Corporate Welfare Wins Big

The May 22 (1997) Senate passage of the "historic" property tax reform bill means that many property tax payers in high tax towns will sooner or later see a reduction of their tax burden, as the local property tax for schools is replaced with a statewide levy. At the same time, the Senate bill, like the House version, will effect a radical centralization of educational control in the state government which will soon be paying almost all of the education bill.

But a notable big winner was corporate welfare - special deals for politically favored business firms. Leading the list is Gov. Dean's favorite corporation, the Husky Injection Molding Company of Bolton, Ontario. Last July, after a year of earnest wooing, the state, the town of Milton, and Husky entered into a "memorandum of understanding" (labeled "confidential") which spelled out what all the parties were going to do to get Husky to locate a $50 million plant in Milton.

The town has already come through by dumping its town plan and rezoning to allow Husky to locate on the previously residential-only shores of Arrowhead Lake. The Chittenden County Regional Planning Commission dutifully followed suit by revising its regional plan accordingly. The town will offer property tax stabilization. The state recently awarded Milton $750,000 to build water and sewer lines out to the plant site.

Governor Dean ordered, and got, very fast-track, benefit-of-every-doubt state agency approval of all required Husky permits. The Act 250 hearings, usually an endless torture chamber for some poor Vermonter desiring to put a sign outside his plant, or a small town trying to open its own gravel pit, were over practically before they started. The state either didn't send out its crack archeological team to look for ancient Abenaki remains and arrowheads (on the shores of Lake Arrowhead, no less), or else a quick (windshield?) survey yielded nothing of interest.

Remaining to close the Husky deal were two items: money from Washington to build a $6 million bridge over the lake solely to accommodate the desires of Husky, and a legislated sales tax exemption on the materials used to construct the plant.

Harry and Mary Homeowner will pay the sales and use tax on their doublewide and its foundation, but Husky declined to accept the same terms. The memo states that the State will "use best efforts to ease the sales tax burden on this project." The delivery agents for this benefit turned out to be Sen. Cheryl Rivers (D-Windsor) and Sen. Helen Riehle (R-Chittenden.) The choice of Sen. Rivers is interesting, since she is an ardent backer of U.S. Rep. Bernard Sanders, who is fond of declaiming against the evils of corporate welfare.

The Rivers-Riehle amendment exempted from payment of the sales tax "the sale of building materials, in excess of one million dollars in purchase value, used in the construction or expansion of facilities which are engaged in the manufacturing of tangible personal property for sale." They might as well have added "in the town of Milton."

While they were at it, the corporate welfare twins added another section giving a similar exemption for the materials to be used in the parking garage essential for the proposed Filene's department store in downtown Burlington. Whether this is a direct welfare grant to Filene's or a shifting to the state's taxpayers of a cost otherwise to have been inflicted on the taxpayers of Burlington alone is a question for the economists to ponder.

Of course these two exemptions could be used by other million dollar plus development projects elsewhere in the state, presently unknown. However it is likely that these special deals will soon be found to be an undue revenue drain, and repealed, just as soon as Husky and Filene's are completed.

Not to be outdone in the corporate welfare department, Sen. Jan Backus (D-Chittenden) and Peter Shumlin (D-Windham) secured passage of another truly regressive amendment which caps the liability for the telecommunications services tax to $10,000 per user per year. This little gem is said to benefit one large South Burlington firm, whose CEO is highly public spirited in ways approved by liberals. The bill raises the tax rate for everybody else. Strangely, the liberal senators who are usually so quick to inveigh against regressive taxes were quick to sign on to those one.

Efforts to give ordinary taxpayers the chance to protect themselves from the tendency of future legislatures to raise tax rates fared far less well. Sen. Vincent Illuzzi (R-Essex-Orleans) got only 12 votes (all Republicans) for an amendment which would have required a general election approval of the electorate before any increase in the 1997-enacted state property tax rate could take effect. Apparently the architects of the state property tax are not eager to give the voters the chance to vote on the inevitable future rate increases - especially at an election where the tax-raising legislators are seeking reelection. These people aren't dumb.

The bill now goes to conference with a House version. The headlines will focus on the struggle over including a House-passed local income tax, which Gov. Dean has vowed to veto. Little media attention is likely to be paid to the truly radical state takeover of local public education, accepted by both houses, which will inevitably follow from the new act. And far down in the small type, it may be possible to find the corporate welfare provisions, if you know what to look for.

And the Senators who so eagerly voted for these tax breaks for a very few politically favored corporations will be on the campaign trail next year, distributing the usual voter-pleasing class-warfare rhetoric about the need to "stop corporate welfare" and "make big business pay their fair share of taxes." Count on it.

May 1997