Walters: Scott Officials Unveil Tax Plan Meant to Counter Losses From Trump Cuts | Off Message

Walters: Scott Officials Unveil Tax Plan Meant to Counter Losses From Trump Cuts


Tax Commissioner Kaj Samsom and Administration Secretary Susanne Young - JOHN WALTERS
  • John Walters
  • Tax Commissioner Kaj Samsom and Administration Secretary Susanne Young
Gov. Phil Scott's top financial officials released the broad outline of a tax-reform plan designed to counter the Vermont tax implications of the federal tax cuts adopted in December.

"If we do nothing, the effect is a $30 million tax increase," Tax Commissioner Kaj Samsom said during a Friday press briefing at the governor's office. "This plan is intended to insulate Vermonters from an inadvertent tax increase."

The administration presented charts showing that the biggest state tax hikes would fall on middle and upper-middle income households — those with taxable incomes between $50,000 and $300,000 a year. Those in very low and very high tax brackets would, on average, see slight reductions in state income tax.

Samsom acknowledged that the federal changes have wide-ranging and unpredictable consequences. But, he said, the Scott plan is focused on two relatively clear and dramatic changes: the elimination of the personal exemption and the doubling of the standard deduction.

Vermont's tax system depends on the personal exemption, which is now valued at zero by the feds. Samsom said this means higher taxable income for many Vermonters — especially families with multiple children. The Scott plan would address the loss of the federal exemption by introducing a state personal exemption of $4,000 each, and an income deduction of $6,000 for single filers, $9,000 for heads of households and $12,000 for joint filers. According to the administration, this would keep personal deductions at roughly the same level as last year.

The plan would also introduce a 5 percent tax credit for charitable contributions. The federal tax law will mean far fewer people itemize their deductions and Samsom said the tax credit would "re-incentivize charitable giving."

Immediate reaction from top lawmakers was muted but far from dismissive — bearing in mind that as of midafternoon Friday, they had yet to see any details. Rep. Janet Ancel (D-Calais), chair of the tax-writing House Ways and Means Committee, agreed with some of the concepts of the Scott plan, but said "there is a need for more information and more discussion on how much money we're talking about."

She noted that state economists Tom Kavet and Jeff Carr have also estimated that state tax revenues will rise — but emphasized that their projections were far less certain than usual because the overall impact of the federal tax cuts remains unknown. "What we need to be really careful about is that we don't make decisions about money, either spending it or returning it to taxpayers, if we don't have it," Ancel said.

The rollout of the tax plan came at the end of a bad-news week for Team Scott. It began with a focus on an emerging House proposal to reform the education funding system — a plan that was attracting bipartisan support and has the potential to defuse one of Scott's top issues. On Tuesday, Seven Days reported that Scott falsely boasted of a $20 million additional contribution to state pension funds. That same day came the news that Vermont Electric Cooperative CEO Christine Hallquist, who voted for Scott in 2016, is poised to launch a bid for governor as a Democrat.

There was also Scott's almost entirely dismissive reaction to recommendations made by his own Climate Action Commission, and swift progress in the legislature for a net-neutrality bill that the administration opposes.

On Thursday, top lawmakers threw cold water on one of the governor's signature claims: that Vermont is losing six workers a day. That embarrassing kerfuffle spilled over into Friday, as administration officials furiously worked the building in support of their beloved "6-3-1" talking point.

It's not hard to conclude that the administration was looking for a way to change the conversation, and the rather precipitous launch of this tax plan was meant to accomplish that.

The details of the plan are still being worked out. For instance, there would be modest reductions in state income tax rates — but Samsom said the exact amounts were still under discussion. "We will have a bill drafted within a week," he said. He and his colleagues will also be making the rounds, testifying before House and Senate committees.

One big question: Can the legislature and administration tackle this plan and the Ways and Means proposal in the same session? Samsom was doubtful, if only from the perspective of a tax commissioner who would have to implement all of the changes. "It doubles the challenge," Samsom said. "The ed financing changes certainly touch on taxes quite a bit. I wouldn't say it's impossible, but certainly another thing we're concerned about."

Ancel, whose committee is the driving force behind the education funding plan, was more positive. "There may be advantages to doing them both in the same year," she said. "They deal with some of the same issues. It's more work, but I think there may be advantages in the timing."

This year's legislative agenda is already top-heavy with tough issues. But as far as the administration is concerned, its tax plan should go straight to the front of the line. "It is at the top [of our list], along with education and economic development," said Administration Secretary Susanne Young.

Doubtless, the legislature has a priority list of its own.