By Guy Page

A popular tax cut package backed by the Governor has hit an unexpected roadblock in the Vermont House, sidelined by a long-simmering policy debate over whether the state should exempt military retirement income from taxation.

The $9 million tax relief proposal—introduced as H.483—had been moving swiftly through the legislature. It includes expansions to the Child Tax Credit, the Earned Income Tax Credit, and a broader exemption for Social Security income. The House Ways and Means Committee passed the bill in late March and sent it to the floor for a vote.

But momentum ground to a halt on March 25 when Rep. Jed Lipsky (I-Stowe) proposed a floor amendment to add a military pension tax exemption to the package. Leadership, sensing that the amendment could pass with bipartisan support, pulled the bill from the floor and sent it back to committee, where it has remained in limbo.

The amendment reflects the language of H.43, a separate bill Lipsky co-sponsored with Ways & Means Vice-Chair Bill Canfield (R-Fair Haven) and others earlier this year, which would exempt military retirement and survivor benefit income from Vermont income tax. That proposal has drawn unusually strong support this session, with dozens of House members from both parties signing on.

“Military retirees are still of working age,” Lipsky said in a recent interview. “They’re experienced, disciplined, and bring valuable skills to Vermont’s workforce. If we want them to settle here, our tax code shouldn’t push them away.”

Indeed, supporters argue the policy isn’t just about honoring service—it’s an economic development tool. Many military retirees, often in their 40s or 50s, seek to launch second careers and choose where to live based in part on how states treat their pension income.

Yet the political dynamics have changed in Montpelier. After years of Democratic supermajorities, the current session lacks the veto-proof margins that previously allowed leadership to manage controversial votes more easily. Now, any measure that risks crossing party lines—like a military pension exemption—poses a challenge for those trying to keep the broader tax bill clean and on track.

“You can stop a bill from moving,” one committee member said on background, “but it’s a lot harder to stop an amendment on the floor. That’s the chess game right now.”

Rep. Charlie Kimbell (D-Woodstock), the ranking Democrat on Ways and Means, moved quickly to return H.483 to committee as soon as Lipsky introduced his amendment. The bill is currently not scheduled for further action, either in committee or on the floor this week.

The stalemate leaves both the tax relief package and the military pension exemption in limbo. But with wide bipartisan backing and a growing chorus of public support, observers say it may be only a matter of time before leadership is forced to act.

What comes next remains uncertain. Lawmakers could attempt to negotiate a compromise — perhaps by introducing the military pension exemption as a standalone measure, or by amending H.483 in committee to include a more limited version. But if H.483 returns to the House floor in its current form, Lipsky’s amendment is likely to return with it—and this time, it may have the votes to pass.

Until then, the bill, and its $9 million in proposed tax cuts, remains “on the wall”—a legislative euphemism for deadlock.

Members of the Vermont House & Ways Committee 

Emilie Kornheiser, Chair, ekornheiser@leg.state.vt.gov

William Canfield, Vice Chair, wcanfield@leg.state.vt.gov

Charles Kimbell, Ranking Member, ckimbell@leg.state.vt.us

Carolyn Branagan, cbranagan@leg.state.vt.us

Bridget Burkhardt, Clerk, bburkhardt@leg.state.vt.us

Martha Feltus, mfeltus@leg.state.vt.us

Mark Higley, mhigley@leg.state.vt.us

Rebecca Holcombe, rholcombe@leg.state.vt.us

James Masland, jmasland@leg.state.vt.us

Carol Ode, code@leg.state.vt.us

Edward “Teddy” Waszazak, ewaszazek@leg.state.vt.us

This story was sourced from information published in the April 4 Advocacy Newsletter of the Lake Champlain Chamber.