MONTPELIER — Governor Phil Scott signed a tax cut package Friday that will send $1,000 for every child 5 and under to Vermont households earning $125,000 or less.
As federal stimulus spending floods the state’s economy and boosts tax revenue, the Democratic-controlled legislature and the Republican governor have agreed on something they usually disagree on: slashing taxes.
Still, the parties spent months negotiating between competing visions, and a final compromise was not signed until the last day of the legislative session earlier this month.
The House was initially looking to spend nearly $50 million, almost entirely on the Child Tax Credit alone. The Senate responded with an envelope of $36 million, of which only $22.5 million would have gone to the child tax credit. Fearing that a slowdown in the economy was on the horizon, the upper house had also proposed ending the package’s major tax breaks after three years.
The final version of H.510 will spend $40 million, the bulk of which – $32 million – will pay for the Child Tax Credit, which is expected to benefit more than 30,000 children. The timeout provision has also been removed.
Families claiming the Child Tax Credit would lose $20 for every $1,000 above their income threshold.
“Tax relief has always been my priority, but instead I have had to resort to preemptive efforts to raise taxes over the past six years, so I am encouraged that the Legislative Assembly has agreed with me this session that Vermonters need a break,” Scott said. in a statement Friday.
“While the proposals I put forward would have helped a wider range of taxpayers, such as working families, low-income households, seniors on fixed incomes and students, while helping to recruit and retain needed workers, and more, this bill is a step in the right direction,” he continued.
The bill signed Friday also includes tax relief for low-income workers, caregivers, student loan payers, retirees and people receiving military pensions, but not to the extent proposed by Scott.
In particular, the governor has long called for a full exemption of military retirement allowances from state income tax. Lawmakers ultimately chose to exempt only $10,000 of military pensions, subject to income thresholds ($50,000 for individuals, $65,000 for a household).
Vermont’s new child tax credit is modeled after a federal credit that was temporarily expanded during the pandemic to send an additional $3,600 to most parents for each child 6 and under. The payments have been widely credited with lifting millions of children out of poverty – albeit only as long as cash transfers continued.
President Biden and congressional Democrats attempted to make the tax credit expansion permanent under the Build Back Better program, but failed when the provision faced opposition from U.S. Senator Joe Manchin, DW. Go.
In a statement, House Speaker Jill Krowinski, D-Burlington, called the tax package “historic,” adding that it “would not have been possible without the leadership and vision” of the outgoing Rep. Janet Ancel, D-Calais, the longtime chairman of the ways and means committee of the tax editorial house.
“This is a huge victory for the people of Vermont and I’m proud that we were able to pass legislation that will provide financial support to families and individuals in all 14 counties,” Krowinski wrote. “We will continue to do the work to ensure that communities across the state recover from the pandemic stronger than ever and that no Vermonter is left behind.”
Also on Friday, Scott signed the following bills:
■H.515, Banking, Insurance and Securities Act
■ H.517, Military and Family Educational Benefits and Warrant Officer and Inspector General Eligibility Act
■H.533, Forfeited Property Disposal Act and Study Assessing Civil and Criminal Asset Seizure and Forfeiture in Drug Offenses
■H.546, Racial Justice Statistics Act
■H.551, Prohibition of Racial and Religious Restrictive Clauses in Deeds Act
■H.559, Workers’ Compensation Act
■H.626, Act relating to the sale, use or application of neonicotinoid pesticides
■H.697, An Act relating to the eligibility of forest lands in the reserve for registration in the use-value assessment program
