…and discourage investment, charitable giving
The Vermont House Ways and Means (tax) Committee has discussed two ‘wealth tax’ bills aimed at more resourced Vermonters, the Vermont Chamber of Commerce reports in its Feb. 23 newsletter.
H.828 would seek to add a 3% surcharge to the incomes of Vermonters making more than $500,000. This proposal would affect roughly 3,500 taxpayers to bring in a combined revenue of about $75 million.
H.827 would seek to target individuals with a net worth of $10 million or more at a rate of 50% annual tax on unrealized gains or losses on their assets with a cap of 10% of the individual’s net assets exceeding $10 million.
Such legislation should be concerning for a myriad of reasons that apply to each of these proposals.
First, implementing and administering a mark-to-market tax system could be costly and complex. Complexities in valuing assets could create loopholes for wealthy individuals to avoid the tax, rendering this whole effort less fruitful with the state spending on the high cost of compliance without the corresponding revenues.
Setting aside that complexity, taxing unrealized gains would likely discourage investment, potentially harming economic growth and job creation. If not, it will also increase Vermont’s market volatility as investors sell assets to offset gains, potentially leading to market instability.
People are highly mobile now, especially after a pandemic that forced everyone to adapt, meaning some might flee the state for a lower tax regime.
Furthermore, the application of the law will be inequitable, given that some individuals are mobile while others are rooted. For example, a household of two advanced medical providers could have an income of $500,000 and not be able to legally live 6 months and a day out of state the way a household that owns an online business might.
Those leaving might be replaced. However, the person potentially replacing them does not have the same social ties to Vermont communities. This could have a considerable impact on charitable giving in the state as we lose philanthropic activity due to outmigration or due to the diminished capacity of high-net-worth individuals.
Finally, the constitutionality of taxing unrealized gains has not been definitively decided by the Supreme Court, which is currently considering a case, Moore v. United States, that could have implications for what is considered income and the legality of taxing unrealized gains under the 16th Amendment.
Furthermore, this decision will not address the constitutionality question about the lack of a due process of law surrounding this deprivation of property by taxing unrealized gains before they’re even realized through sale or other means.
This legislation is like Schrodinger’s cat in that it is alive and dead on arrival.
Generally, rank-and-file legislators understand the detrimental impact of such a proposal, and an overwhelming majority have rejected such a proposal in recent sessions.
However, it is also a year in which the legislature is facing massive structural deficits on top of a loss of federal funds, an increase in costs, and an unforced error in property taxes due to Act 127, the per pupil weighting bill.
This gap of $243+ million, with no easy solution to fix it and a legislative ethos and dogma that does not allow any cuts, means that even the most reasonable legislators might be swayed by their progressive peers to pass such a tax.
(Lightly edited bill analysis from the February 23 Lake Champlain Chamber Advocacy Update.)
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Categories: News Analysis
I believe that ultra-wealth should be taxed at higher rates than at present. That being said, “the devil is in the details. It appears that this outline is not practical.
The question is why you think this way?
First, the wealthy already pay the lion’s share of taxes. But do you think the government can be trusted to spend that money more fairly and efficiently than those who earned it? How’s that going so far? It seems to me that emphasizing higher taxes on anyone is the same as our school system taking more and more money to correct a problem it created in the first place. Since when has spending (i.e., taxing) more and more money by government improved the well-being of our school children? Why, for example, is it that the more money Vermont taxpayers spend on homelessness, the more homelessness occurs?
“One of the great mistakes is to judge policies and programs by their intentions rather than their results.” ― Milton Friedman
I believe it is called “communism”.
Back we go to the “fair share” question. What exactly is your definition of fair share? 10%? 15%? More? Currently Vermont’s top rate is 8.75% and some federally accepted deductions and programs are not accepted in Vermont- making Vermont’s effective rate much larger for some. Remember too, that the ability of the wealthy to become mobile threatens your proposal. The ultra-wealthy do not even enter into this discussion as they have benefit of legal trusts and other tax shields- if they even claim Vermont as their domicile. Experience has shown that new taxes expand into lower tax brackets as the insatiable need for dollars expands. The millionaire tax will quickly be applied to lower income brackets as politics dictates tax policies. Should either of these two tax bills become law, the migration out of folks earning $500,000 up will begin in earnest. Should H.827 survive a veto, then Vermont’s taxpayers will be forced into spending millions to defend that law- The USSC deemed tax schemes like that unconstitutional a century ago- but hey, it’s just more tax dollars to defend stupidity.
