Invest in Vermont
Legislators in Montpelier are getting close to the end of the session, but they’re still in search of that elusive prey: revenue. According to legislative watchers, our elected officials are trying to find revenue sources for state investments that are widely acknowledged to be long overdue: clean water, child care, Reach Up, weatherization.
Here’s an idea: How about using some of the $350 million in federal tax breaks delivered to upper-income Vermonters in 2018? Our policy makers need to think bigger.
Unlike most Vermonters, the richest Vermonters probably enjoyed filing their taxes this month. According to the Institute of Taxation and Economic Policy, the top one percent of Vermonters (with incomes starting at $487,500) saw an average tax break of over $30,000, a state total of nearly $100 million. The top five percent (incomes over $210,600) saw a total of over $200 million in savings. Even half of that would go a long way to addressing the state’s most urgent needs.
The House-passed revenue bill, H. 541, raises just under $8 million and even that meager amount is under scrutiny in the Senate. There are bits and pieces of revenue being proposed in other bills too, but taken together they’re not going to make much of a dent. The $8 million proposed for child care is just the first step in what could be a $200 million investment. Reach Up benefits haven’t been updated since at least 2004, and even if the additional money for weatherization passes this year, Vermont will be far short of its goal of 80,000 homes weatherized by 2020.
Our policy makers need to think bigger. The Trump tax cuts may not be popular to many, but they provide an opportunity to invest in Vermont hundreds of millions of dollars that are no longer being sent to Washington.
VT Democrat county and town chairs had a call-in with Mitzi Johnson last night. I raised exactly this point with her. She did not know how much wealthy Vermonters had saved from the Trump tax “reform,” but said the 2018 VT reform had extracted a lot from them by curbing deductions for charitable donations. She didn’t have a figure for that either. Do you have a figure for that? Mitzi was also nervous about VT standing out among other states by raising the top bracket(s).
The 2018 VT tax reform did extract some money from upper income VTrs, but not a lot. Of the $220 million annual federal tax cut windfall to those with incomes above $200,000, the state recaptured less than $10 million. For a filer with income of $500,000 or more the average federal tax cut was about $30,000 and VT took back about $1,200.
You mentioned curbing deductions for charitable contributions. That was one of several reforms that were in the VT tax reform bill. The numbers above are the result of all of the reforms.
-Paul