McCoy: Tax break for $203,000 earners, but not military retirees? No way

U.S. Army retiree hobknobs with serving soldiers (U.S. Army photo)

by Rep. Pattie McCoy

I want to talk to you about three numbers: 4,000. 60,000. And 221 million.

4,000 is the number of military retiree families in Vermont who are fully taxed on their pensions—unlike 47 other states that have largely exempted them from taxation.

Rep. Patty McCoy

60,000 is the number of Vermonters living in poverty—who are struggling with the cost of child care, housing, education, and more.

And $221 million is the amount of student loan debt borrowed by Vermonters from 2020 to 2021 alone—ranking us among the top 15 highest states for student loan debt.

None of these numbers spell good news for Vermont. But in his budget address last month, Governor Scott outlined a bold vision of $50 million in tax relief for over 100,000 Vermonters—including the most vulnerable Vermonters described in the numbers above.

This plan would have helped virtually every aspect of our state. For low-income Vermonters, it would have boosted the state’s poverty-fighting Earned Income Tax Credit (EITC) to among the most generous levels in the nation. For families with young kids, it would have more than doubled the size of the child and dependent care tax credit to help with child care costs. For retirees, it would have boosted the state’s Social Security tax exemption, helping thousands of seniors retire with dignity. And for young Vermonters in the workforce, it would have allowed all those repaying student loan debt to deduct their interest payments from their income taxes. In total, this would have made Vermont more affordable for more than 80,000 taxpayers.

And that’s not all. The Governor also produced specific tax credits for nurses and child care workers; two struggling parts of Vermont’s economy. That’s an additional 21,000 taxpayers helped. And, once and for all, it would have eliminated the tax on military retirement income, helping more than 4,000 military retirees and their partners in Vermont.

This plan tackled almost every critical component of our economy. Yet Vermont House Democrats just threw it out the door.

By casting aside this far-reaching, robust tax relief plan, Vermont Democrats pushed through a plan that includes virtually no new relief for nurses…or child care workers…or military retirees…or Vermonters with student loan payments.

Instead, Vermont Democrats are advancing a version of the failed national Child Tax Credit scheme that would cut a check to Vermonters earning up to $223,000. How much is $223,000? For a single earner, that’s about 1,500% more than the federal poverty level. It means that those in the top 5% of income filers in Vermont could get a tax cut while thousands of the poorest Vermonters are left behind. Since when did Vermont Democrats become the party of the top 5%?

Put simply: instead of passing a series of wide-ranging tax cuts for our most vulnerable friends and neighbors, Vermont Democrats want to send checks to even those in the top 5%. In fact, roughly three times as many Vermonters would have been helped by Governor Scott’s tax plan compared to Vermont Democrats’—and for the exact same price tag!

Not only is the Democrats’ plan targeted to the wrong population, but it would be a complete failure administratively.

Consider—the Democrats’ plan calls for 50% of their tax cuts to be paid before tax time. In other words, before an individual even files their taxes and knows how much they’ve earned for the year, they’ll be receiving a check. Sounds good, right? Wrong. While the details haven’t been finalized yet, it’s very possible that, if that individual winds up earning more than the best guess of the bureaucrats at the Tax Department, they’ll most likely be liable to pay it back when they file their taxes.

Imagine a Vermonter who gets a check, spends it, and then is told months down the road they owe hundreds of dollars back to the State of Vermont because, oops, the Tax Department made the wrong guess at what their income would be. What if they’ve already spent that money and don’t have the resources to pay a surprise tax bill?

How would the Tax Department even be able to make that guess? How many more bureaucrats will they have to hire to administer the program, and at what cost? To answer those questions, Vermont House Democrats are pulling out the oldest trick in the book—a new government study!

We don’t need a study. Once upon a time, this is how the EITC was administered—with advance payments. Guess what happened? It was a complete failure. According to the non-partisan Government Accountability Office (GAO), a total of 80% of participants failed to comply with program requirements. Ultimately, the Obama administration pulled the plug in 2009. And now, Vermont Democrats want to resurrect this already-failed advance payment scheme right here.

This legislation is now on to the Senate. Vermont Senators have a question to ask themselves: do you want a tax package that favors the most financially well-off, ignores the most vulnerable, and leaves potentially fatal administrative questions unanswered? Or do you prefer a tax package that targets the truly needy in a far-reaching manner with real relief to make Vermont more affordable?

Let’s hope they make the right choice.

Representative Pattie McCoy (R-Poultney) represents Poultney and Ira in the Vermont House of Representatives, where she serves as House Minority Leader.

8 replies »

  1. The legislative majority in Vermont wants to be re-elected.
    This gimmick is one way to get votes.
    Some call this pandering.

  2. Regarding taxing military pensions, Governor Scott mentioned that eliminating the tax would encourage more military retirees to move to Vermont to help augment the workforce. More patriotic, freedom loving, law and order types moving to Vermont? Needs more study!

  3. What about elimination of the education property tax for those over 65. We have paid those taxes for years, thousands of dollars and now we need help to live here. No wonder so many people leave their birth state. Have the voters had enough yet? Probably not. For those democrats who do not realize this, progressives have high jacked the democratic party and they are not your father or grandfathers party any more. Trying a new government by voting these people out just might surprise you. Doing the same thing over and over and expecting a different outcome is the definition of crazy and so is voting for these progressives. Wake up!

  4. Not that we needed more proof the Vermont Legislature lacks wisdom, but yet another shining example.

  5. This is what can happen when too many self-absorbed “progressive” hacks are elected to the legislature. Repeat this in the areas of energy / environment, health care, education….the list of counter-productive, wasteful, damaging legislating and decision-making goes on, and on, and on, and on. How about we dump these losers and get some lawmakers who listen, care, understand and will use common sense to do some work that helps Vermonters instead of catering to re-election ambitions, embracing “progressive” future-fantasies, and promoting “social justice”?

  6. Who are these progressive / liberal / democrats that are responsible for this travesty? They’re probably the usual slim-ball suspects, but I’d love to put a name to a particular grease slick that is left behind by their oily slinking through the legislative halls in Montpelier. Where can I find the legislation; where can I find their names? These people need to be called out…