BRATTLEBORO-If there can be an obituary for a piece of legislation, then this is it: H.829, we hardly knew ye.
H.829 was enthusiastically passed by the Vermont House of Representatives, 97–42 but was killed in the Senate.
From the beginning of the legislative session, H.829 was spoken about reverently by its supporters in Windham County. Its intent was to increase affordable housing in a number of ways by investing $900 million over the next 10 years.
But where would the money come from?
According to the person who formulated the plan - House Ways and Means Committee Chair Emilie Kornheiser (D-Brattleboro) - funds would be raised through new taxes on the wealthy.
Windham County housing activists enthusiastically applauded the bill.
Chris Donnelly, director of community relations for Champlain Housing Trust, worked with lawmakers to "put forward a 10-year plan to work ourselves out of the housing/homeless[ness] quagmire we are in," said housing activist Fred Bruenig of Brattleboro.
The bill then passed "with a wide margin," and was sent to the Senate Committee on Economic Development, Housing, and General Affairs, chaired by Sen. Kesha Ram Hinsdale (D-Chittenden-Southeast).
Bruenig said Ram Hinsdale "put it 'on the wall,' meaning that it would not be even discussed or debated," and said that the Legislature "could not commit future Legislatures" to such expenditures.
The means of funding the program was also at issue, Bruenig said, including the creation of "a new tax bracket for earners making more than $500,000, plus a higher property transfer tax on houses selling for more than $750,000."
"I think there's just a little aversion to [an] increase in taxes this year, for a couple of reasons," Donnelly told The Commons.
"The Senate feels like Vermonters are a little bit in shock around property tax increases for the education funds. And I think that has played into a sense of feeling that this is just a lot of increasing taxes, even though H.829 would only affect a small number number of people," he added.
Donnelly alluded to "fear that the governor would veto the bill" and that if he did, there wouldn't be sufficient votes to override it.
"The Senate is just a little bit reluctant to move forward with a proposal that they may not be able to ultimately succeed with," he said. "And that's my view."
Kornheiser said that new revenue sources would be needed in order to build affordable housing and get homeless people out of the expensive, taxpayer-funded motels they have been staying in - some of them since the pandemic.
"The motels are not not a permanent solution," Kornheiser told The Commons.
"The motel programs are a big cost to the state that could be prevented if we were investing in more permanent housing solutions. […] There are a lot of people who are paying way more for housing than they want to, or are stuck in housing that's bigger than they need, and they would move if there were other options."
H.829 would have increased the tax rate on marginal income over $500,000 to 11.75% - a 34.3% increase from the current rate of 8.75%.
"[U.S. Sen.] Bernie Sanders talks about making sure that the wealthy are paying their fair share, and there are proposals all over the country to add a new top tax bracket," Kornheiser said. "I've worked with my committee and my colleagues in the House to do it."
The tax bracket change was expected to raise over $74 million annually in state revenue, and would have affected only the top 1.1% of Vermont taxpayers.
H.829 also would have lowered the transfer tax paid on the first $200,000 in the sale of principal residences, which would have constituted an approximately $900 tax break for anyone buying a home for less than $750,000.
At the other extreme, the transfer tax collected on the value of a property sold for more than $750,000 would have been adjusted from 1.25% to 3.65%.
Vermont Business Magazine reported that the median sale price of homes in the state in 2023 was $325,000, "ranging from a median home sale price of $185,000 in Essex County to $460,500 in Chittenden County." The article estimated that if H.829 were law, "approximately 93 percent of homebuyers in 2023 would have received a tax break."
Housing and homelessness advocates praised the bill, citing the urgent need for affordable housing across the state, the problem of skyrocketing income and wealth inequality, and the strong public support for increasing taxes on the wealthiest Vermont residents.
Oddly enough, some of Vermont's wealthiest people also endorsed H.829, including ice cream magnates Ben Cohen and Jerry Greenfield and Putney Student Travel's Jeff Shumlin.
More than 30 of them signed an open letter to the Legislature, which was posted on the website of Fair Share for Vermont, a nonprofit organization devoted to increasing taxes on Vermont's wealthiest residents (fairsharevt.org/wealthy-letter).
"We see an acute housing crisis, chronic underfunding of state services, and a need for immediate investments in our infrastructure and environmental protection," the letter reads. "As Vermonters who have economically prospered in our state, we believe in contributing our fair share to build a state that works for all people who live here."
The letter goes on to assert that Vermonters take care of their neighbors and form close relationships that transcend economic circumstances.
"Public investment, funded through tax revenue, is necessary to amplify these community efforts and fund programs that strengthen our communities," they wrote.
Even The New York Times noted the potential of this bill. Kornheiser gave an interview to the paper about her plan to raise the income bracket for the wealthiest 1%.
