Would affect wealthy individuals with total income over specific thresholds
Republished from April 24 Lake Champlain Chamber advocacy newsletter
This week, the House Ways and Means Committee looked at a new draft that reflects a shift toward more of a restructuring of the state’s income tax system, instead of just a new bracket they discussed last week, as well as the creation of a new “Vermont Investment Proceeds” (VIP) tax.
- Income Tax Overhaul: A new proposal would lower the bottom tax rate from 3.35% to 2.7% and expand the middle bracket.
- New Top Rate: To pay for these cuts, the top marginal rate would climb to 12.7% (down from an earlier proposal of 13.3%, so we can’t say the highest bracket in the nation) for the highest earners.
- The VIP Tax: This new 4% surtax would target investment income, such as capital gains and dividends, for individuals with total income over specific thresholds,
What to do with the Money? The revenue generated, estimated at roughly $100 million annually, seems like an afterthought and is debatable.
- Option A: Use the money for broad tax relief by lowering brackets for most residents.
- Option B: Invest in healthcare affordability, including premium caps for marketplace plans and expanded Medicare assistance.
What’s Next? No final decision has been made. The committee is currently refining how to structure the rates and exactly where to allocate the resulting revenue. This week, the Governor noted his opposition to any tax increases when asked at his weekly press conference.