The final assessment of Vermont’s taxing and spending remains as it did 30 years ago- Vermont is victim of a legislative spending problem. We do not have a taxing problem.
Say goodbye to Bernie if this passes, good way to get rid of him though…………..
The article says that “taxing unrealized gains would likely discourage investment, potentially harming economic growth and job creation” and would spur an exodus of high-income highly mobile Vermonters to more friendly states. Exactly right. Why would anyone who figured out how to acquire such wealth hang around Vermont to pay such an exorbitant tax if they could relocate to avoid it. “The power to tax is the power to destroy,” as Chief Justice Marshall observed in McCullough v. Maryland in 1819. Why should we punish people for their success by taxing it disproportionately? Particularly when it will backfire.
this is what happens when the vermont legislator coyotes fight for the last piece of meat from the taxpayers///
“Socialism is the philosophy of failure, the creed of ignorance, and the gospel of envy.” –Churchill
Yup, we’ve arrived.
It baffles me that folks in higher income brackets stay in Vermont as it is right now, never mind if the legislature goes ahead with this egg-headed plan. I love Vermont, but seriously… Why would anyone making a fair amount of money stay here when there are so many better options out there? I guess you might if you were a socialist demonrat, but in that case, why would the legislature want to cut off the hands that feed them?
But let’s say this passes. Then what? Is the AG going to haul everyone into court for “fraud” because they “mis-valued their assets”?
Re: “It baffles me that folks in higher income brackets stay in Vermont…”
Anecdotally, I know several people, not necessarily ‘wealthy’ but with comfortable retirement savings, who have recently left or are in the process of leaving.
Some of us can’t leave because no one will buy our homes. The carrying costs are simply too high. While commercial real estate is also losing value, the only sector with any hope is vacation rental properties. But the shoot-themselves-in-the-foot legislature is beginning to focus on that market too, with over-regulation on Airbnb, Vrbo, and other entrepreneurial investments.
Only the truly foolish (the legislature, for example) shoot themselves in the foot over and again. And in Vermont’s case, sooner than later, they won’t be able to walk at all.
Believe me, I get what you’re saying. The middle class are the folks who literally “can’t move” for the reasons you put forth. No argument there.
But when does “We can’t afford to move” become “We can’t afford NOT to move”? I guess if you’re young enough where taking the “hit” far outweighs staying, in that that hit is easier to make up over the long term.
One of my sons makes close to $200K per year and is in his mid-thirties. He’s no dummy. He tried for years to find a decent place in Chittenden County in the $300k range with no luck. Most everything at that price was a fixer-upper or was on a lot the size of a postage stamp. Meanwhile, he was paying almost $2500/mo for a decent rental in Burlington. As he said, how are you going to scrape up the 20% ($80k) down payment on a $400k house? He finally gave up and bought a beautiful place across the lake in NY state, outside of Plattsburgh, for just over $300k. I’m very surprised more young people haven’t reached the same conclusion and continue to stick it out.
Re: H.828 would seek to add a 3% surcharge to the incomes of Vermonters making more than $500,000. This proposal would affect roughly 3,500 taxpayers to bring in a combined revenue of about $75 million.
So, when the people making over $500,000 start to leave, they will add the surcharge to people making $400,000.
When they start to leave, they will add the surcharge to people making over $300,000.
When they start to leave, they will add the surcharge to people making over $200,000.
When they start to leave, they will add the surcharge to people making over $100,000.
“The power to tax is the power to destroy”. – Daniel Webster
Operation Tincup – the more dimes they seek, the more they seek to destroy. The thieving, money-grubbing tables under the Golden Thunder Dome are going to be flipped over bigly – Declared and decreed!
I repeat…our legislature specializes in extracting blood and vital organs from dead horses. Then moving on to kill the next horse.
I have a well to do friend who lived in VT over 50 years who came from a business his family built from scratch through blood, sweat and tears, hard and smart work.
He did and gave a lot to the town and the state and quietly helped out many in need…a good man and a good citizen.
He left the state because if he died the state would just take too darn much of the wealth he and his family worked for.
