Charts & Infographics

While this is not a comprehensive picture of everything in the 2025 federal
reconciliation bill, these are some of the biggest impacts. Vermont will pay $1
billion less in federal taxes each year, with $440 million going to the top 5%.
Meanwhile, Vermonters are facing cuts to critical services like food assistance,
healthcare and housing.

The federal cuts to government benefits and services financed bigger tax breaks for the wealthiest Americans. The One Big Beautiful Bill Act (OBBBA) passed in July permanently extended and expanded many of the tax cuts from the Tax Cuts and Jobs Act of 2017. These new cuts will provide over $700 million in tax savings each year to the richest 20 percent of Vermonters. The top 1 percent will save an annual average of nearly $60,000, twice the earnings of a Vermonter working full time for minimum wage.

Vermont’s state and local tax system is less regressive than most states’, but middle-income Vermonters still pay a bigger share in taxes than the richest. Vermonters pay taxes in three big categories: on income, consumption, and property. The state income tax is progressive (higher-income Vermonters pay a bigger share of their income), while the sales tax is regressive—it takes a bigger bite out of lower-income people’s budgets. Property taxes are progressive up to the middle level of income and become regressive at the high end.

In addition to the pending loss of the enhanced tax credits, states are facing significant cuts to Medicaid under the reconciliation bill Congress passed in July, amounting to the loss of hundreds of millions of federal dollars to Vermont’s budget each year. More than 170,000 Vermonters across the state are covered through Medicaid, and estimates suggest 10 percent could lose healthcare.

While energy costs have come down from their 2022 peak, they’re higher than in 2021. A Vermont household with two vehicles and using fuel oil to heat their home spent over $1,200 more in 2024 than in 2021. The volatility in energy prices, particularly for fossil fuels, makes it hard for Vermonters to predict their bills from month to month and year to year. Changing federal policies, such as weakening efficiency standards and the ending of tax credits for electric vehicles, as well as the elimination of many grants for climate infrastructure, make it harder to invest in sustainable and more durably affordable energy.

While energy costs have come down from their 2022 peak, they’re higher than in 2021. A Vermont household with two vehicles and using fuel oil to heat their home spent over $1,200 more in 2024 than in 2021. The volatility in energy prices, particularly for fossil fuels, makes it hard for Vermonters to predict their bills from month to month and year to year. Changing federal policies, such as weakening efficiency standards and the ending of tax credits for electric vehicles, as well as the elimination of many grants for climate infrastructure, make it harder to invest in sustainable and more durably affordable energy.

In 2025, over 30,000 Vermonters on the exchange received an estimated total of $350 million to help cover the cost of care. Most of these funds come from federal tax credits, including at least $65 million from the enhanced credits. Vermont provides just under 2 percent of the assistance ($6.2 million). Participants range across income and age; a third are between 55 to 64 years old.

Healthcare premium assistance
Everyone receiving credits will pay more for healthcare if the enhanced credits expire. Those with incomes under 400 percent of poverty would pay between .5 percent and 4.6 percent more of their income for the benchmark plan, after accounting for state assistance. Middle-income Vermonters, earning more than 400 percent of poverty, would no longer receive assistance. They would pay the full cost of their premiums if they continue to buy healthcare on the exchange.

Because Vermont has the highest premiums in the country and some of the fastest growth in costs in recent years, Vermonters will be hit particularly hard. An individual making $63,000 would pay $15,000 a year for the benchmark plan—nearly a quarter of their income. A family of four at the same poverty level could see an increase of over $30,000 a year.

Because Vermont has the highest premiums in the country and some of the fastest growth in costs in recent years, Vermonters will be hit particularly hard. An individual making $63,000 would pay $15,000 a year for the benchmark plan—nearly a quarter of their income. A family of four at the same poverty level could see an increase of over $30,000 a year.

In 2025, over 30,000 Vermonters on the exchange received an estimated total of $350 million to help cover the cost of care. Most of these funds come from federal tax credits, including at least $65 million from the enhanced credits. Vermont provides just under 2 percent of the assistance ($6.2 million). Participants range across income and age; a third are between 55 to 64 years old.

Taxpayers using the exchange receive federal premium tax credits (PTCs), which are based on the cost of the benchmark silver plan and are often paid directly to the insurer. Recipients pay a percentage of their income toward the premium, on a sliding income scale, and the PTC covers the rest.

One of the main issues at stake in the federal government shutdown is the expiration of enhanced healthcare premium tax credits, which help people buy insurance through the state marketplace. If Congress does nothing, the credits will expire at the end of 2025, and millions of Americans will see large increases in the cost of their healthcare.

