. The tax would apply to a victim of domestic abuse hiring counsel to represent her. It would apply too a custodial parent trying to collect child support or enforce an order of the court. It would apply to the landlord trying to evict a tenant after going months without collecting any rent. Likewise, it would increase the cost to a tenant who needed representation in a case on uninhabitable premises. I told the committee that taxing Vermonters such as these is bad public policy and will only increase the number of self-represented litigants in an already overburdened court system.

Also, if you look at Sec. 54 there is troubling language that sets the tax rate at 4.75% “of the sales price charged…” Really? Is the tax on the amount billed or the amount actually collected? We all know those numbers are rarely the same.

Finally, I raised what I consider to be a constitutional issue in criminal cases. If I were to exercise my 6^th Amendment right to “have assistance of counsel” in my defense, can the state tax me on what I pay my attorney? Isn’t that a tax on exercising my rights? Is it any different than taxing lobbyists and their clients?

In any event I think the committee will leave us in the bill as there is hardly time for deliberation, discussion and amendments now. The committee is hoping to vote the bill out tonight! Then it’s off to conference where I expect and hope the services tax goes away. The budget bill can’t be finished without knowing what the tax bill will raise. The capital bill can’t be finished until the budget is done. Stay tuned. As always, thanks for reading.