Vermont taxpayers’ privacy may still be in jeopardy

by Robert Maynard

A previous TNR post may have jumped the gun a little in declaring that:

Vermonters have dodged a major bullet for now.  As reported here:

an item buried in the Senate Tax bill (H.528) that would put individual tax returns in the hands of legislative staff. Currently,the JFO can view tax data at the Tax Department but not have individual returns. A good way to drive high income tax payers from Vermont and a way to involve the legislature in instigating enforcement actions with regard to individual tax payers.

Fortunately for us, the Vermont legislature appears ready to adjourn without addressing this issue:

With an agreement to postpone action on a plan to reform income tax deductions and rates, and a deal on next year’s budget, the Legislature cleared the two biggest hurdles standing in the way of adjourning Tuesday.

Plenty of bills still require final action, such as an early education bill and a measure that would raise some government fees. But having settled the major money issues and having exhaustively debated and voted on the most controversial policy question of the session — the end-of-life bill — legislative leaders seemed willing to abandon some unfinished bills until next year if necessary in order to slam the gavel down on the 2013 session.

According to the Journal of the House, the Committee of Conference adopted H.295 today (Wednesday May 15th) “An act relating to technical tax changes.”  The full text of the bill starts on page 1886 and the bill provisions of which take effect on July 1st 2013.  The part that should raise concerns is section six, which reads as follows:

Sec. 6. 32 V.S.A. § 3102(l) is added to read:

(l)(1) The Commissioner of the Department of Taxes and the Chief Fiscal Officer of the Joint Fiscal Office shall enter into a memorandum of understanding in order to provide the Joint Fiscal Office with state returns and return information necessary for the Joint Fiscal Office or its agents to perform its duties, including conducting its own statistical studies, forecasts, and fiscal analysis.

(2) The memorandum of understanding shall provide for:

(A) mechanisms to prevent the identification of individual taxpayers, including the redaction of any information that identifies a particular taxpayer;

(B) protocols for handling and transmitting returns and return information;

(C) the designation of specific employees of the Joint Fiscal Office with access to the information provided by the Department of Taxes;

(D) the incorporation of penalties for unauthorized disclosures under subsections (a) and (h) of this section.

Sec. 6a. TAX DATA

The Commissioner of Taxes and the Chief Fiscal Officer of the Joint Fiscal Officer shall enter into a memorandum of understanding under Sec. 6 of this act no later than August 1, 2013.

While this section does call for “mechanisms to prevent the identification of individual taxpayers, including the redaction of any information that identifies a particular taxpayer;” it is still problematic that state returns are still going to be turned over to the Joint Fiscal office.  One of our readers raised the following question: “Why they need this when their economist Tom Kavett already has complete access is beyond me.”  Another expressed this concern: “Despite assurances that the language stipulate aggregate data only, and no individual tax returns …… it appears to say ….state tax returns ….. Wouldn’t that also include the returns of 501’s, now in controversy in Washington, DC?”

Vermont’s taxpayers need to keep an eye on this.  Rest assured that TNR will.