MONTPELIER, Vt. — Republican lawmakers are backing Gov. Phil Scott’s plan to save $30 million in additional tax burden brought on by the Tax Cuts and Jobs Act of 2017, saying the plan is necessary to keep the money from getting spent by Democrats and Progressives.
When it became apparent that changes to the federal tax law would negatively impact some Vermonters’ wallets, Gov. Phil Scott proposed a plan to modify Vermont’s tax laws to shield taxpayers from potential tax increases. Now Republicans in the Statehouse are giving their endorsement of plan.
“What we’re saying is that working Vermonters deserve this,” House Minority Leader Don Turner, R-Milton, told True North late last week.
“[The federal tax change] was intended to lower their tax burdens as a whole … [but] because of the way Vermont does the income tax, tying it to the federal tax, it is inadvertently costing Vermonters more.”
One thing the federal tax act did was double the standard deduction, but it also eliminated many personal exemptions. Vermont’s tax code is one of six in the nation that is closely tied to the federal code, so the loss of those personal exemptions hits Vermont taxpayers, especially middle-income families with children.
“What we’re saying is, ‘Wait, we want it to go to Vermonters where it is supposed to be,'” Turner said. “And the people who are particularly hit the hardest are working Vermonters with kids.”
If the additional tax revenue were to be collected, the state government would end up with a $30 million surplus. In a year with major financial challenges, including an estimated $80 million education fund deficit, temptations could be high for lawmakers to keep the money.
The two largest groups of Vermont tax filers are those in the $25,000 to $50,000 range, with 87,867 filers, and those in the $50,000 to $100,000 range, with 87,789 filers. The first group would pay an additional $1.62 million in taxes, and the second group would pay $7.87 million more. Vermonters making between $100,000 and $200,000 — 52,353 filers — would pay in an additional $16.5 million.
According to an analysis released by the Congress’ Joint Committee on Taxation, on the national level, those making between $20,000 and $50,000 will receive $61 billion in tax cuts in 2019, or 23 percent of the total tax cut savings. These benefits are largely seen in the 44 states that, unlike Vermont, do not have their tax code tied to the federal system.
Aside from the impact on Vermont individuals, at least 15 Vermont businesses are passing on savings from the tax cuts onto their workers. For example, after the federal corporate tax rate was lowered from 35 down to just 22 percent, 1,273 Walmart employees in Vermont can expect a base wage bump to $11 an hour and bonuses of up to up to $1,000.
Turner said plans for modifying Vermont’s tax code include lowering the marginal tax rate, introducing more deductions and exemptions ($4,000 per household member), expanding the Vermont income earned tax credit ($6,000 to $12,000 depending on household status) and introducing charitable contribution credits.
“That will sync the two together more in line with AGI [adjusted gross income] and allow these people to get the benefit that they were intended to get,” he said.
Sen. David Soucy, R-Rutland, commented that the plan doesn’t play favorites among income classes.
“This plan doesn’t favor any particular class of wealth or income — it simply helps those who would otherwise be hurt. Doing nothing means Vermonters will face higher state taxes. We cannot allow that to happen.”
Rep. Patti McCoy, R-Poultney, called across party lines for support.
“We urge our Democratic, Progressive and independent colleagues to support this common-sense plan to avoid a tax hike,” she said. “Now is the time to stand behind Gov. Scott to avoid an unplanned, unnecessary and unaffordable tax hike.”
Turner expressed that the word needs to get out to Vermonters that they are facing this tax hike.
“This is very important for Vermonters to hear and know about,” he said. “They are going to see an increase in their income tax if we don’t fix this, and the majority is comfortable with that because they will have that much more money to spend.”