He already paid taxes on that wealth, as he built it, and now the state of Vermont wanted to grab a chunk of it when he died, so he up and split, taking the wealth and all the good he did, to a state with no death taxes. Bad enough they tax you too much when alive, but to do it when you are dead, adds insult to injury.
Like beating a dead dog with a stick. Lowest of the low.
I say this to the progressive left…like the old James Mason song says…”You shouldn’t have took more than you gave…”
VOTE THE BUMS OUT,VOTE TEAM TRUMP!
The Vermont GOP’s influence on national presidential elections is non existent, rendering its support for controversial figures like Trump counterproductive for Vermont Candidates
– Candidates aligning with Trump’s ideology, such as Malloy, have experienced resounding defeats, mirroring the performance of other like-minded candidates.
– In the event of a Trump presidency, the Vermont Democrat supermajority, bolstered by the electorate’s liberal stance, is poised to counteract any policy Trump implements. Electing Trump will have no affect on Vermont.
To regain relevance and impact, the Vermont Republican Party must:
– Refocus its efforts on issues and policies that resonate with the majority of Vermonters.
– Understand that without aligning with the preferences of the state’s electorate, the party risks becoming entirely irrelevant.
– Prioritize getting elected and earning the support of the majority over maintaining a rigid and unpopular stance.
The party must choose to either stand for something meaningful to the majority of Vermont’s voters or risk standing for nothing and losing its place in the state’s political landscape.
Vermont Republican’s Losing TWATS Strategy is;
T rump – running on Trumps shrinking coattails is detrimental to a Vermont General Election candidate.
W all – running migration and building a wall is detrimental to a Vermont General Election candidate.
A bortion – abortion is a settled issue in running on removing it more the State’s constitution is detrimental to a Vermont General Election candidate.
T ransgender & BLM – are not key issues for most Vermont voters, move on
S tolen Election – Majority of Vermonters believe the stolen election narrative is false.
Nonsense…balderdash…hogwash…VT GOP is worthless as tits on a boar or the state wouldn’t be in the state it’s in. Drastic measures are needed to get VT and the country back on track.Team Trump is revamping the RNC, with a organization that works, and will work with the state GOP to rebuild to an effective organization. The above is defeatist, and what Trump is doing with the GOP is the opposite of defeatism, under the guise of reality, as you had written Tom,your approach a more don’t rock the boat approach. Well that has proven not to work. Damn the torpedo’s and full speed ahead. To save the Republic and the State it is time for harsh action, so vote Team Trump, for positive long term results, and damn the nay sayers and vote every leftist,dem,progressive,socialist out of office and I mean every last one of them, until they scatter like rats fleeing a sinking ship, and then we can do damage control and keep the ship afloat. It is not too late to salvage…get active! Get out the vote! VOTE TEAM TRUMP! The only man with a common sense plan that works.
Following your plan above makes any R or GOP candidate into a Democratic Socialist™. Conservative candidates cannot even get moderate R voters to sign on. Therefore the populist candidate, the one with the D or P or both will win in today’s Vermont. Even if it were a close race, the ballot engineering would kick in to negate any R win.
Trump will never win in Vermont. You know that.
The majority of Vermont Voters won’t elect a candidate running on Trump’s coattails. You know that too.
Vermont is inconsequential in the Presidential election. You know that too.
A Vermont candidate running on the Republican TWATS strategy, will never get elected in Vermont.
The RNC is financially strapped, like Trump.
Your Trump strategy is in the same vain as Vermont’s Climate Change strategy.
If this wealth tax is enacted, Vermont will quickly run out of other people’s money.
Let me see if I understand…we want to carve out some of our fellow citizens (…those who have been TOO SUCCESSFUL — subscript; their success is clearly through pernicious means…oppressing/cheating their neighbors). We want to differentially take their resources (…because we don’t like the way they spend it…[buy, invest, donate] — it’s not under the mattress you know.) …and WE CAN DO IT BETTER SO LETS TAKE IT! Is that about it? Can you see how absurd this is? ….how anti constitutional?
Philosophically, Trump and I are one. I vote basically on a persons track record. It is impossible for me to vote for a rino or a democrat, they have proven to be incapable of competence and common sense. And they are irrationally vindictive.