Vermont legislators are calling for support on a bill that seeks to exempt Social Security benefits from state income tax, a move aimed at easing financial burdens for retirees while aligning Vermont with most other states. This proposed legislation, H.74, has over 60 co-sponsors from across all parties and from all corners of the state.
Currently, Vermont is one of only nine states that still tax Social Security benefits. With neighboring states and others across the country phasing out these taxes, this bill proposes a gradual approach to eliminating Vermont’s tax on Social Security income over an eight-year period. The bill was introduced by Rep. Daniel Noyes (D-Wolcott) and Jim Harrison (R-Chittenden).
“Most states have recognized the financial challenges faced by retirees and have exempted Social Security benefits from taxation,” said Rep. Noyes. “This bill is about giving older Vermont’s the same relief already available in most parts of the country.”
The proposed phase-out plan begins in 2026 by increasing the income exemption thresholds by $15,000 for single filers and married couples. Additional increases of $12,000 and $10,000 annually will follow in subsequent years, eventually leading to the full exemption of Social Security benefits by 2034.
Under the current system, Vermont exempts Social Security income for individuals earning under $50,000 and married couples earning under $65,000 annually. The proposed changes would progressively expand these thresholds, reducing the tax burden for middle-income retirees.
“With so many Americans struggling to afford health care and other basic needs, the promise of hard-earned Social Security is even more important,” said Colin Hilliard, advocacy director of AARP Vermont. “AARP Vermont urges the legislature to act now on Social Security tax relief that will help support Vermont’s retirees so they can live their retirement years with dignity and independence.”
According to AARP, nearly one in four Vermont residents receives Social Security benefits. These payments inject more than $2.6 billion into the state’s economy every year, with $2 billion paid annually to those receiving retirement benefits and their eligible family members.
While some have expressed concerns about the potential revenue loss, proponents of the repeal believe proper budgeting and a phased implementation make this plan feasible. Lost revenue is projected to be $5.4 million in the first year and eventually rising to $56 million after eight years, in current dollars. States like Missouri, Kansas, and Nebraska have already eliminated their Social Security taxes, and West Virginia is set to follow by 2026. This legislation aims to ensure Vermont remains competitive in retaining and attracting retirees.
“We believe this initiative is not only fiscally responsible, but also a necessary step in honoring Vermont’s retirees,” said Rep. Jim Harrison. “We hope the Ways & Means Committee will prioritize providing relief to older Vermonters as it begins the process of balancing the state’s revenue needs.”
