Vermont's Tax Test

Odds are that tax reform will soon get a real hearing in Washington, D.C. President Obama has called for it, and both Federal Reserve chairman Ben Bernanke and a bipartisan deficit-reduction committee have endorsed the idea. A simplified system—one that lowers the overall rate but eliminates exemptions—could help attract foreign investment and shrink the deficit, recouping an estimated trillion dollars a year now lost to creative accounting. Or that's the argument.

But in three Northeastern states, lawmakers have taken the talking points of national tax reform for a local spin—with mixed results. Maine mirrored the most likely national reforms, chopping its overall tax rate and eliminating loopholes. But voters balked at the lost exemptions, repealing the changes last summer. Rhode Island got similar reforms to stick, championing them as just, efficient, and revenue-neutral. And now Vermont is poised to become the political tiebreaker. Early this year its tax commission is expected to recommend the same framework for reform, which the state speaker of the House has called a priority for 2011. For the spin, if not the specifics, Washington will be watching.

Vermont's Tax Test | U.S.