I agree totally with the Jon Margolis op-ed, published in the Mountain Times July 13 -19, but I don’t think the millionaires who were described in the article are the ‘rich’ that a lot of people are talking about. Those whose annual income is in the $75,000 to $150,000 range are considered to be rich by many people. And those ‘rich’ people are under great pressure to sell and move out.
The tax burden for those ‘rich’ is quite heavy. Many IRS deductions are phased out in the bracket above, family and rental property, for example. Then you also have the Vermont property tax sensitivity cliff at $90,000.
To those of you who are unfamiliar with that cliff, I’ll explain. If your household income is $89,999 you get a substantial deduction on your property tax. If you earn $1 more, ($90,000) your property taxes nearly double. In my case, that would be a property tax increase of over $5,000.
Senior retirees are especially hit by these burdens. It’s no wonder why a recent Kiplinger report listed Vermont as the No. 1 least favorable place in the country for seniors.
There are several income speed bumps for seniors. When the IRS taxes Social Security they only tax 85 percent. For example, if you earn $20,000 in Social Security, your IRS taxable amount is $17,000. The same goes for Vermont’s income tax. However, when the household income is calculated, Vermont takes the full $20,000. That effectively reduces the sensitivity cliff to $87,000. I wonder how many seniors have been bushwhacked by that little trick?
If a senior pulls out $10,000 and goes over the sensitivity cliff, the net amount after taxes is pitiful. In my case, if I pull out $5,000, my tax increase is roughly $6,000. Doesn’t make much sense, does it?
So if those income earners need extra cash to pay mortgage, medical, college loans, new cars, whatever, they have to pull out excessive amounts from their retirement accounts which in many cases makes their accounts unsustainable.
If those seniors sell out, more than likely they’ll have to take a hit on the sale price of their home and a really rich person can come in and buy it. That satisfies the portion of the op-ed article that says, “People moving into Vermont were more affluent than people moving out.” I only wish that article took into account those who are forced to move out because they are shafted by Vermont’s tax code.
Stephen Foley, Killington