By Vermont Tax Commissioner Bill Shouldice
This year the governor submitted a proposal to the legislature to provide $13.5 million in much-needed, targeted tax relief for Vermonters.
We’ve seen some initial momentum on the proposal, but we need to make sure these tax breaks cross the finish line. We know that right now many Vermonters are struggling. And we know that the most straightforward way we can help is simply by keeping more money in their pockets. Now we need the legislature to do their part to keep Vermont affordable.
The governor’s tax relief package would increase tax credits and exemptions for thousands of Vermonters through four major proposals.
For the families raising our littlest Vermonters, we would expand access to the Child Tax Credit by increasing the maximum age where children are eligible for the credit from 5 to 6. The Vermont Child Tax Credit is up to $1,000 per child. It has a proven track record of reducing childhood poverty and providing greater stability for families.
Vermont has been a leader in this credit compared to other states, with the full credit available to families with annual incomes up to $125,000 and a partial credit available to families with annual incomes up to $175,000. It’s a smart investment, and providing Vermont’s young families with a strong start is the right thing to do.
For Vermont workers without children, an expansion of Vermont’s Earned Income Tax Credit would help them keep more of the money they earn. Our current credit is 38% of the federal credit. Increasing the credit to 100% would target an additional $3 million in credits to 14,000 working adults with incomes below $24,000 with an average impact of $220 per eligible worker.
For Vermont seniors, the governor has proposed to expand a crucial tax break by increasing the income eligibility limits for the tax exemption of Social Security income by $5,000. We expanded the exemption in 2022, which was the right decision to make Vermont more affordable for seniors. Unfortunately, with inflation and rising costs we need to make another adjustment now.
We must remember that workers have a choice of where they retire. Forty-one US states don’t tax Social Security at all, including our neighbors in New Hampshire, Massachusetts and New York. We want workers nationwide to want to retire to Vermont, and we want our lifelong Vermonters to be able to afford to stay. That won’t happen if seniors can stretch their retirement dollars farther simply by choosing to retire in a neighboring New England state.
This Social Security exemption eligibility adjustment would impact 8,300 Vermonters, giving our seniors living on a fixed income a little more breathing room in their budgets. The new threshold would be $65,000 in adjusted gross income for single filers and $80,000 for couples filing jointly, with an average benefit of $250 per impacted taxpayer.
For our military families, the governor’s proposal seeks to fully exempt military pensions and survivor benefits from Vermont state tax. I’m embarrassed to say that Vermont has the weakest exemptions on military benefits in the country. When we thank members of the military for their service, this would show them we mean it.
Thirty-five states are ahead of Vermont on this issue and already do not tax military pensions and survivor benefits. This is especially important because it would benefit all of us to have more military retirees starting the next chapter of their lives in Vermont. The average age of a military retiree is between 35 and 50. These veterans can start their second careers right here in our brave little state, bringing the valuable experience they gained in the military to our communities.
The tax benefit for retirees would be an average of $980, $500 for survivors. By not taxing military pensions, we would honor those who have served and make it clear that Vermont welcomes veterans to our workforce and our communities.
The filing deadline for federal and Vermont personal income tax is Tuesday, April 15. As Vermonters complete their taxes, probably a lot of us are thinking about what a difference it would make in our household if our refund was a bit bigger, if our tax burden were a bit less. The legislature could make that difference real for tens of thousands of Vermonters through the governor’s proposed tax breaks.
Right now, our representatives in Montpelier can help their constituents keep more money in their pockets. Hundreds of dollars for thousands of low and middle-income Vermonters: Vermont’s young families, our workers, our retirees on a fixed income, our veterans. It’s unacceptable for the legislature to put this opportunity on the back burner.
There may be a lot going on at the State House right now, but Vermonters can’t afford for tax relief to get lost in the shuffle.
Bill Shouldice is the Commissioner of the Vermont Department of Taxes. He has formerly served as president and CEO of Vermont Teddy Bear Company and the Vermont Country Store, as well as Secretary of Commerce and Community Development under former Governor Howard Dean.
This commentary was published on VermontBiz on April 10, 2025, and in the Caledonian Record on April 11, 2025.