On February 16, 2022

Tax relief for Vermonters not good enough

By Rep. Pattie McCoy

Editor’s note: Rep. Pattie McCoy (R-Poultney) represents Poultney and Ira in the Vermont House where she serves as House minority leader.

I want to talk to you about three numbers: 4,000, 60,000 and 221 million.

Four thousand is the number of military retiree families in Vermont who are fully taxed on their pensions—unlike 47 other states that have largely exempted them from taxation.

Sixty thousand is the number of Vermonters living in poverty—who are struggling with the cost of child care, housing, education, and more.

And $221 million is the amount of student loan debt borrowed by Vermonters from 2020 to 2021 alone—ranking us among the top 15 highest states for student loan debt.

None of these numbers spell good news for Vermont. But in his budget address last month, Gov. Phil Scott outlined a bold vision of $50 million in tax relief for over 100,000 Vermonters—including the most vulnerable Vermonters described in the numbers above.

This plan would have helped virtually every aspect of our state. For low-income Vermonters, it would have boosted the state’s poverty-fighting Earned Income Tax Credit (EITC) to among the most generous levels in the nation. For families with young kids, it would have more than doubled the size of the child and dependent care tax credit to help with child care costs. For retirees, it would have boosted the state’s Social Security tax exemption, helping thousands of seniors retire with dignity. And for young Vermonters in the workforce, it would have allowed all those repaying student loan debt to deduct their interest payments from their income taxes. In total, this would have made Vermont more affordable for more than 80,000 taxpayers.

And that’s not all. The governor also produced specific tax credits for nurses and child care workers; two struggling parts of Vermont’s economy. That’s an additional 21,000 taxpayers helped. And, once and for all, it would have eliminated the tax on military retirement income, helping more than 4,000 military retirees and their partners in Vermont.

This plan tackled almost every critical component of our economy, yet Vermont House Democrats just threw it out the door.

By casting aside this far-reaching, robust tax relief plan, Vermont Democrats pushed through a plan that includes virtually no new relief for nurses or child care workers or military retirees or Vermonters with student loan payments.

Instead, Vermont Democrats are advancing a version of the failed national Child Tax Credit scheme that would cut a check to Vermonters earning up to $223,000. How much is $223,000? For a single earner, that’s about 1,500% more than the federal poverty level. It means that those in the top 5% of income filers in Vermont could get a tax cut while thousands of the poorest Vermonters are left behind. Since when did Vermont Democrats become the party of the top 5%?

Put simply: instead of passing a series of wide-ranging tax cuts for our most vulnerable friends and neighbors, Vermont Democrats want to send checks to even those in the top 5%. In fact, roughly three times as many Vermonters would have been helped by Scott’s tax plan compared to Vermont Democrats’—and for the exact same price tag!

Not only is the Democrats’ plan targeted to the wrong population, but it would be a complete failure administratively.

Consider—the Democrats’ plan calls for 50% of their tax cuts to be paid before tax time. In other words, before an individual even files their taxes and knows how much they’ve earned for the year, they’ll be receiving a check. Sounds good, right? Wrong. While the details haven’t been finalized yet, it’s very possible that, if that individual winds up earning more than the best guess of the bureaucrats at the Tax Department, they’ll most likely be liable to pay it back when they file their taxes.

Imagine a Vermonter who gets a check, spends it, and then is told months down the road they owe hundreds of dollars back to the State of Vermont because, oops, the Tax Department made the wrong guess at what their income would be. What if they’ve already spent that money and don’t have the resources to pay a surprise tax bill?

How would the Tax Department even be able to make that guess? How many more bureaucrats will they have to hire to administer the program, and at what cost? To answer those questions, Vermont House Democrats are pulling out the oldest trick in the book—a new government study!

We don’t need a study. Once upon a time, this is how the EITC was administered—with advance payments. Guess what happened? It was a complete failure. According to the non-partisan Government Accountability Office (GAO), a total of 80% of participants failed to comply with program requirements. Ultimately, the Obama administration pulled the plug in 2009. And now, Vermont Democrats want to resurrect this already-failed advance payment scheme right here.

This legislation is now on to the Senate. Vermont Senators have a question to ask themselves: do you want a tax package that favors the most financially well-off, ignores the most vulnerable, and leaves potentially fatal administrative questions unanswered? Or do you prefer a tax package that targets the truly needy in a far-reaching manner with real relief to make Vermont more affordable?

Let’s hope they make the right choice.

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