Vermont Gov. James H. Douglas delivered his state of the state speech yesterday afternoon, focusing on health care reform and tax cuts to achieve “prosperity through affordability.” He also discussed leasing the Vermont Lottery as an additional funding source.

“With health care premiums increasing by double digits, fuel topping three dollars per gallon, and property taxes continuing a steady climb, families are feeling the squeeze,” Douglas said. He asked that the legislature make affordable health care “the top priority” this year.

Additionally, Douglas proposed cutting property taxes by $25 million and investing another $25 million in school modernization projects by utilizing the projected $50 million of proceeds from leasing the state lottery.

Douglas wants to lease the lottery to private investors for a period of 40 years for an up-front payment of an estimated $300 million. Vermont would annuitize a majority of its proceeds so the state could maintain a consistent stream of funds and would also receive the one-time lump sum payment of about $50 million.

“The need for property tax relief is acute and taxpayers expect us to find ways to optimize state government and return those savings to them,” he said. “I encourage you to keep an open mind, carefully weigh the advantages of this proposal, and make your decision based on the pressing needs of property taxpayers.”

Douglas also proposed to close a tax loophole in which the state’s current tax structure taxes earned income at a higher rate than it taxes unearned income. This means that a working Vermonter pays 50% more tax than someone who does not work but lives off investment or trust fund capital gains income in the same amount, according to the governor.

“We must close this loophole and eliminate this working tax penalty,” Douglas said. Vermont’s income tax rates are among the highest in the nation, he said.

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