Among these are as many as 30,000 Vermonters. And because Vermont’s exchange has the highest premiums in the country, Vermonters will see the biggest increases. Middle-income participants are looking at an additional $10,000 a year for an individual and $32,000 for a family of four.

On July 4, President Trump signed into law the tax and spending “megabill” which makes permanent the provisions of the 2017 tax law that were set to expire and makes many additional changes beyond that. This analysis examines the tax provisions in the law and provides numbers generated with the ITEP microsimulation model.

Overall, the law favors the richest taxpayers and provides working-class Americans with relatively small tax cuts that will in many cases be more than offset by the import taxes, or tariffs.

Income sensitivity thresholds have not been updated for decades. More and more Vermonters pay a combination of income and property taxes. When their incomes or house values pass certain thresholds their tax bills can jump even when school spending doesn’t change. Updating the thresholds would ensure low- and middle-income Vermonters benefit from income sensitivity.

As more Vermonters age into retirement, will the income tax base shrink and the state get less revenue?
Two-thirds of Vermont’s baby boomers—people born between 1946 and 1964—were 65 or older as of 2024, meaning they were eligible for Medicare and retirement benefits from Social Security. But more Vermonters aging out of the workforce has not led to less income tax revenue for the state. Vermonters 65 and over have more taxable income on average than those under 65 and pay more taxes per return than younger filers.

Low- and middle-income Vermonters are subsidizing higher-income taxpayers.
School taxes are currently regressive: Higher-income Vermonters pay a smaller share of their income to support schools than lower-income taxpayers. High-income Vermonters pay school taxes based on property because it’s cheaper for them than paying based on income like everyone else.

The Vermonters with the most income don’t pay school taxes based on income.
Vermonters can pay their school taxes either based on income or on property value. For most Vermonters, paying by income is the better deal. But for higher-income Vermonters, paying by property is cheaper. While Vermonters with incomes above about $125,000 represent just 30 percent of households, they hold 60% of the total income tax base—more than $13 billion.

Recently released IRS data from tax filings in 2022 provide new information about people moving in and out of Vermont. For the third year in a row, the state continued to see more filers enter than leave. Two of these years of growth occurred during the COVID pandemic—2021 and 2022.

The Earned Income Tax Credit (EITC) provides cash to families, reducing poverty and providing flexibility to meet their differing needs. The state EITC is 38 percent of the federal credit. In 2024, 32,500 households claimed $26 million from the state EITC.

The Child Tax Credit (CTC) provides cash to families with children under six, reducing poverty and providing flexibility to meet their differing needs. In 2022, the Vermont Legislature enacted a Child Tax Credit for families with young children. In its second year, the CTC provided $24 million to 20,000 Vermont families.

The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide cash to families, reducing poverty and providing flexibility to meet their differing needs. The state EITC is 38 percent of the federal credit. In 2021 Covid relief increased the federal EITC for filers without children and expanded eligibility, leading to an increase in uptake at the state level too. In 2022, the Vermont Legislature enacted a Child Tax Credit for families with young children. In its second year, the CTC provided $24 million to 20,000 Vermont families, while 32,500 households claimed $26 million from the state EITC.

When government aid is accounted for, childhood poverty drops. The Supplemental Poverty Measure accounts for noncash aid; the Official Poverty Rate does not. That decline holds true across the New England states and the U.S. as a whole. In Vermont, childhood poverty was a third lower from 2021 through 2023 when government benefits were counted. State-level refundable tax credits, particularly the Child Tax Credit enacted in 2022, helped lift 3,000 Vermont kids out of poverty during this period.

• Vermont is one of the few states where the tax system does not make inequality worse
• The system is mostly progressive but still regressive at the top, meaning the highest-income Vermonters pay a smaller share of their income in taxes than many middle-class Vermonters
• Sales taxes tend to be the most regressive, although Vermont exempts many necessities like food, clothing and prescriptions
• Vermont’s income tax is progressive
• Property taxes tend to be regressive but Vermont’s is progressive at the low end because of income sensitivity in school taxes

New Census data offer proof that federal and state governments can significantly reduce child poverty. Almost 9 percent of Vermont’s kids lived in poverty, according to the three-year average of the federal official poverty measure for 2021-2023. However, the Supplemental Poverty Measure (SPM)—which factors in state and federal government programs such as universal school meals, food and utility assistance, and the child tax credit—came in 3 percentage points lower, at less than 6 percent for the same period. The difference in poverty rates was evident across New England, where anti-poverty programs are generally strong. In Vermont, the 3-percentage-point difference between the two measures accounted for roughly 3,000 children.