"The package of bills is part of a broader push across the country by progressive groups who hope that the political moment has arrived to shake up the tax system to address income inequality," the Times reported.
Another Vermont advocate for H.829 was Lt. Gov. David Zuckerman, who wrote a passionate op-ed piece for VTDigger accusing the governor of trying to gut Act 250 - the state's land use planning law - to help "profiteering developers."
"Now is the time to make your voice heard," Zuckerman said. "Do you think we should irreversibly alter the landscape of Vermont for investors and real estate developers to make massive profits?
"Or do you think we should take a balanced approach and increase our development in our town and village centers, create more walkable communities and invest more resources in affordable housing for everyday Vermonters?"
Responses to H.829
In a rebuttal to Zuckerman's piece, Emerson Lynn, editor of the St. Albans Messenger, wrote, "Painting one side as evil and the other as virtuous promotes the divisiveness that keeps progress at bay."
He went on to say that housing can be affordable only if it can be done on a large-enough scale to make materials, labor, and other costs more affordable.
"As a state, we can't afford to forever bear the individual burden of higher and higher taxes to subsidize the huge gap between the housing stock we have and the housing stock we need," Lynn wrote.
"We also have the relatively certain prospect of a large - 17% - property tax coming our way. It seems a less than prudent time to push additional costs on Vermonters."
Although it was probably a given that Republican Gov. Phil Scott would veto the bill, the Legislature has a veto-proof majority of Democrats and Progressives. With political will, it could have overridden a veto.
But the Senate chose not to poke the bear, instead deciding to amend Act 250 to lower the property tax, which is threatening to come in at double-digit percentage increases this year due to higher school budgets.
Kornheiser said a number of bills related to zoning "have all been rolled into one bill" but the creation of a new income bracket "was taken out at some point, and the property transfer tax has changed."
She added that "a very small amount of housing investment is in a bill that's now in the Senate Finance Committee."
Ram Hinsdale said it would make more sense for the committee to lower the property tax for 99% of Vermonters than to raise the income tax for the wealthiest 1%.
"I think we'd be punishing the relatively few high-income earners who choose to claim themselves as Vermonters," Ram Hinsdale said of the income tax surcharge. "It's becoming easier and easier to move your residency to Florida or manipulate your income."
When The Commons, through Windham County Senator Wendy Harrison, asked Ram Hinsdale to explain her decision further, she pointed to Lynn's editorial.
Opposition from business sector
One business owner who definitely opposed Kornheiser's vision is Michael Alexander, the founder and owner of Recycle Away, a $17 million Bellows Falls company that makes and sells recycling bins. This year, his company will manufacture trash containers for Tesla charging stations.
"Emilie Kornheiser [was] poised to make Vermont the most unfriendly state in the U.S. for business," Alexander told The Commons.
Alexander claims that although the bill seemed like a true wealth tax, it is actually focused on anyone who makes over $500,000 in income, but it's targeting only annual income, not investment portfolios, he said.
"That's completely different than a tax on the wealthy," he said. "Most wealthy people will not be affected by this tax. Only the working entrepreneurs who are actually making income in a specific year will will be taxed."
Alexander suggested that Kornheiser write a bill that taxes trust funds instead.
"There's no part of the legislation that I'm aware of that focuses on all the wealth that is inherited," he said. "For instance, the truly wealthy will not be taxed, as their income comes from capital gains on their stock portfolios rather than income from small businesses' operations, and it is unlikely that their capital gains would ever reach the income thresholds in this legislation."
He claimed that Kornheiser's bill would, in contrast, tax "the working entrepreneurs, like myself, who may once every five or 10 years have a great year."
The bill, he said, would have targeted "me and people like me, who are the real people who are generating the jobs in the state. Not the people who inherited a large sum of money and are happy to sit on it and protect it from this tax."
"If you really want to tax the wealthy, then target their enormous stock portfolios, not the working entrepreneurs," Alexander said.
There's always next year
Nothing is over until it's over, said Kornheiser, who has not lost hope about creating a future tax-the-rich mechanism to raise money for housing.
"Absolutely anything is possible, and nothing is impossible," she said, describing the chaos of the final weeks of the legislative session.
Kornheiser described herself as "really inspired by all of my colleagues in the House who sort of all came together and said that this is the right thing to do."
"This is what Vermonters want us to do," she added. "Legislative work operates on a really long timeline, and pace and grace are both needed."
Until the Legislature ends its session, Kornheiser is not willing to talk about whether she will introduce something like H.829 next year. Between sessions, she pointed out, she has to run for reelection.
"I don't know how this year is going to end," she said, "but it's really, really important to me to fully fund government, and to make sure that people's needs are met."
"And housing is one of the top needs right now," Kornheiser pointed out. "Income inequality in this country is not just about the revenue. Income inequality hurts all of us."
This News item by Joyce Marcel was written for The Commons.