Vermont passes income tax law to compensate for federal changes

COURTESY
MONTPELIER, Vt. – At a press conference Thursday, Gov. Phil Scott celebrated passage of his Working Family Taxpayer Protection Act — a state income tax reform package. He was joined by Tax Commissioner Kaj Samsom, Director and Tax Economist Doug Farnham, Research Statistician Jake Feldman and Research Economist Andrew Stein, who helped develop the proposal.

The reforms, which were proposed by the administration and passed by the legislature in response to changes in federal law, lowered state income tax rates for all taxpayers. In conjunction with the elimination of the income tax on social security benefits for low and middle-income Vermonters, these reforms prevented a $30 million tax increase on working families and provided tax relief for many retirees in Vermont.

Governor Scott said after the state department of taxes evaluated the impact of the federal tax changes passed last year in Washington, they found the changes would lower most Vermonters’ federal taxes but raise their state income taxes. 

 “If we had taken no action or made no changes to our laws, about half of Vermonters — primarily working families with kids — would have paid a net total of $30 million more in Vermont income tax,” he said. Scott said the legislation would protect Vermonters from the increase as well as producing other benefits. The plan, for the most part, has been enacted into state law.

 “Further, the changes simplify our tax system and maintain our progressive tax code, where the wealthy pay more than those with low and moderate incomes. This proposal was revenue-neutral and ensured working families with children saw the full benefit of the federal tax reductions, without requiring cuts in state spending. Additionally, it greatly simplifies Vermont’s tax calculation, lowers rates, and encourages charitable giving by all taxpayers while adding stability in revenue collection.”