The House Ways and Means Committee last week pulled the trigger on about $130 million from increases in personal income, corporate income, property transfer tax, and fees for those selling securities.
You might assume that these taxes are to close the over $200 million gap in the education fund, and you’d be wrong. These increases are aimed at various housing programs and Medicaid expansion, so more pain is coming.
Corporate Tax Changes
Citing recommendations from the Vermont Businesses for Social Responsibility that run counter to the rest of the business community, the committee decided to raise $40 million more in corporate income taxes to pay for H.721, a Medicaid expansion and H.880 an act relating to increasing access to the judicial system.
These bills would increase the corporate tax rate to 10% from 8.5%. JFO estimates that this tax rate increase will generate $17.7 million. The bills would also add back the amount of Foreign Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI) deducted at the federal level and increase reported net income to Vermont for those corporations with those types of income. This move would make Vermont an extreme outlier, but it would raise $15 million.
Finally, it would increase securities registration fees for filing, initial notice fees, and renewal fees. The Committee was considering worldwide combined reporting, however, with that proving infeasible, this is where they landed.
Income and Property Transfer Tax Increases
The Committee also followed the direction of Vermont Businesses for Social Responsibilities’ founders and board members to raise taxes on the top marginal bracket to some of the highest in the country and used the endorsed proposal to pay for items in H.829.
Under the bill, the personal income tax would add a new bracket of 11.75%, starting at $500,000 of income, making Vermont’s top bracket one of the highest in the country and with a lower start to the top bracket than even high-tax states. This would raise about $75 million.
If you were hoping to avoid paying your over 20% increase in property taxes this year by selling your home, the Committee has found a way to still take some tax dollars from you. The Committee advanced increases in the property transfer tax that would make it the highest in the country, raising about $18 million. The property transfer tax was already tapped in the Senate to fund proposals in S.311, their housing bill.
The Commissioner of Taxes pushed back on the last-minute additions to these bills. While not accomplished this week, a $47 million short-term rental surcharge is being considered.
Depending on how much the committee seeks to raise to bridge the education spending gap, there also is a potential tax on cloud-based services.
When the Governor signed the Budget Adjustment Act earlier this month, his message to legislators was, “I’m deeply concerned this bill exceeds my proposed budget adjustment by almost $15 million. As the House Appropriations Chair has said herself, this leaves a $15 million gap in the fiscal year 2025 budget.”
The Legislature will also need to find $15-30 million in tax revenue to replace the revenue that comes from flavored tobacco, which they stand to ban very soon.
Certainly, don’t consider this session done in May at the fall of the gavel; they will need to return for a veto session.
Contribute to Vermont Daily Chronicle via Stripe.com – quick, easy, confidential